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Some Additional Questions for Proponents of a Legislated Minimum Wage

Posted By Don Boudreaux On October 25, 2013 @ 4:53 pm In Crony Capitalism,Seen and Unseen,Work | Comments Disabled

Following up on this post [1], here are some additional questions for those people who propose that government order workers to remain unemployed if these workers cannot persuade employers to pay them an hourly wage at least equal to the wage specified by government – that is, questions for proponents of a policy of economic apartheid against workers with the least-valuable skills.

1. Let’s presume that you accept the reality of the law of demand, and accept also that this law applies to labor no less than it applies to legumes, Legos, plywood, cigarettes, and other goods and services.  (If you don’t accept this reality and its application in labor markets, explain why you do not.)  How much empirical research appearing in scholarly outlets (showing no negative consequences on the job prospects of low-skilled workers) do you believe should be minimally necessary to cause fair-minded people to abandon their presumption that the standard predictions generated by the law of demand apply to low-skilled labor no less than they apply to other goods and services?  10 percent of such research?  50.001 percent?  0.01 percent?

2. Do you believe that politicians propose minimum wages that (a) never; (b) almost never; (c) not infrequently; (d) almost always; or (e) always exceed the ‘optimal’ wage as determined by real-world conditions of monopsony?  If your answer is (a) or (b), are politicians (or their subjects) simply just lucky to so consistently choose legislated minimum wages that happen almost never to exceed the wage rate that is optimal in the monopsony model?  If the answer isn’t luck, what explains this consistent excellence in this realm of policy-making?  If your answer is (c), (d), or (e), what explains why you are sanguine in the face of actual proposed hikes in the minimum wage?  Might it be that the chances of politicians overshooting the ‘optimal’ wage are so high that the best policy is a rule that prevents politicians from setting minimum wages?

3. Given that the history of the origins of minimum-wage legislation in the U.S. and South Africa (and, I’m guessing, some other countries as well) was to protect politically powerful firms and workers from the competition of less politically powerful firms and workers – and given that the designers of this legislation at least believed that the consequences of the minimum wage would indeed be precisely those that are predicted by the law of demand – what reason have you to believe that today the motivation of governments when implementing and raising minimum wages is to overcome problems of monopsony?  What reason have you to suppose that governments’ original protectionist motives have today been displaced by the more noble motives that you presume in your abstract modeling?

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