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Thursday, December 13, 2012

Minimum Wage Arithmetic

A recent article in the Economist discusses minimum wage laws.  Some representative excerpts about the current state of empirical evidence include:  "... minimum wage has done little or no harm..." and "... a moderate minimum wage probably does not do much harm and may do some good...".

This hardly seem like a ringing endorsement of minimum wage laws to me.  I interpret the article as basically saying that this particular government intrusion and loss of freedom at best has little effect other than to increase the size and power of government and limit freedom of the populace.

While that seems like a bad thing to me, many are thrilled to know that their favored approach of having the government do as much as possible is probably not going to screw things up too badly in this particular instance.  The Economist, for example, seems quite happy with minimum wage laws.

7 comments:

Peter said...

Bret, leaving aside questions of quantum, how would you answer the argument that conservatives should make their peace with minimun wage laws because, whatever the economic inefficiencies, the political consequences of getting rid of them would be a gift to the left and result in a wave of old style Upton Sinclair--like populism, and particularly a resurgence of unionism?

I take your point about their effect on unemployed youth, but other demographics don't necessarily have the same "take it or leave it" freedom.

Peter said...

Bret, leaving aside questions of quantum, how would you answer the argument that conservatives should make their peace with minimun wage laws because, whatever the economic inefficiencies, the political consequences of getting rid of them would be a gift to the left and result in a wave of old style Upton Sinclair--like populism, and particularly a resurgence of unionism?

I take your point about their effect on unemployed youth, but other demographics don't necessarily have the same "take it or leave it" freedom.

Peter said...

Whatever Harry had is obviously contagious.

erp said...

Peter, the same argument could be made for all the left's fantasies of entitlements/redistribution of earnings: subsidized housing, food stamp credit cards, free phones, free health insurance, free abortions, affirmative action ...

Not only does socialism work against prosperity of the general population of working stiffs, it is absolutely deadly to the downtrodden it allegedly wants to "help" by keeping them ignorant and dependent.

Bret said...

Peter,

My post was expressing my surprise at an article the suports minimum-wage laws yet has such marginal evidence to back that support.

There's really nothing new in the economist article that isn't available with more detail numerous places (wikipedia, for example).

The politics is another question. If we need to reduce liberty and possibly make ourselves less well off in order to pretend to help various groups, then maybe we have to do so, because you're basically saying "pick your battles and this isn't a good one to fight" and that's probably right. That doesn't mean we shouldn't continue to point out the negative aspects of such policies.

erp said...

Standing up for principle is the only battle to fight. We lost that one and now we're toast.

Hey Skipper said...

[Peter:] ... how would you answer the argument that conservatives should make their peace with minimun wage laws ...

By strenuously resisting every attempt to raise the Federal minimum wage. The states can do what they like, whereupon we will get a chance to find out that supply and demand is not merely a good idea.

[Bret:] My post was expressing my surprise at an article the suports minimum-wage laws yet has such marginal evidence to back that support.

This is going a ways back, but I seem to remember The Economist doing a study about 15 years ago of purchasing power parity minimum wage rates and youth unemployment across Europe and the U.S.

You would not be the least surprised by what they found.