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Two Birds With One Minimum-Wage Stone!

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Here’s a satirical e-mail from faithful Cafe patron Robert Watkins (posted here with his generous permission).

….

My city council was recently debating raising our local minimum wage.  It was while listening to a news report and going through it in my mind that I had a grand epiphany.  Please try and follow my logic and I’m sure that you will certainly see that I have indeed found a solution that can’t help but satisfy all parties.

One of the most basic arguments for raising the minimum wage is that the current one is too low to support a family in a lifestyle to which they are clearly entitled as Americans.  My city’s proposal was to raise the minimum wage to $10.10 an hour.  I’m sure you wouldn’t be surprised to hear the arguments given by both sides.  In my mind, I realized that $10.10 an hour was also too low to support a family.

The solution when it hit me was blinding.  The minimum wage across the board should be raised to $1,000 per hour.  A worker receiving this salary could work a single 40 hour work week and they would be done working for the year.  This worker would have a $40,000 a year job and that’s a pretty fair salary.  What’s more, unemployment that some fear would come from raising the minimum wage is taken care of by this plan too!  Instead of hoarding a valuable job for the entire year, a single worker would work that job for just one week!  That job could then be available to another 51 workers!  That’s 52 workers making a good living wage per job per year!

If the logic itself wasn’t enough to convince you, my idea has at least *four* exclamation marks in it!

I understand that there may some pushback from businesses that don’t realize the benefit of 52 middle class consumers for each job.  I imagine there may need to be some tax incentives or such to be offered in the short term to convince them.

Thank you,
Robert Watkins

Mr. Watkins offers the above as satire.  He correctly understands that even the smallest increase in the minimum wage will have some deleterious effects on the employment options of the lowest-skilled workers – deleterious effects that will be real and painful even if they are too small to be detected in the data or if they occur in unmeasurable ways [2] (for example, a less-friendly work environment).

Sharing here Mr. Watkins’s satire gives me the occasion to address the argument that proclaims as illegitimate the argument that says that if raising the minimum wage by $3.00 is a good thing, it must be an even better thing to raise that wage by $30.00 or even $300.

It’s true that reality is not (to use fancy academy-talk) linear.  In fact it is possible to construct a theoretical model in which a small increase in the minimum wage in fact helps many low-skilled workers without harming any, yet also in which a larger increase does indeed harm most, or even all, such workers.  So the expandio ad absurdum argument indeed is generally not a sound argument against most real-world proposals to raise the minimum wage.

That said, the expandio ad absurdum argument ought not be completely ignored, for it does apply logically to at least one popular argument for minimum-wage legislation.

The argument to which the expandio ad absurdum argument is a sound response is the one that proclaims that a hike in the minimum wage is justified in order to ensure that each minimum-wage worker has at least “enough” income to survive on.  This argument is frequently heard, if not among economists, certainly in many popular discussions of public policy.

Let’s call this argument the “People Need at Least $X to Live On!” argument in support of the minimum wage.  (The exclamation point is part of the argument.)

People who make this particular argument presume that government can command hourly wages to be whatever hourly wages must be in order to yield for minimum-wage workers a flow of income the size of which minimum-wage proponents have determined to be minimally acceptable.  That is, people who make the People Need at Least $X to Live On! argument simply take for granted that a government edict to raise wages will in fact raise wages for all affected workers at least up to the level sufficient to ensure the desired minimum income flow.

Put differently, people who make this argument either assume away completely all potential downsides for workers of minimum-wage hikes or assume that, through some mysterious mechanism, no such downsides emerge until and unless the hourly minimum wage reaches whatever height is necessary to ensure the minimally desired flow of income.  In yet other words, such supporters of the minimum wage – by basing their argument exclusively on the alleged ‘needs’ of workers – ignore any incentives that raising the minimum wage unleash to cause employers to economize on the amounts of labor they use.  Such minimum-wage supporters, therefore, set themselves up to be smacked-down by the expandio ad absurdum reply.  Such a reply – when used against the People Need At Least $X to Live On! argument – is perfectly valid, logical, and appropriate.

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