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Being Reckless with Other People’s Lives

This economics-student correspondent of mine is determined to find justification for minimum wages:

Mr. A___:

You describe as “wise” Rep. Ro Khanna’s assertion that – as you put it – “businesses that can’t afford to pay at least $15 an hour shouldn’t be in business to begin with.”

I describe Rep. Khanna’s assertion as witless, and perhaps even as wicked. It’s also, as Christian Britschgi writes, remarkably cavalier.

Four years ago I did a blog post on the fallacy now spread by Rep. Khanna. And I could write a long paper simply listing additional weaknesses in Rep. Khanna’s ‘argument.’ But I’ll here mention only two.

First – and being a student of economics, Mr. A___, you should be aware of this reality – worker pay generally reflects worker productivity. Therefore, what Rep. Khanna’s position amounts to is a reckless disdain for businesses that employ workers whose skills do not yet allow them to produce at least $15 per hour worth of output. One would think that a tender-hearted Progressive such as Rep. Khanna would applaud businesses that provide jobs for low-skilled workers. But no. Rep. Khanna apparently believes that workers who aren’t capable of producing at least $15 per hour are unworthy of employment. (I don’t dare suppose that Rep. Khanna secretly applauds the fact that a higher minimum wage will further swell the ranks of the welfare-state’s clientele and, thus, increase his and his fellow Progressives’ political support.)

Second, workers – especially low-skilled workers – receive from their employers more than hourly wages. My late, great colleague Walter Williams, writing on pages 150-151 of his 2011 book, Race & Economics, explains:

It is important to note that most people acquire marketable skills by working at a “subnormal wage,” which amounts to paying to learn. For example, inexperienced doctors (interns), during their training, work for salaries that are a tiny fraction of what trained doctors earn. College students pass up considerable amounts of money in the form of tuition paid and income foregone in order to develop marketable skills. It is ironic, if not tragic, that low-skilled youths from poor families are denied an opportunity to get a similar start in life. This is exactly what happens when a high minimum wage forbids low-skilled workers to “pay” for job training in the form of a lower beginning wage.

Rep. Khanna seemingly wishes to deny job training to low-skilled workers. Do you share his wish?

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