Quotation of the Day…

by Don Boudreaux on November 3, 2013

in Crony Capitalism, Seen and Unseen, Work

… is from pages 237-238 of Milton & Rose Friedman’s 1980 book, Free To Choose:

Another set of government measures enforcing wage rates are minimum wage laws.  These laws are defended as a way to help low-income people.  In fact, they hurt low-income people.  The source of pressure for them is demonstrated by the people who testify before Congress in favor of a higher minimum wage.  They are not representatives of the poor people.  They are mostly representatives of organized labor, of the AFL-CIO and other labor organizations.  No member of their unions works for a wage anywhere close to the legal minimum. Despite all the rhetoric about helping the poor, they favor an ever higher minimum wage as a way to protect the members of their unions from competition.

The minimum wage law requires employers to discriminate against persons with low skills.  No one describes it that way, but that is in fact what it is.  Take a poorly educated teenager with little skill whose services are worth, say, only $2.00 an hour.  He or she might be eager to work for that wage in order to acquire greater skills that would permit a better job.  The law says that such a person may be hired only if the employer is willing to pay him or her (in 1979) $2.90 an hour.  Unless an employer is willing to add 90 cents in charity to the $2.00 that the person’s services are worth, the teenager will not be employed.  It has always been a mystery to us why a young person is better off unemployed from a job that would pay $2.90 an hour than employed at a job that does pay $2.00 an hour.

The high rate of unemployment among teenagers, and especially black teenagers, is both a scandal and a serious source of social unrest.  Yet it is largely a result of minimum wage laws.

Readers will note that this classic description by the Friedmans of some of the ways that minimum-wage legislation harms the very workers it is ostensibly meant to help does not depend upon assumptions of frictionless labor markets or employers facing horizontal supply curves of labor.


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