Debating the Minimum Wage

by Don Boudreaux on July 25, 2013

in Reality Is Not Optional, Seen and Unseen, Work

Yesterday morning, on the Joy Cardin Show on Wisconsin Public Radio, I debated Laura Dresser on the merits of the minimum wage.  The 45-minute debate – complete with some call-ins – can be found here.

There’s one point that I especially wish that I would have addressed with greater strength and more eloquence.  That point is one made several times by Ms. Dresser (and by many other advocates of the legislated minimum wage).  It is this: the minimum wage should be increased because working even full-time at the current minimum wage yields too little income for a typical American family to live on.

Let’s grant without qualification that this claim is true.  Its truth does not strengthen, much less prove, the case for raising the minimum wage.  Ms. Dresser’s argument (as I’ll call it here) assumes the very conclusion that is in dispute – namely, that raising the minimum wage will in fact increase the incomes of all or most low-wage workers.

Suppose that Jones insists – indeed, proves beyond doubt – that humans could travel more safely, quickly, conveniently, and economically if we humans could flap our arms and fly through the air like birds.  Based upon Jones’s recognition of the great benefits of arm-flapping flight, Jones then calls upon the legislature to mandate that arm-flapping flight be possible.

Smith, in response, agrees with Jones that arm-flapping human flight would indeed be wonderful, but disputes Jones’s contention that legislation can make such flight a reality.  Smith goes on to argue that the legislation might have unintended ill consequences; perhaps some people, duped by the legislature’s action, fall to their deaths from buildings as they try without success to fly by flapping their arms.

Jones then, reacting to Smith’s opposition, repeats that there would be great benefits to being able to fly by flapping our arms.  Smith repeats that he neither disputes nor doubts this point, but, again, he notes that enacting legislation that pretends to make arm-flapping-flight a reality will not work and might well have some very bad, unintended consequences.

Everyone this side of sociopathy wishes that all honest and hard-working people would earn fortunes.  But wishes such as this one cannot be made into reality simply by legislating that these wishes be granted.  The desirability of the wish is not at issue.  What’s at issue here is the proposed means – a legislated minimum wage – of achieving higher incomes for low-skilled workers.  Repeating the wish and detailing the hardships that people suffer because the wish is not a reality does absolutely nothing to address the pertinent question: does minimum-wage legislation improve the well-being of the workers whose well-being is being discussed?

….

Consider this more-to-the-point hypothetical.  We all (again, at least those of us this side of sociopathy) would love to see everyone with severe physical and mental disabilities earn a great deal more income from working.  Yet it is, I’m sure, impossible for the typical quadriplegic, or the typical adult whose intelligence is no more advanced than that of a four-year-old child, to earn enough money by working to support himself or herself and his or her family.  This fact is sad; it is regrettable; if I could snap my fingers to enable all such people to earn, without any ill side effects, at least, say, $50,000 in annual income while working in the market economy I would snap my fingers immediately.

But snapping my fingers won’t succeed, no matter how fervently I want such snapping to improve the economic lot of those folks.

Nor will legislating a minimum wage for such people work.  Suppose that Congress legislates that all severely physically and mentally disabled workers be paid at least $25 per hour (which is about the hourly wage that will generate an annual income of $50,000 per worker).  Does anyone older than the age of seven think that employers will hire such people at that minimum wage?  Of course not.

Very much the same analysis holds for low-skilled workers.  The only difference between the reality of the actual minimum wage and the disabled-worker hypothetical above is the severity of the situation.

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