Monday, August 19, 2013

There's A New Push To Increase Unemployment in Seattle

The demonstration of how economically confused, the people of Seattle are, is reaching new heights.

According to AP,  Washington already has the nation's highest state minimum wage at $9.19 an hour. Now, there's a push in Seattle to make it $15.

Murray Rothbard beautifully smashed the call for minimum wage laws, decades ago:
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.

If the minimum wage is, in short, raised from $3.35 to $4.55 an hour, the consequence is to disemploy, permanently, those who would have been hired at rates in between these two rates. Since the demand curve for any sort of labor (as for any factor of production) is set by the perceived marginal productivity of that labor, this means that the people who will be disemployed and devastated by this prohibition will be precisely the "marginal" (lowest wage) workers, e.g. blacks and teenagers, the very workers whom the advocates of the minimum wage are claiming to foster and protect.

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 antipoverty 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?

It is obvious that the minimum-wage advocates do not pursue their own logic, because if they push it to such heights, virtually the entire labor force will be disemployed. In short, you can have as much unemployment as you want, simply by pushing the legal minimum wage high enough.


  1. Ouch...this one hits home! My mother is on the Seattle City Council, and I'll have to send her this post to share with her cohorts. Meanwhile, I live in Singapore where there is no minimum wage and unemployment measures under 2%. Even if we aren't talking about a priori truths of Austrian Economics, doesn't the empirical evidence start to get a little heavy in our favor at some point?

  2. According to Peter Schiff, the rate of inflation since 2004 has been 6.2%/year (see article on this blog in which he measures inflation with a Big Mac).

    Washington Minimum Wage
    January 1, 2004 $7.16
    January 1, 2013 $9.19

    $9.19 in 2004 schifflation adjusted dollars is $5.34. So the real minimum wage is 25% lower in 2013.

    Unemployment rate in July 2004 was 6.1%. Unemployment rate in July 2013 was 6.9%.

  3. The education and skills of workers has also dropped. People should be responsible for their own wages. You don't like making $8 an hour? Than you should make yourself a more valuable employee to someone. Get training. Show up early and stay late. If you double a businesses labor expense overnight without increasing revenue, than you have sentenced that business to death and no one will have jobs.