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Thursday, February 13, 2014

Minimum Wage -- Jeffrey Dorfman in Forbes

Anyone reading this blog knows I'm not a Republican by any stretch of the imagination.  I suppose it's pretty clear that I'm not a Democrat either.  Maybe I'm a Daily-Show Independent.  But one place I have to break from the Daily Show is on the minimum wage.  Jon Stewart et al. have run a number of pieces on recent pushes to increase the minimum wage, and they make it seem like a complete no-brainer.  And they make good fun of the idiots that the Republicans trot out to oppose the increase.  But in this case, I think the idiots are right.  The main reason goes back to what I learned in Economics 101 -- that labor should be governed by supply and demand, just like nearly everything else.  The more one increases something like the minimum wage (i.e. the price of labor), the more distortions get introduced.  E.g. if the cost to serve burgers increases, then demand for burgers decreases, with the result that fewer burgers are needed, and fewer people are needed to serve them.  Maybe good if you're a vegetarian (which I sort of am), but not so good if you're one of the burger-servers who got laid off because of the decreased demand.  And of course, if the wage goes up, it makes it harder for entrepreneurs to start businesses that rely on unskilled labor.  And then we have all the unemployed people who would be perfectly willing to work at the current minimum wage, but can't even find a job.  The higher we raise the minimum wage, the harder it will be for those people to find jobs.

All of those points might be swept aside with the argument that "look, the evidence is right before our very eyes -- nobody can feed a family of 4 on a minimum wage income."  That seems to be the argument for increasing the minimum wage.  But really, it's an argument for guaranteeing everyone a minimum income (which I believe is what socialist countries try to do). 

A recent Forbes article by Jeffrey Dorfman provides additional reasons why the case for raising the minimum wage is less than compelling.  Minimum wage workers are a very small percentage of workers over all, and very few minimum wage workers are actually the primary earners in their households -- many are teenagers from middle-class families, and most are under 25.  Few of them look at minimum wage as a permanent job.  And as for the argument that minimum wage should keep pace with worker productivity such that the minimum wage would be $22/hour, that's a complete fabrication.  It turns out there are no statistics kept for productivity of minimum wage workers generally, so that productivity gain is based on the work of more skilled workers.  For food service workers, it turns out that increases in the minimum wage have actually outpaced increases in worker productivity.  Here's the current link to Dorfman's article:


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