Kicking a Dangerous Immortal Horse

by Don Boudreaux on March 13, 2015

in Myths and Fallacies, Seen and Unseen, Work

Here’s another letter to my new, persistent correspondent:

Mr. Marion Ellis

Dear Mr. Ellis:

You again assert that because corporations are now “sitting on mountains of cash” they will therefore pay a higher mandated minimum wage in full without adjusting their labor practices in any ways that harm low-skilled workers.

Much is wrong with your assertion, not least that you fail to ask why corporations are choosing now not to invest (as you say) “as much as they can.”  Presumably they find greater investment to be unduly risky or otherwise unlikely to yield sufficiently high returns.  Therefore, a government mandate that artificially raises labor costs even further is likely to make corporations even less willing to invest than they already are.

But let me also ask if you favor a carbon tax to reduce CO2 emissions.  I judge from your many other e-mails that you do indeed favor such a tax.  If so, given your belief that a higher minimum wage will simply be paid for out of “excess” corporate cash reserves, why do you not also believe that a carbon tax will simply be paid for out of these same “excess” cash reserves?  That is, if you (correctly) understand that a government mandate that forces businesses to pay more for each unit of carbon they emit will cause businesses – regardless of their cash holdings – to reduce the amounts of carbon they emit, why do you think that a government mandate that forces businesses to pay more for each unit of low-skilled labor that they employ will not cause businesses to reduce the amounts of low-skilled labor that they employ?  That’s a first-rank inconsistency.

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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