Who’d a-Thunk It?

by Don Boudreaux on April 6, 2015

in Economics, Reality Is Not Optional, Seen and Unseen, Work

Among business-owners’ responses to a mandated higher minimum wage are greater efforts to economize on the use of low-skilled labor.  (HT Jan Jorgensen)  A slice:

[Seattle restauranteur Quynh-Vy] Pham says they are considering scaling down employment, possibly ending sit-down service and transitioning to a “fast-casual” concept to cut down on labor costs.

This report also features the fatuous comments of Seattle’s mayor Ed Murray – comments that are quite annoying to read.  While actual, experienced, skin-in-the-game business owners deal with the very real cost consequences of a mandated artificial hike in wage rates – and while many actual, skin-in-the-game employees who are willing to work at wages below the mandated minimum are denied by ‘their’ government the right to so work and, thus, will find themselves unemployed – prancing and preaching politicians make economically ignorant and irrelevant pronouncements as their cruel handiwork causes hardship to innocent victims.

No doubt some highly credentialed economists will defend these officious politicians, offering up rococo theoretical explanations of why the minimum-wage legislation in fact will yield great benefits to the workers who standard and well-grounded economic theory predicts will be harmed.  Sigh.

….

The minimum-wage debate in economics is rather like the reverse of the debate that took place centuries ago among astronomers.  In astronomy, the standard, mistaken geocentric theory of the solar system was defended with ever-greater cleverness and desperation by thinkers eager to explain how the apparently inexplicable movements of the planets in fact are consistent with Ptolemaic theory.

In economics, in contrast, the standard textbook theory works remarkably well, without any desperate tweaking, to explain observed patterns of activity following increases in the minimum wage.  The clever and desperate tweaking of theory is done instead by those economists whose faith in the politics-centric view of the economy refuses to be shaken by reason or observed empirical reality.  These faith-guided economists just know that minimum-wage legislation helps the poorest of poor workers, and to ‘prove’ the validity of their faith they concoct and deploy all manner of contorted theoretical explanations to explain why the market for low-skilled workers is, among all markets in creation, the one in which the standard law of demand is suspended whenever the great hand of Government-the-Creator is waved and a prayer is muttered by the congregation about how this waving hand will by Will (backed by Force) enrich poor workers.

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