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The Point

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There’s an interesting debate going on in the comments section of a recent post of Don’s [2] about the minimum wage. Steven Warshawsky started it off with this observation:

And your point is? That there should be no minimum wage legislation
at all? This is a non sequitur. The billboard example simply reflects
technological innovation. It hardly proves that minimum wage laws, per
se, have a net negative effect on the economy (even if they do cause
unemployment for some workers) or are otherwise unjust. I realize this
is free market gospel, but the empirical and ethical basis for this
position is far from compelling.

In earlier posts, I have tried to summarize the empirical literature [3] on the negative impacts of the minimum wage. Is it compelling? Take a look. Read some of it. You can argue that it’s not compelling and still be for or against the minimum wage for philosophical reasons. Or you can be for or against it based on your best guess, your own gut level theorizing, as to how employers respond to an increase in the cost of labor. But I’d really like to react to Steven Warshawsky’s opening question.

And your point is?

He sharpens that question a paragraph later:

The extremist, knee-jerk libertarianism so often promoted by this
website is completely untenable, philosophically and politically. I
guess it makes you feel good to believe in the logical superiority of a
point of view that is a meaningless blip in the American public policy
scene.

I’ll let Don speak for himself as to why he advocates things that are politically untenable. But since we share the characteristic of advocating politically untenable positions, I’d like to take a crack at answering the question as what the point is of what I write here.

My goal on this site is to help people understand how the world works using the tools of economics.

I don’t think economic understanding is meaningless. I think if most people came to agree with me that the minimum wage hurts the people it’s allegedly trying to help, then it would be more likely that it would be abolished. Yes, unions and others (employers of higher-skilled labor who compete with employers of lower-skilled labor) who benefit personally from minimum wage legislation would still support it. But it would be harder for the politicians to brag about it and the political calculus would change.

I’m not trying to convince politicians to see the error of their
ways—that’s a waste of time. I’m trying to convince you, the reader,
that economics is a powerful illuminator of what’s really going on when
the minimum wage goes up. I’m trying to get you to understand something
that I understand. I might be wrong. You might reject my understanding. Or, after understanding what I
understand, you might still disagree. That’s fine.

And even if you agree with
me, what you do with that information at cocktail parties and in the
voting booth is an interesting strategic question. When a friend says that the minimum wage is good for the poor what should you say in return?

The minimum wage is immoral. Government has no right to interfere with the contracts between employers and employees.

The minimum wage hurts the people it’s trying to help. I think it’s counterproductive.

The minimum wage is a good idea, but if we raise it too much, it might be harmful. So be careful.

I think the first two arguments are correct. But when I speak with someone who supports the minimum wage, someone who doesn’t value freedom for its own sake as I do and who thinks freedom should be sacrificed for various attractive short-run outcomes, I emphasize the second argument. The third argument is tempting. You’re more likely to keep your friends. But it’s intellectually dishonest and I don’t think it will get us to where I want to go, which is a zero minimum wage.

Strategically, I think it’s best to calmly (calmly!) keep making the point that the minimum wage is a bad law because it hurts the people we’re trying to help, and that we should get rid of it. That makes me untenable as a politician. But I hope it makes for interesting reading. And I naively believe that it has a better chance of creating political change down the road.

A final strategic point: many arguments are politically untenable when they’re first made. My model is Friedman’s Capitalism and Freedom [4]. When he made the case for the volunteer army or non-compulsory social security or even floating exchange rates, he lost a lot of friends and people sneered at him and he was mocked. But he never wavered on any of those issues. Not because he had a free-market gospel but because he found the logic compelling. For those of us who are not in the political trenches, that’s the way to go.

So yes, there’s something quixotic about being against the minimum wage in a world where most people think it’s a good idea. I still say hand me that lance.

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