Some Additional Questions for Proponents of Minimum-Wage Legislation

by Don Boudreaux on December 3, 2013

in Reality Is Not Optional, Seen and Unseen, Work

Here are some additional questions for people who endorse a government policy of making illegal the paid employment of all workers unable to produce for their employers value at least equal to the value that government stipulates all employees must be paid per hour.

(1) In the U.S. in 1948, quoting my colleague Walter Williams, “the unemployment rate for white 16-17 year olds was 10.2 percent while that for blacks was 9.4 percent.  Among white 18-19 year-olds, unemployment was 9.4 percent and for blacks it was 10.5 percent.”  Today (October 2013) the unemployment rate for white 16-19 year olds is 19.4%; the unemployment rate for black 16-19 year olds is 36.0% - nearly double the rate of white teenage unemployment.  (In 2006 – the year before the current recession began – the unemployment rate for white 16-19 year olds was 13.2%; the unemployment rate for black 16-19 years olds was 29.0% - slightly more than double the rate of white teenage unemployment.)

That is, the unemployment rate of black teenagers in 1948 was comparable to that of white teenagers, and about 2.5 times higher than the overall unemployment rate of 3.8%.  Today, the unemployment rate for black teenagers is much higher than that for white teenagers, and nearly 5 times higher than the overall unemployment rate of 7.3%.  (In 2006, the year before the current recession began, the unemployment rate for black teenagers was 6.3 times higher than the overall unemployment rate of 4.6%.)

How do you explain these data?  Are American employers more prejudiced in 2013 than in 1948 against teenagers?  More importantly, are Americans more racist in 2013 than they were in 1948?

These facts about teenage unemployment are straightforwardly explained by the standard economic theory that predicts that a legislated minimum wage causes the lowest-skilled, most poorly educated, or otherwise least-desirable workers to be the first to be fired and the last to be hired.  What is your alternative explanation?  (Note: blaming poorer quality schooling won’t work very well, as all that fact should mean is that the equilibrium wage rate for entry-level teenage workers that come from worsening schools falls rather than that the unemployment rate of such teenagers rises.)

(2) If your concern is to raise the incomes of the very poorest amongst us (in the United States), why focus your concern on those workers who currently have jobs?  The overall black unemployment rate today, at 13.1%, is 108 percent higher than the overall white unemployment rate of 6.3%.  So why not instead plead for minimum-job legislation?  Why not have government mandate that all employers must hire some minimum number of full-time-equivalent workers – say, at least 15 such workers per firm?

Because you’re skeptical that employers respond as predicted by standard economic theory to mandated higher labor costs – or you believe that employers enjoy significant-enough monopsony power to cause the standard predictions of economics to not apply – why not, rather than force employers to pay more to their currently employed workers, instead force every employer to hire more workers?  Would not an increase in the newly hired workers’ pay from $0.00 per hour to, say, $7.25 per hour be preferable to a policy that doesn’t increase employment but only raises the wages of people who already are earning pay?  (And I’ll bet, by the way, that you could get companies such as McDonald’s and Wal-Mart to support such legislation.)

Let’s be clear: Because of the manner in which you support minimum-wage legislation, you cannot with a clean Scientific conscience reply that minimum-job legislation would be too heavy a burden on firms – a burden likely to bankrupt many firms that would otherwise profitably operate with fewer than the minimum number of legislatively required workers.  Where, after all, is the empirical evidence for such a standard, textbook prediction?  And what reason have we to believe that the same market imperfections, consistently earned excess profits, abilities to pass along higher costs to consumers in the form of higher output prices, and other alleged real-world facts that you point to as justifications for a policy of mandating minimum wages do not also justify – and make workable – a policy of mandating minimum jobs?

Be Sociable, Share!

Comments

comments

Add a Comment    Share Share    Print    Email

Previous post:

Next post: