Calling Mark Perry

by Don Boudreaux on May 24, 2017

in Budget Issues, Work

News reports abound today with allegations that Trump’s proposed budget cuts are cruel and dangerous.  Each and every proposed cut is presumed, should it become reality, to cause the operation and output of the affected government programs to shrink.  Of course, “Progressives” are among those who have no doubt that a government program that receives less funding is a government program that will thereby scale back its operation and, hence, produce less of whatever goods or services that program is meant to produce.

So I’m confused.  If cutting the budget of a government program causes the operation of that program to shrink, why does not raising the minimum wage inevitably cause the operations of employers of low-skilled workers to shrink?  How can “Progressives” be so very confident that reducing the amount of money available to fund the operation of government programs results in a scaling-back of the operations and outputs of these programs if these “Progressives” also are so very confident that reducing the amount of money available to fund the operation of employers of low-skilled workers does not result in a scaling-back of the operations and outputs of these employers?

Raising the minimum wage – should employers simply pay the higher wage and make no other adjustments in their labor arrangements (as most minimum-wage advocates believe occurs) – necessarily reduces the amount of funds employers of low-skilled workers have available to fund those parts of their operations other than paying for low-skilled labor.  Therefore, if it’s true (as it almost surely is) that cutting funding for government programs causes a scaling-back of those programs, it’s nearly impossible to see why raising the minimum wage doesn’t have the same scaling-back effect on the operations of employers of low-skilled workers.

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