Minimum Wage legislation, should we abolish it?

Posted on May 10, 2013 by

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This is subject of a recent debate featuring Libertarian’s Russ Roberts and Jim Dorn as well as Progressive’s Jared Bernstein and Karen Kornbluh.   Unfortunately, the audience voted with Mr. Bernstein that we should keep the minimum wage.  If you take the time to listen to the debate, you’ll find some rather startling admissions by Mr. Bernstein.  He (and Ms. Kornbluh) do not believe the Law of Demand holds–that is the if the price of something goes up (in this case labor) then the quantity demanded will fall.  Oh yes, occasionally they concede (implicitly) that the Law of Demand holds, but the effects are “small.”  I thought Russ Roberts did a particularly good job of illustrating why–even if you agree the effects are small–they are not unimportant.

I would like to repeat the moral argument that Russ makes here, and invite comment.  For those supporters of the minimum wage, what right or moral basis do you have to use the power of the law to make it illegal for a low-skilled worker to get a job?  It is undeniably true that if a potential employee does not have the skills to bring $7.25 of value to a company they will not be hired at the minimum wage.  Is it not immoral to make work illegal?  Yet for some “small” subset, that is what we do. And this small subset are the least skilled workers in our economy, disproportionately hitting young people and minorities.  It is precisely young people and minorities that benefit most from the job training and skills development that come with employment.

Of course Mr. Bernstein denies this.  Another fundamental tenet of economics which Mr. Bernstein scoffs at is that in a competitive market, the worker is paid according to his or her marginal product.  If you only have a few moments, I encourage you to look at Mr. Bernstein’s comments about 1:14 and then Mr. Roberts response–Russ nails the issue.

If progressives really believe what they say, then I have one question for them:  why are you so stingy to the poorest of the poor?  If the minimum wage truly has no effect on employment, then why are you unwilling to raise it to $20/hr?  Or better yet, why not $35?  Obviously they don’t believe it.

So we have two competing moral arguments.  The Bernstein argument is that if you eliminate the minimum wage, some workers currently making the minimum wage will see their incomes fall, and these folks are desperately poor already–how can you be so heartless?  The Roberts argument is made above, how can you pass a law that in effect condemns low-skilled workers to a wage rate of zero–it is illegal for them to have a job for which they are qualified.  So how do we answer?  Both of these competing arguments are likely true to a degree–some workers would see a wage cut if minimum wage were eliminated, while other workers would finally be able to gain employment.  What are the exact gains and losses are at best a thorny empirical question.  But are we restricted to a utilitarian calculus to simply add up the social welfare?

I don’t think so.  While its likely true that some will be hurt by the loss of the minimum wage, the benefit they currently receive is only due to a harm that government inflicts on others–a harm that has no moral basis other than an arguable utilitarian calculus.  On the other hand, those that are harmed by the minimum wage are unjustly denied the opportunity to work.  While Ms. Kornbluh insists the moral argument is all on her side, I have to ask–what morality allows you to make it illegal for a low skilled worker to gain employment?  Does it really make it ok if you only hurt a few people, that the effects are “small”?  I find that a strange morality.

What say you?

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