Friday, February 15, 2013

The Minimum Wage is still Stupid

In short, you can have as much unemployment as you want, simply by pushing the legally minimum wage high enough.

- Murry Rothbard, 1988

In truth, there is only one way to regard a minimum wage law: it is compulsory unemployment, period. The law says: it is illegal, and therefore criminal, for anyone to hire anyone else below the level of X dollars an hour. This means, plainly and simply, that a large number of free and voluntary wage contracts are now outlawed and hence that there will be a large amount of unemployment. Remember that the minimum wage law provides no jobs; it only outlaws them; and outlawed jobs are the inevitable result.

All demand curves are falling, and the demand for hiring labor is no exception. Hence, laws that prohibit employment at any wage that is relevant to the market (a minimum wage of 10 cents an hour would have little or no impact) must result in outlawing employment and hence causing unemployment.

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The advocates of the minimum wage and its periodic boosting reply that all this is scare talk and that minimum wage rates do not and never have caused any unemployment. The proper riposte is to raise them one better; all right, if the minimum wage is such a wonderful anti-poverty measure, and can have no unemployment-raising effects, why are you such pikers? Why you are helping the working poor by such piddling amounts? Why stop at $4.55 an hour? Why not $10 an hour? $100? $1,000?
If a minimum wage makes people wealthier, then why not make it $100?

This sounds like a good question to ask our friends at the Huffington Post.

Do you think that anyone will give an actual answer?

6 comments:

  1. Minimum wage serves a purpose by preventing a race to the bottom in wages. This pushes up wages in other brackets as well forcing more money int the system.

    Now granted in a deflationary economy the prescriptions of Rothbard et all make sense, if wages drop, prices drop. This however only works if pretty much everyone involved in trade runs a minarchist state with closed borders or is at least on a no debt/rigid gold standard.. In the real world, no one does any of these things and as such chronic inflation is the way of life.


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    1. Crud, forget something. Existing incomes preclude too high minimum wage but don't preclude all minimum wages. The $100 question is a classic strawman for that reason.

      Also Libertarians and Economic Liberals assume social capital and moral behavior don't cost anything in the way of money and are as abundant than air. Thats simply not true and for society to function, people must have a stake in it. This means they must be paid as we don't have a church to threaten them (not that this always worked the Middle Ages was full of economic riots)

      The broad erosions in prosperity from trade policy and automation are putting the US at more than a little risk. We see inklings of this with the broad support for Dorner and in a sideways way, the Patriot Movement

      Its simply not possible for a minimalist state to keep back angry crowds of hungry people. As an example, the 50 million of EBT. If they chose to riot, rebel or follow some ugly political movement, there is nothing anyone could do to stop them and the likely equal number along for the ride.

      Now granted we could have never started with the Food Stamp program and hoped hunger would kill people off or quell them but they were put in during a time two philosophies were waiting in the wings to steal power , both Communism and Nazism. The choice was made, pay or play. We chose wisely

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    2. If that race to the bottom theory was true then why don't accountants, lawyers, tradesmen and other professions earn minimum wage (nonwithstanding the per hour paradox of being salaried). The reson why is because there is no such thing as a race to the bottom, jobs are paid what the market will bear. And the minimum wage is an artifical constraint on the market.


      The biggest crime of minimum wage is that it makes employment for teenagers much more difficult, the traditional labor for fast food, grocery jobs and farm jobs. My parents earned their money as teenagers by picking fruit for farmers, but kids can't do that anymore because minimum wage laws have priced them out of the market.

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    3. Cogitans Iuvenis has, what I think to be, the correct response to your comment.

      I don't think that proposing $100 minimum wage is a strawman, but instead meant to show the extreme position of a minimum wage. If someone can understand why a $100 minimum wage will not work, then he should understand why a $10 minimum wage won't work.

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  2. Yet another issue regarding 'minimum' wages is that it essentially presumes that all entry level jobs are equivalent. Then throw into the mix the false concept that a minimum wage is equal to a 'living' wage or even a subsistence level wage and the problem spirals even further out of control.
    At best, a minimum wage is meant to be an entry level wage in order for a new worker to learn basic skills, both job related and how to work in a cooperative environment (aka team work) and should by determined by market forces, not an arbitrarily determined 'wage'. A new worker should be able to see for himself that if he wants to prosper in a work environment he has to advance his skills in order to obtain a higher level job. Wages, as well as all other costs of doing business should be a reflection of market forces. Forcing a minimum wage (while it sounds good in theory) merely exerts unwarranted forces on that market. Artificial forces will always skew normal market influences. Apparently that concept is just too difficult to understand..........

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