Tuesday, March 18, 2014

Murray Rothbard On the Only Way to Truthfully Regard the Minimum Wage: Compulsory Unemployment

From Chapter 36  in Murray Rothbard’s book Making Economic Sense:
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.
(Via Mark Perry


  1. large amount of unemployment? Raising the minimum wage to $10.10/hour costs 500,000 jobs and raises wages for 16.5 million. It's a trade off. The fact that 16.5 million keep their jobs and get higher pay means these workers were getting ripped off. So 500K lose jobs to prevent 16.5 million from getting ripped off. Many of the 16.5 million who get higher pay are still getting ripped off even after the wage is raised.

    Also, illegal does not mean criminal.

    Violating the civil code is not a crime. Violating the penal code is a crime.

    If you are charged with a crime, the burden is "beyond a reasonable doubt" and the govt is required by the 6th Amendment to provide you with an attorney.

    Violating the Fair Labor Standards Act is rarely a crime. It's a civil law violation. If you hire an illegal to babysit your kid you are violating the Fair Labor Standards Act. You are not committing a crime. If you get caught, you face a civil prosecution.

  2. This passage said nothing about existing jobs, only that minimum wage laws make otherwise voluntary contractual agreements illegal.

    The author was using the stronger "criminal" to make a point; perhaps the audacity on the part of bleeding heart social wardens (sic) was just a bit too much for professor Rothbard.

    The concept of immeasurable utility is an interesting one... and the idea that the cost of capital goods impacting the cost of consumers good should pretty much be a given. We also shouldn't ignore the newly created demand for technological advancement in the service industry. But hey, I am "skilled labor" so I'll probably just get a sweet cost of living adjustment...

    Dismissing instead of answering is wrong, I think.