The New Republic – no bullhorn for libertarians or for free-market conservatives – republishes an essay by Stanford University economics student Christos Makridis on the economic fallacies that are committed by proponents of minimum-wage legislation. A slice:
The second [consequence of the imposition of a minimum wage] is an indirect effect on the way businesses invest in workers and design compensation and organizational policies. When companies are forced to pay higher wages, they may offset the cost by reducing how much they invest in workers. There is evidence that minimum wage laws have this effect.
This can result in weaker compensation contracts (e.g., purely salary-based), which provide employees with fewer incentives to accumulate skills. As a result, workers paid fixed wages suffer greater long-run earnings volatility than those receiving performance-based pay.
I love the (I think) unintended irony of the photograph at the top of this article. It shows labor-unionists protesting against Wal-Mart and, presumably, for a higher minimum wage. The photographer happens to catch them marching down the street as they pass beneath a billboard that reads “SAVAGES.” The minimum wage is indeed a savage policy: it prices the most vulnerable and least-skilled workers out of jobs and out of opportunities to gain skills through on-the-job training.
(Note, then, that when New York Times columnists assert – as this columnist did this past July – that “There’s just no evidence that raising the minimum wage costs jobs, at least when the starting point is as low as it is in modern America”, those columnists obviously haven’t kept abreast of the empirical literature on the employment consequences of the minimum wage.)
“Hell,” said Alabama’s Democratic Gov. George Wallace before roiling the 1968 presidential race, “we got too much dignity in government now, what we need is some meanness .” Twelve elections later, Wallace’s wish is approaching fulfillment as Republicans contemplate nominating someone who would run to Hillary Clinton’s left. Donald Trump, unencumbered by any ballast of convictions, would court Bernie Sanders’s disaffected voters with promises to enrich rather than reform the welfare state’s entitlement menu — Trump already says, “I am going to take care of everybody” — and to make America great again by having it cower behind trade barriers.