The following originally appeared, in a slightly different form, as my response to a comment by Thomas Hutcheson on this post. Mr. Hutcheson continues his insistence that minimum-wage opponents, such as myself, stop arguing as if the minimum wage is unambiguously bad and recognize that it involves trade-offs – trade-offs that, as a matter of fact (Mr. Hutcheson believes), might work out empirically in favor of, or against, the minimum wage. Quoting Mr. Hutcheson: “But just as I wish to see proponents acknowledge that a tradeoff exists, I’d like to see opponents do the same.”
Trade-offs exist always. No minimum-wage proponent has ever denied that some workers get higher wages because of the minimum wage. What’s at issue here (other than the widespread denial – although not by Mr. Hutcheson – that low-skilled workers in fact suffer harm because of the minimum wage) is two things:
(1) the morality of the means of forcing this trade-off, and
(2) the fact that considering everyone in the economy – that is, considering the economy as a whole rather than lopping off from consideration the welfare of some people or groups who we arbitrarily choose to ignore – a minimum wage reduces economic prosperity. It reduces total output (save under the most bizarre and unrealistic circumstances, such as in the face of widespread monopsony power, which, I take it Mr. Hutcheson agrees, quite sensibly, is too unrealistic to take seriously as a basis for policy).
As to (1), I ask Mr. Hutcheson again a question that I asked earlier in that comments threat: Do you believe that Jim Crow is potentially justifiable? Jim Crow involved trade-offs. Jim Crow restrictions caused some people’s wages and incomes to rise artificially by causing other people’s wages and incomes to fall artificially. My guess is that Mr. Hutcheson would reject out of hand, as unacceptably immoral, a government policy that strips people of the right to work based on skin color even if it were shown with unassailable evidence that workers whose skin color is of the preferred shade experience rises in wages and incomes greater in total than are the total losses suffered by people with less agreeably colored skin.
If I am correct in my guess, why, I ask Mr. Hutcheson, do you think that the minimum wage is different? The minimum wage, while not explicitly targetted to harm any particular ethnic group, does in fact disproportionately harm workers who are at the very bottom of the productivity ladder – workers who are assessed by employers to be the least likely among all workers to be worth the minimum wage.
See this link that Sam Grove offered in a comment on another post. That research – which is quite empirical – shows that the workers who bear the brunt of the minimum-wage’s costs are the least productive among all workers. Do you think it acceptable for governemnt policy to redistribute income and opportunity from the least productive workers in society to some subset of more productive workers if the gains to this favored subset are greater in total than are the losses in total to the disfavored group?
As for (2), as I wrote in an earlier post (that I now haven’t the time to locate), the only way to find – empirically or theoretically – that the gains from the minimum wage are higher than the losses is to arbitrarily exclude some people from the welfare calculus. Because the minimum wage reduces total economic output, mean per-capital real income necessarily falls in the economy as a whole. So only by saying “Oh, let’s examine the effects of the minimum wage only on the incomes of this particular subset of people (low-skilled workers)” is it possible (although not at all guaranteed) to find that the increase in the aggregate income of (X-Y) people in this subset was larger than the fall in the aggretate income of Y people in this subset.
Surely Mr. Hutcheson must see, though, that whatever quantitative measurements and comparisons you get by performing this exercise are driven not only by whatever redistributive effects are unleashed by the minimum wage but also by the specific, arbitrary way that you’ve chosen to define the relevant group whose aggregate welfare you examine. But you, Mr. Hutcheson, tell me: how do you distinguish low-skilled workers who should be included in the group whose aggregate welfare we are to care about from workers who are to be excluded from that group?
At what hourly wage or annual income do you draw the line separating “people whose welfare counts for assessing the impact of the minimum wage” from “people whose welfare does not count for assessing the impact of the minimum wage”? Would you draw the line at, say, workers who earn an hourly wage of $12 or less? A wage of $16 or less? A wage up to $21 (which is just shy of the average wage of all full-time production and non-supervisory workers in America)? Change where you draw the line and you potentially change the results of your welfare calculus. Change where you draw the line in a big way and you almost certainly change the results of your welfare calculus. Change where you draw the line so that you include all people in the economy and you discover that the gains to the minimum-wage winners are smaller than are the losses suffered by the minimum-wage losers.