Quotation of the Day…

by Don Boudreaux on August 4, 2014

in Seen and Unseen, Work

… is from pages 180-181 of Milton and Rose Friedman’s essential 1962 volume, Capitalism and Freedom:

Minimum wage laws are about as clear a case as one can find of a measure the effects of which are precisely the opposite of those intended by men of good will who support it.  Many proponents of minimum wage laws quite properly deplore extremely low rates; they regard them as a sign of poverty; and they hope, by outlawing wage rates below some specified level, to reduce poverty.  In fact, insofar as minimum wage laws have any effect at all, their effect is clearly to increase poverty.  The state can legislate a minimum wage rate.  It can hardly require employers to hire at that minimum all who were formerly employed at wages below the minimum.  It is clearly not in the interest of employers to do so.  The effect of the minimum wage is therefore to make unemployment higher than it would otherwise be.  Insofar as the low wage rates are in fact a sign of poverty, the people who are rendered unemployed are precisely those who can least afford to give up the income they had been receiving, small as it may appear to the people voting for the minimum wage.

Today, my 17-year-old son, Thomas, starts work at his first paid job outside of his home.  He’s earning the minimum wage (and he had absolutely no problem finding a job).  Without minimum-wage legislation, Thomas’s wage rate would likely be lower.  He is likely a beneficiary of minimum-wage legislation.

Yet Thomas’s good fortune on the wage front comes at the expense of unknown strangers somewhere who are kept unemployed by minimum-wage legislation.  At the artificially higher price per hour of labor, employers cannot afford to employ as many low-skilled workers as they would otherwise employ (or the work conditions and other terms of employment for these faceless strangers who do have jobs are made worse by minimum-wage legislation).

The sad irony is that Thomas doesn’t need an artificially higher wage as much as many now-unemployed strangers need the sub-minimum-wage pay that they would have earned (along with work experience) had the state not priced these workers out of jobs.  Thomas is a white, private-school-educated kid from a leafy, wealthy suburb – and each of his parents has multiple graduate degrees and earns high pay.  He, and teenagers like him, are among the last low-skilled workers to be priced out of jobs by minimum-wage legislation.  Kids such as Thomas (and their middle- and upper-class families) almost certainly are net beneficiaries of minimum-wage legislation, while the huge and cruel damage done by such legislation is inflicted on people much poorer.

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