Quotation of the Day…

by Don Boudreaux on January 23, 2021

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

… is from page 34 of my late, great colleague Walter Williams’s remarkable 1982 book, The State Against Blacks (footnote deleted; original emphasis):

Legislative bodies have the power to legislate a wage increase, but unfortunately, they have not found a way to legislate worker productivity increases. Further, while Congress can legislate the price of a labor transaction, it cannot require that the transaction actually be made. That is, they can dictate what minimum wage must be paid a person if you hire him, but they cannot dictate that you hire him in the first place. To the extent that the minimum wage law raises the pay level to that which may exceed the productivity of some workers, employers will predictably make adjustments in the use of their labor. Such an adjustment will produce gains for some workers at the expense of other workers. Those workers who retain their jobs and receive a higher wage clearly gain. The adverse effects are borne by those workers who are the most disadvantaged in terms of marketable skills – those who lose their jobs and their income or who are not hired in the first place.

DBx: I add one small tweak – one that I know from countless conversations with Walter he would endorse. It is this: Not all low-skilled workers who retain jobs after the minimum wage is raised (and, hence, who, as a result, are paid a higher hourly wage) gain. Some such workers gain. But others don’t. Indeed, some such workers are made worse off.

The reason is that employers and employees have many margins along which they can adjust the terms of the labor contract. If Jones keeps her job after the minimum wage is raised but, as a result, finds that her job has become more onerous, she might well consider herself to be worse off than before her monetary pay was hiked as a result of the minimum-wage increase.

Anyone who denies this possibility is someone who would find it impossible to explain the many instances of workers choosing jobs that pay less (in terms of money income) but that have more flexible hours, nicer workplace conditions, fewer responsibilities, higher fringe benefits, or any of the innumerable other non-wage aspects that people understandably value in their jobs.

The most ardent supporters of minimum-wage legislation are political and ideological “Progressives” – a group that is overrepresented in its ranks by members who are especially eager, in other contexts, to mistakenly accuse market-oriented scholars of naively believing that individuals are motivated overwhelmingly, or even only, by money. Ironic, that.


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