It’s time to talk minimum wage laws again!
Confession: I tend to understand some issues on the level of logic — of, even, common sense. A prohibition (which is what a minimum wage law is, forbidding payment at a rate below the “minimum”) doesn’t spur productivity, and it’s from increased productivity that we get general higher wages and wealth and progress itself.
Sure, there are “studies” that indicate otherwise. But, we don’t conduct field studies amongst chimps arranging their bananas to prove 2 + 2 = 4. If an experiment of chimp-arranged bananas comes up with 3, I look for the chimp with the banana-eating grin.
Anyway, there’s this new study about employment from 2007-2009, when the economy went into the toilet, and right after the national minimum wage was upped from $5.15 to $7.25 per hour.
The study’s authors look at employment broadly. They pride themselves on their careful assessment of “the minimum wage from an anti-poverty perspective” and “its effects on the broader population of low-skilled workers. . . .”
Off the top of my head, I marvel that anyone can distinguish one cause for unemployment (financial crash) from another (minimum wage law), but the authors make a pretty convincing case.
Their conclusion? “Our best estimate is that these minimum wage increases reduced the employment-to-population ratio of working age adults by 0.7 percentage points. This accounts for 14 percent of the total decline over the relevant time period.”
So, yes, they say, the last minimum wage hike led to higher unemployment.
Which is what I would suspect. Because of, you know . . . Common Sense.
I’m Paul Jacob.
4 replies on “Chimps, Chumps, and the Minimum Wage”
In a conversation with a young woman, she told me increasing the minimum wage was a good idea. Thinking to show how irrational that was by reductio ad absurdum, I asked if $10.00 per hour was good, wouldn’t $15.00 be better.
She agreed, so I kept raising the ante. $25.00, $50.00, finally reaching $500.00 per hour. At that point, she looked at me as though I was retarded and said “Of course it would! What’s your point?”
Without getting into arguments about the effects minimum wage might have, I tend to think the whole issue is almost moot.
When the minimum wage goes up, it doesn’t take long for everyone else’s wages to go up to compensate, the unions being among the first to demand increases. Before you know it, minimum wage earners are back to square one.
Seems to me there will always be someone at the bottom of the pay scale. The way out of being at the bottom of the pay scale is to get a better job.
the minimum wage forces the price of low skilled labor artificially high (higher than the rate that would have been set if market participants had been left alone to sort things out for themselves).
The most basic grasp of economics tells us this inevitably creates surplus, since supply is encouraged and demand discouraged. In this case, it translates into surplus low skilled workers.The only way the wages of “everyone else can go up” would be if productivity of “everyone else” also rose or if the value of the currency dropped (via inflation) so that the money this nominally higher wage could purchase was less.You can’t get something for nothing. That’s silly.The point of increasing the minimum wage was not to equalize wages between low and higher skilled workers. The point was to increase purchasing power of low skilled workers, presumably at the expense of employers. The actual result, of course, is if employees don’t produce enough value to justify their now higher wages, they are either fired or not hired in the first place.In other words, some low skilled workers do better, while others are unemployed. Therefore, they never pick up skills, work history, and experience, condemning many to long term unemployment. This is why the minimum wage hurts the very people it is meant to help.
Is anyone else annoyed by WordPress? There doesn’t seem to be any way to use things such as italics or paragraph breaks reliably. Disqus doesn’t have this problem.