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Answer Me This About Mandated Minimum Wages
Posted By Don Boudreaux On July 15, 2013 @ 9:36 pm In Prices,Reality Is Not Optional,Seen and Unseen,Wal-Mart,Work | Comments Disabled
Here’s a letter to WTOP Radio:
You quote minimum-wage supporters who assert that hiking that wage will raise the pay of low-skilled workers if the legislation targets “industries that can afford to increase wages” (“Wal-Mart faceoff with DC fuels minimum wage debate ,” July 15).
You should ask these minimum-wage supporters the following questions: “If government enacts legislation setting the minimum price that people can pay for a new car at $50,000, do you – you confident supporters of government-mandated minimum prices – believe that this legislation will result in people paying $50,000 for the likes of Toyota Corollas and Ford Fiestas? Or do you realize that if government obliges car buyers to pay at least $50,000 for a new vehicle, these buyers will choose to buy no low-end cars and opt (if they buy a new car at all) instead to purchase a new BMW, Lexus, or other luxury model?”
And here’s a follow-up question that you should ask: “Do your answers to the above questions change if the minimum-car-price legislation applies only to high-income people? That is, do you think that merely because an attorney or surgeon earns, say, an annual salary of one million dollars – and, hence, can “afford” to pay $50,000 for a Corolla or Fiesta – that that wealthy car buyer will be prompted by minimum-car-price legislation to fork out $50,000 for the likes of a Corolla or Fiesta, especially given that he or she can buy the likes of a BMW or Lexus for the same money?”
Unless you find a minimum-wage supporter who can plausibly explain why a legislated minimum price for cars will not reduce the income earned by sellers of low-end cars, you should be more skeptical of the analytical abilities of those who insist that a legislated minimum wage will not reduce the income earned by sellers of low-skilled labor.
Donald J. Boudreaux
Professor of Economics
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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 Wal-Mart faceoff with DC fuels minimum wage debate: http://www.wtop.com/109/3389522/Wal-Mart-faceoff-with-DC-fuels-minimum-wage-debate
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