Quotation of the Day…

by Don Boudreaux on March 13, 2015

in Scientism, Seen and Unseen, Work

… is my colleague Dan Klein’s comment on this recent EconLog post by David Henderson (original emphasis):

The term fringe benefits isn’t as general as non-wage job attributes. For example:

– work demands
– flexibility in schedule
– kindness, amiability in the workplace
– consideration and respect in the workplace
– upward mobility
– unpleasantness/pleasantness of the work
– health insurance
– on-the-job training
– lockers for workers
– food for workers
– air conditioning and good lighting
– workplace safety
– etc. etc. etc.

Non-wage job attributes.

That is the term for all that is beyond the wage.

The value to workers of some of these things can, with some effort, be reasonably measured quantitatively; the value of others of these things – for example, amiability in the workplace – cannot be so measured.  Yet each one of these job attributes (including the many in the “etc. etc. etc.”) can be changed by employers in response to a change in the legislated minimum wage.  And many of these job attributes will be changed insofar as employers don’t simply hire fewer hours of low-skilled workers.

Defenders of the empirical studies that show little or no disemployment effects of minimum-wage legislation, in addition to generally taking an economically unjustified short-term view of the matter, typically ignore these other potential negative consequences of minimum wages.  If the numbers don’t show it, then it must not exist – or so it is unreasonably reasoned.

Such defenders of minimum-wage legislation who assert that empirical studies refute the economic case against such legislation are poor economists.  They see only what their numbers show; they remain blind to what economic reasoning strongly suggests is real but uncapturable in the numbers.  These defenders of minimum-wage legislation don’t understand the full range and depth of the economic analysis.  That analysis shows that raising employers’ costs of employing low-skilled workers will cause employers to economize further on the amounts and kinds of low-skilled labor they employ.  One way that such economizing will occur is that employers will employ fewer hours of such labor – but that’s not the only way that economizing can occur.  Adjustments – all unfavorable to minimum-wage workers – along the many of the margins highlighted above by Dan will likely also be made.

The victims of such a policy of artificially raising workers’ hourly money wages are the workers who can least afford to be victimized by such a policy.  And the fact that some of the proponents of the minimum wage mean well, and that other proponents trot out empirical studies that naively (if with impressive window displays) report that minimum-wage legislation has no or only de minimus downsides in order to assure the world that science is on the side of minimum-wage legislation, does not relieve the unjust damage uncorked on poor people by such legislation.


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