I participated in the February 21, 2017 “Libertarian Angle,” podcast sponsored by the Future of Freedom Foundation, with the Foundation’s president, Jacob G. Hornberger, on the topic: “Minimum Wage and Free Trade,” joined by our guest, Dr. Donald Boudreaux, professor of economics at George Mason University.
One of the most persistent and harmful fallacies is the belief that worker’s wages can simply be raised by government fiat by passing a minimum wage law making it illegal to hire anyone below a certain amount per hour. Rather than helping the unskilled and inexperienced to improve their economic position, minimum wage laws price out of the market many of those whose value-added from the employer’s perspective is less than the wage governments command the employer to pay.
Thus, many of those most in need of on-the-job training and workplace experience, so they may become more skilled and valuable in the future to earn a higher market-based wage, are left potentially permanently unemployed. They are prevented from moving up that ladder of success over time because the minimum wage keeps them from getting their feet on the bottom rung to start an upward climb to a higher salary down the road.
The other great fallacy is the misplaced belief that government protectionism against imported goods “saves” or “creates” jobs, and improves the economic well being of the citizens as a whole in the country putting up trade barriers against the importation and sale of foreign goods.
All such trade barriers succeed in doing is raising the prices and narrowing the choices of goods available to the consumers in the country practicing trade protectionism. It undermines the cost-efficiencies and productivity of a wider, global specialization in worldwide system of division of labor, with the result that the standard of living in the protectionist country either declines, or at a minimum improves far less than could be case under freedom of trade. The beneficiaries are those protected industries and sectors of the protectionist country that do not have to face the competitive offerings of their foreign rivals, at the expense of the other members of the consuming public in that society.
Also emphasized by all three of us in the discussion is that whether it is minimum wage laws or barriers to trade, both entail a common feature: The denial of individual liberty and freedom of choice by the citizens in the country practicing these interventionist policies. The government arrogantly and presumptuously claims the authority to tell people with whom they may enter into mutually agreeable trades, whether it is a wage contract for employment or the buying and selling of desired goods in the marketplace.
And, thus, governments impose forms of economic tyranny on the people living under such political paternalism and special interest privilege.