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Making Low-Skilled Workers Illegal

Here’s a letter to the Washington Post:

Because no employer can afford to pay any employee more per hour than the value per hour that that employee produces, your headline “Twenty states will raise their minimum wage on Jan. 1” (Dec. 26) would be more informative if it instead read “Twenty states will raise the number of low-skilled workers to be priced out of jobs on Jan. 1.”

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

I’m aware that the economically more sophisticated proponents of raising minimum wages reply to such an argument by saying something such as “You mischaracterize our position!  Of course we understand that employers will not long pay any employee more than that employee is worth.  But the minimum wage is justified by monopsony power in the market for low-skilled workers; this power keeps the market wages of low-skilled workers below the values-per-hour that these workers produce for their employers.  Minimum-wage legislation only corrects this market failure.”  To which I again reply: If you’re so economically informed – if you’re sufficiently certain that genuine monopsony power in the market for low-skilled labor is so very prevalent as to justify government imposition of minimum wages – then why do you not start businesses to exploit this profit opportunity, or at least encourage your more-entrepreneurial friends and acquaintances to do so?  Why do you not put your money where your academic (or political) mouths are, rather than cavalierly risking the employment opportunities for the most vulnerable workers on your wager that they are massively victimized by monopsony power?

It’s actually quite cowardly of you to avoid acting in meaningful ways with your own skin in the game while you instead advocate legislation that you admit will result in the involuntary unemployment of multitudes of the lowest-skilled workers if your assumption of monopsony power is wrong.  Minimum-wage advocates such as yourself play, at no cost to yourselves, with the livelihoods of countless strangers, most of whom can ill-afford being guinea pigs for your untenable academic rationalizations of a policy whose history reveals that its true purpose is indeed to price certain employees out of jobs.  Yet you shamelessly keep repeating, year after year, the monopsony claim, not only never taking real actions yourselves to exploit this alleged profit opportunity, but – amazingly – never wondering why people more talented and perceptive than yourselves about the real world don’t enter the market to exploit these allegedly available profits.

Because you can draw a fancy graph on a whiteboard and explain, as you depict, the difference between “marginal” and “average” – and because you can also imagine a world where monopsony power described by your neat little graph exists and where government officials are so well-informed and altruistic as to set a minimum wage just high enough (but never, ever higher!) to correct for the ill-effects of monopsony power – you fancy yourselves intellectually equipped to advocate minimum-wage legislation.  But you’re not.  You play fast and loose with other people’s lives, and you pat yourselves on your backs for your humanity.  It’s shameful.