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More Economic Ignorance On the Minimum Wage

Here’s a letter to the Washington Post:

Extraordinary claims must be backed by extraordinary evidence before people accept such claims as valid.  And so the extraordinary claim made by Rachel West that using minimum-wage legislation to raise firms’ costs of employing low-skilled workers does not cause firms to employ fewer low-skilled workers ought not be accepted just because she points to one study that supports her claim (Letters, August 24).  For every study that she points to in support of her claim, I can point to a study that refutes it.  The fact is, empirically detecting in a globalized and highly dynamic economy the full consequences on employment of legislation that directly affects less than five percent of the workforce is very difficult.

So rather than play the futile game of Dueling Studies to decide whether or not to put at risk with minimum-wage legislation the employment prospects of hundreds of thousands, and perhaps millions, of low-skilled workers, let’s ask a simple yet probing question: Does anyone doubt that fewer people would vote if government raised the cost of voting by imposing a poll tax?

The unambiguous answer is no.  Yet the same logic that leads to this answer strongly suggests that firms will employ fewer low-skilled workers when government raises the costs of employing such workers by imposing a minimum wage.

Ms. West will reply that firms differ from voters.  But the burden is upon her and other minimum-wage supporters to explain what no one has ever adequately explained – namely, why is it that experienced and profit-hungry business people (most of whom operate in highly competitive industries) are more likely than are voters simply to shrug their shoulders and absorb higher costs imposed by government without taking steps – such as employing fewer low-skilled workers – to reduce their exposure to those higher costs?

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

This woman’s letter also suggests that she labors under the misapprehension that if some market price or wage fails to satisfy her moral criterion, then that fact alone ensures that government efforts to forcibly move that price or wage to where she thinks it should be will work.

Also, it’s appropriate to ask the likes of Ms. West just how many low-skilled workers she directly employs at wages that she finds to be morally acceptable.  My guess is ‘none.’  Like most academic and think-tank types, she criticizes as immoral people who actually employ the workers for whom she expresses sympathy even though she herself doesn’t employ a single one of these workers.  The presumption of such arrogant people is that only other people should pony up – or be forced to pony up – to bear the expense of making the world (appear to) conform to the arrogant-people’s moral demands.