Monday, September 14, 2015

Minimum-Wage Legislation, In Short, is a Manifestation of Cronyism Costumed as Compassion.

A Don  Boudreaux letter to WSJ:
Michael Saltsman is correct: even those economists who support modest increases in the minimum wage largely oppose raising that wage to $15 per hour out of fear that such a huge rise would significantly reduce the employment prospects of low-skilled workers (“Joe Biden and the $15 Question,” Sept. 12).  Mr. Saltsman also predicts that “[t]hese prominent economists won’t deter unions from their quest to enact $15 wage floors around the county.”
Yes.  But the reason unions won’t be deterred in their quest is not that they disagree with economists’ prediction that a 107 percent hike in the minimum wage will price legions of low-skilled workers out of jobs.  Quite the opposite.  Unions want such a whopping increase in the minimum wage because they agree that it will destroy jobs for legions of low-skilled workers.  Because for many tasks a smaller number of skilled workers can substitute for a larger number of low-skilled workers, the greater is the number of low-skilled workers artificially priced out of jobs by the minimum wage, the greater is the artificial increase in demand for skilled unionized workers.
Minimum-wage legislation, in short, is a manifestation of cronyism costumed as compassion.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason Universit
The above originally appeared at Cafe Hayek

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