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Open Letter to Merrill Matthews on Minimum-Wage Legislation

Mr. Merrill Matthews
Institute for Policy Innovation

Dear Merrill:

Thanks for weighing in against the minimum wage (“Minimum Wage Increase Is Another Form of Income Redistribution”).  This regulation does indeed redistribute income unjustly.  But the redistribution is even more pernicious than you describe.  The chief redistribution is not from businesses to workers; instead, it’s from the least-advantaged workers to workers with greater advantages.

Whatever the hardships suffered by firms ordered to raise workers’ pay, most businesses manage to cope.  They do so by hiring fewer workers with the lowest skill sets.  Some businesses replace their lowest-skilled workers with machines or with a smaller complement of skilled workers.  Other businesses – especially those that continue to use large numbers of low-skilled workers – scale back and become more selective in choosing which low-skilled workers to employ.  The result is higher wages for skilled workers (including those who invent and build the likes of computers and robots) as well as for the more ‘desirable’ unskilled workers (such as middle-class teenagers from affluent suburbs with good schools).

In short, minimum-wage legislation enriches more-advantaged workers by rendering the least-advantaged workers unemployable.  Such redistribution is not only unjust; it is downright cruel – and made all the more so by the fact that not one in a thousand of its victims understands the true cause of his or her plight.

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


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