≡ Menu

Quotation of the Day…

… is from pages 48-49 of Thomas Sowell’s August 4, 2001, column, “Minimum Journalism Evident in Wage Story,” as this column is reprinted (and renamed as “Minimum Journalism”) in Sowell’s 2002 collection, Controversial Essays:

The minimum wage law is very cleverly misnamed. The real minimum wage is zero – and that is what many inexperienced and low-skilled people receive as a result of legislation that makes it illegal to pay them what they are currently worth to an employer.

Most economists have long recognized that minimum wage laws increase unemployment among the least skilled, least experienced, and minority workers. With a little experience, these workers are likely to be worth more. But they cannot move up the ladder if they can’t get on the ladder.

DBx: If you really want to help low-paid workers and young people – particularly young people of color – you should work to abolish minimum wages. Work to return to these people their right to compete for employment by offering to work at wages below the government-set minimum.

Minimum-wage legislation is as helpful to low-paid workers as would be legislation that explicitly puts a cap on the amount of skills that all low-paid workers are allowed to acquire or to use while on the job. Do you think that the government would help low-skilled paid workers by prohibiting them from competing for employment by offering to use skills or effort while on the job that exceed some mandated maximum amount?

If you answer yes, then at least you are consistent in your misunderstanding of the consequences of minimum wages and other government interventions that shrink the bargaining power of low-skilled workers. But if you answer no, yet still continue to support minimum-wage legislation, you’re not thinking very hard.

Economic pedants: Please don’t remind me of the monopsony model. I’m aware of it and of the fact that it describes a theoretical case for minimum wages helping low-skilled workers. But anyone who believes that employers of low-skilled workers in the American economy possess monopsony power is someone who takes simple theories far too literally and reality unseriously.

Some evidence that proposed increases in the minimum wage are not really based on any estimation of monopsony power, and a wish to combat its ill-effects, is found in the fact that many such proposals feature a gradual increase in the minimum wage rather than a one-time hike to the desired high minimum. If the existence of monopsony power truly justified a minimum wage of (say) $15 per hour, there would be no point in not imposing that high minimum wage immediately.

The desire of many minimum-wage advocates to increase the minimum wage only gradually reveals that these advocates either don’t understand the monopsony model or that they secretly harbor grave doubts that employers of low-skilled workers possess monopsony power.