Greedy Profit-Maximizers Are Mysteriously Sometimes Indifferent to Maximum Profits

by Don Boudreaux on October 13, 2013

in Seen and Unseen, Trade, Work

Only a few of my responses to my mysterious e-mail assailant “Aaron the Aaron” are posted here at the Cafe.  Here’s one that is:

Mr. Aaron the Aaron

Dear Mr. the Aaron:

You repeatedly allege – as you do today – that my opposition to minimum-wage legislation “proves” that I “ignore science.”  Yet only three days ago you wrote to assert that my support for free trade “exposes” my “callousness” toward “workers victimized by corporations outsourcing to cheap labor countries.”

A mark of sound scientific thinking is consistency and generalizability.  Do you not see your own inconsistency and failure to generalize?

When the subject is international trade you correctly recognize that, all other things equal, firms prefer to pay workers lower rather than higher wages and will, as a result, actively exploit all available profit-enhancing opportunities to lower their production costs.  So why do you not recognize that the same economic motivation and opportunities exist when the subject is the minimum wage?

How can it be that firms are so sensitive to international differences in wages that they greedily lower their production costs whenever possible by shifting away from using higher-wage to lower-wage workers, yet simultaneously are so insensitive to legislated hikes in domestic wages that these firms simply absorb, with no attempts to reduce, the higher costs imposed on them by minimum-wage legislation?  Can you square this circle for me?

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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