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Although for Sure the Wealth of All People AS A GROUP Falls

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This letter is to a Cafe patron:

Mr. B. Harris

Dear Mr. Harris:

Thanks for your e-mail.

First, when I say in my blog post [2] that Paul Krugman is wrong, I refer not to the correctness or incorrectness of his reasons for supporting the minimum wage but, instead, only to his claim that “there’s just no evidence that raising the minimum wage costs jobs.”  On this matter he is indeed, contrary to your defense of him, clearly and verifiably wrong (as my blog post documents).

Second, you mistakenly suppose that the argument over the rightness or wrongness of the minimum wage turns on accurately measuring the amount of extra income earned by minimum-wage workers who keep their jobs compared to the amount of income lost by workers who are rendered unemployed by the minimum wage.  Yet, in fact, the traditional economists’ objection to the minimum wage has nothing whatsoever to do with the effect of the minimum wage on low-skilled-workers’ aggregate income.  I’m perfectly willing to believe that a higher minimum wage results in a higher income for low-skilled workers as a group.

My objection to the minimum wage stems exclusively from the economic reality that such legislation arbitrarily prices some workers out of jobs.  (Incidentally, it also causes total economic output to be lower than otherwise – so total income for the group “all people” falls.)  Discussing all low-skilled workers as if they are a unified group with a single collective interest – such as, say, a family – is deeply erroneous.  They are no such thing.  And so the government has neither an economically nor a morally defensible reason to enforce policies that cause some low-skilled workers’ incomes to rise by making it impossible for other low-skilled workers to find jobs, even if the gains enjoyed by the employed low-skilled workers exceed the losses suffered by the ones forced into the ranks of the unemployed.

If you disagree, then consider the following scenario.  Suppose that an economist produces an indisputably correct quantitative study showing that a policy of outlawing the employment of everyone whose last name is “Harris” will increase the total income of that group of workers whose last names start with “H.”  Such an outcome is perfectly possible in reality.  So would you, as an unemployed Harris, console yourself with the knowledge that you’re a member of a group – namely, people whose last names start with “H” – that, because of the policy that causes you to be unemployed, has a higher aggregate income?  Would you suppose that voters, pundits, and politicians have a scientifically sound reason to support this government policy of prohibiting you and all other Harrises from working?

My guess is that you’d oppose – and rightly so – such an anti-Harris policy.  Yet such a policy is quite similar in its economic and ethical essence to a legislated minimum wage.

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