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Minimum Question for Mr. Obama

Posted By Don Boudreaux On February 17, 2013 @ 12:20 pm In Hubris and humility,Prices,Reality Is Not Optional,Seen and Unseen,Work | Comments Disabled

17 February 2013

Mr. Barack Obama, President
Executive Branch
United States Government
1600 Pennsylvania Ave., NW
Washington, DC

Dear Mr. Obama:

In this year’s State of the Union Show you called for the hourly minimum-wage to be raised from $7.25 to $9.00.  That’s an increase of more than 24 percent.  Because you trumpet this proposal as one to assist low-paid workers, you, presumably, deny that such a hike in the cost of hiring low-paid workers will prompt employers to hire fewer such workers.

In last year’s State of the Union Show you bragged of your administration’s increase in the tariff rate on Chinese-made automobile tires.  This tariff increase, which averages 30 percent over three years [1], is explicitly designed to dissuade Americans from buying Chinese-made tires – an effect that you recognize and applaud.

Question: If a government policy that artificially raises the price of Chinese-made tires reduces the quantities of such tires that are bought, why does a government policy that artificially raises the price of low-skilled labor not reduce the quantities of such labor that are hired?

I’m told that you’re a man of science.  I await your response.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

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[1] which averages 30 percent over three years: http://www.iie.com/publications/pb/pb12-9.pdf

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