Two Cafe Hayek readers e-mailed to me thoughtful and useful observations on the minimum wage. Here these are (shared with each author’s permission).
One thing I haven’t seen discussed is the likely irreversibility of a large increase. Would any politician vote for a decrease in wages?
The answer is “Almost certainly not.” Minimum-wage legislation – despite the patina of ‘scientific’ justification that some economists strain to coat it in – is the bullying bastard off-spring of special-interest groups mercilessly taking advantage of people who are ignorant of basic economics. Yet unlike the victims of real rape, the victims of this species of legislatively arranged rape are under the delusion that those who are taking cruel advantage of them are really making sincere love to them. The legislative arrangers of this economic rape will thus be under neither internal nor external pressures to stop or to ease the raping even if every last empirical study of minimum wages supplies incontrovertible evidence that minimum wages destroy jobs for large numbers of the most vulnerable low-skilled workers.
Mark Hatherly writes:
Regarding minimum wage legislation, one point of view I have not seen expressed anywhere is the following: imagine that instead of the employer being fined for hiring a worker at a rate below the mandated level, it is the employee who is fined for taking a job at a rate less than the minimum wage. Jones takes a job at 6 dollars an hour – Jones is fined or imprisoned for doing so.
Funny how the legislation is not written that way, right?! I wonder how popular minimum wage legislation would be if it were!
Indeed. Although the economic outcome of minimum wages would be unchanged if the enforcement were imposed directly on workers rather than on employers, the true nature of minimum wages would be made clearer if enforcement were imposed directly on workers. The reason is that the minimum wage is targeted chiefly against workers, not employers. Save when employers have monopsony power in the labor market – a situation that no sensible person believes is remotely the reality in modern-day America – minimum-wage legislation raises the pay of some workers only by casting other workers out of jobs (or, more generally, only by reducing the employment prospects of other workers).