Tuesday, February 4, 2014

Economic Illiteracy and the Minimum Wage

By Mark C. Schug And Gordon D. Gaster

Economic illiteracy among American voters is a high cost for the most vulnerable in our society. The newly resuscitated debate regarding the minimum wage is just the latest example.

A November 2013 Gallup Poll found that more than three-quarters of Americans — 76% — say they would vote for raising the minimum wage to $9 per hour (it is currently $7.25). Only about one-fifth — 22% — would vote against it.

Folks with a basic understanding of economics scratch their heads in wonder at this sort of news. As any economist will tell you, the minimum wage is a story about supply and demand. In Econ 101, students learn that prices are incentives that influence the actions of buyers and sellers.

At the core, it's pretty simple. The law of demand states that as the price of a good or service increases, consumers will buy less. As the price goes down, consumers will buy more. The law of supply states that as the price of a good or service goes up, producers will supply more. As the price goes down, producers will supply less. The point where supply and demand balance is called the market price.

Unfortunately, many people have difficulty translating these common-sense ideas — ones they experience every day in supermarkets and at gas stations — to the labor market for unskilled workers and how it affects them.

Read the rest here.


  1. People who support the minimum wage will find their eyes glazed over by the end of the sixth paragraph. So I searched the comments for a neater explanation of "hiking the minimum wage means firing people, not giving raises."

    After some painful reading, I came away more convinced than ever that the minimum wage must be raised as high as possible, as soon as possible, as a desperately needed object lesson in supply and demand.

  2. lol i don't care about supply and demand or whatever.

    Minimum wage moves beyond economics into HUMAN values and caring about HUMAN beings, as opposed to numbers on a spreadsheet.

    oh, and there are a number of scientific, peer-reviewed articles that prove minimum wage doesn't follow supply and demand, FYI

    - Barry Foxgroup

    1. If you cared about human beings you'd care about freedom. Minimum wage is force, not freedom.

    2. Your "scientific, peer-reviewed articles" were written by sectarians who don't have to make payroll.

    3. Yes, and the laws of physics only apply Monday through Saturday, just like the laws of supply and demand. LOL If they don't apply or mean anything, then why not end poverty and raise it to $20/hr? There is plenty of information out there that proves that raising the minimum wage hurts the unskilled. I certainly wouldn't call people that support raising it caring human beings. Life is about tough choices and it seems that the left is incapable of making a tough choice when it comes to economics. They are like the parents that feed their children candy to make them happy. Stop taking the easy way out!

    4. @Barry Foxgroup:

      You are missing the point. Supply and demand are not about numbers on a spreadsheet. They are about the values and cares of human beings.

      With regard to minimum wage laws, supply refers to the willingness of real human beings to supply their labor to other real human beings in exchange for wages. It is an expression of their cares and what they value. Likewise, demand expresses the cares and values of real human beings who may wish to purchase the labor of other real human beings.

      When one says that he cares about the values of human beings, but not about supply and demand, he makes no sense. Such a statement is an absurdity.

    5. "oh, and there are a number of scientific, peer-reviewed articles that prove minimum wage doesn't follow supply and demand, FYI"

      I found a lot of scientific, peer-reviewed articles that prove that the planets do indeed influence our love lives and our destiny. Obviously, it all depends on which peers are doing the reviewing, doesn't it?

    6. I think you've missed a joke here. The person signed himself
      Barry Foxgroup
      Barry - Jerry
      Fox - Wolf
      Group - gang

      This post is a joke--an anonymous mocking Jerry Wolfgang. At least that's the way I read it.

  3. Speaking of economic illiteracy, take a look at this story: Fry Cook Shifted to Part-Time Work Confronts Obama.

    First, Obama passes the ACA and gets the Fry cook partially fired. But that's not good enough for Obama. When the Fry cook complains, Obama vows to do what he can to increase the minimum wage and get Fry cook totally fired!

    Is it any wonder that more and more people are giving up and just dropping out of the workforce?

  4. People who advocate for the minimum wage are putting a specific number on the value of a human being.

  5. Have you seen the Reich video on the minimum wage? Its one of the easiest videos to destroy with logic that I've seen come from someone that is supposedly a brilliant political economist. Had a seemingly intelligent guy actually cite it as irrefutable proof that raising the minimum wage made sense. I watched it and took it apart sentence by sentence. Reich is so stupid in the video he actually contradicts himself several times. Anyhow, when I got done, this guy realized his video was crap but I think still wants so badly to believe that raising the minimum wage is a good thing to do. He even stated that he didn't care if only a few people benefited. How can you argue with that? He's ok with hurting people just because it sounds nice to raise the wage level. I think people like him are the most uncaring people on this planet. Doing evil under the pretense of good is the worst thing humans can do to one another.

  6. The minimum wage outlaws jobs.

  7. Speaking of economic illiteracy, care to chime in, JW?

  8. There are a lot of people wanting to raise the minimum wage with little understanding of the outcome. Sounds ok on the surface, but that money will be accounted for in the long run. Probably through higher prices. Jobs cuts. Hours cut. Faster automation. Trying to make minimum wage jobs, career jobs is not the answer. It is like trying to tell a hamburger it needs to be a steak now. Getting people from these low-skilled jobs to better ones is the answer. America needs to make sure that people that want to succeed can get to the next level.