Again on Comparing Jobs Lost to Trade with Jobs Lost to Minimum Wages

by Don Boudreaux on February 13, 2021

in Myths and Fallacies, Trade, Work

Here’s a letter to Bloomberg:

Editor:

In “The Burger Flipper Who Became a World Expert on the Minimum Wage” (Feb. 3), Peter Coy equates the losses that some workers suffer as a result of minimum wages with the costs that some workers pay as a result of free trade.

This comparison is inapt. For many reasons, the losses from minimum wages differ categorically from the costs of free trade. The most fundamental of these reasons is that free trade is simply the absence of artificial restraints on peaceful commerce while minimum wages are the imposition of such restraints.

To better see the relevance of this distinction it’s helpful, when discussing trade, to replace “foreigners” with “blacks.” Would any right-minded person believe that the elimination of Jim Crow restraints on Americans’ ability to conduct commerce with blacks created losers who deserved special consideration, and perhaps compensation, because they lost some particular jobs to blacks? Of course not. For the same reason, workers who lose particular jobs to foreigners as a result of free trade deserve no special consideration or compensation.

Trade across national boundaries is identical, economically, to trade within national boundaries. And because in competitive economies jobs are incessantly being destroyed as others are created – with only a fraction of this job churn in the U.S. caused by international trade – to single out those individuals who lose jobs to imports as if they are categorically distinct from the many other workers who lose jobs because of economic competition is economically mistaken and ethically improper.

What is not mistaken or improper is to single out and take pity on workers who lose jobs to minimum-wage legislation. Such legislation coercively prevents low-skilled workers from increasing their employment prospects by offering to work at wages below the minimum. These workers are stripped of a human right. These workers lose jobs not as a result of the rightful operation of competitive markets. Instead, they lose jobs because they are denied their full rights to compete for jobs.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

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