Saturday, September 19, 2015

A Further Comment on the Minimum Wage and How It Impacts Individuals

I want to expand a bit on the recent exchange Walter Block had with an emailer, Do Minimum Wage Laws Impact Employees Higher and Higher Up the Wage Ladder?

First, I believe the emailer makes somewhat of a hidden assumption when he writes:
...while people naturally might seek to improve their own productivity, some might do so only as a consequence of being "priced out" of their lower productivity...
It should be made clear that some people may not be capable of increasing their productivity. I am thinking of people on the left side of the intelligence curve. The farther to the left you go, the less likely they are going to be able to improve their productivity, even if we make the huge leap that more schooling (public school?) will increase productivity in general.

Expanding a bit on the range of the intelligence curve, when one recognizes that entry level jobs may be the best education in terms of increasing productivity, the minimum wage may act to stunt productivity improvement, since entry level jobs are the ones most often impacted by minimum wage laws.

Finally, some guy in a suit showing up on reddit suggests to me how rare of an event this is. If it was a daily occurrence it wouldn't show up on reddit. I suspect that further probing of those standing on corners in suits looking for jobs are either seeking jobs that pay more than market conditions or are seeking jobs where no one thinks the applicants are qualified. Markets clear including job markets. Someone on a corner is looking for a specific kind of job, where no one may want him, rather than a job in general.



  1. The more likely outcome is exactly opposite of the emailer's presumption. When minimum wage is raised, people with more productive positions (who may even have made slightly less than the new minimum wage) will be tempted to occupy the jobs that now pay more -- especially if the previously lower-paying jobs are easier. The workers displaced by the new minimum wage will be unable to replace those more productive workers, and the wages for the more-productive positions will have to rise.

    1. Yes, different jobs can be imperfect substitutes for each other if the transition is possible. Almost no market, for jobs or anything else, is isolated, indeed, the very existence of money implies that the conditions in every market can affect every other market.