Here’s a letter to the Atlanta Journal-Constitution:
Joe Biden proclaims that raising the minimum wage will, as you summarize his assertion, be “good for business” because it will ”generate worker loyalty, leading to higher productivity and less turnover” (“Biden: Raising minimum wage is good for business,” March 29).
Solid evidence that Mr. Biden is mistaken is found not only in his own failure to launch a business to reap what he confidently declares are easily reaped profits from still-unexploited productivity gains, but also in the fact that tens of thousands of existing businesses - along with countless other profit-hungry aspiring start-up firms - must be forced by government to do what this career politician proclaims is in their individual, private interests to do.
If, however, Mr. Biden is correct, he would do American consumers and workers a far greater service by quitting politics and going into private business.
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
(I thank my colleague Walter Williams for alerting me to this Atlanta Journal-Constitution report.)
UPDATE: Clearly V-P Biden – and each of the many other politicians, pundits, preachers, and professors who argues that a higher minimum wage will so increase worker morale that it would be “good for” businesses’ profits – implicitly rejects the monopsony tale told by some professors (mostly econ) to justify raising the minimum wage. Note also that a firm that raises its lowest-paid workers’ wages will enjoy a greater reduction in worker turnover in the absence of a hike in the legislated minimum wage than in the presence of such a hike. The reason is that, for each individual firm, a pay hike isn’t necessarily – in the absence of a rise in the legislated minimum wage – offset by a hike the the pay offered by other employers. (All of this latter discussion ignores what seems to me the plausible consequence that raising the minimum wage will so worsen non-wage aspects of employment for many workers that overall morale among minimum-wage workers might actually be reduced by a higher minimum wage.)