Prof. Walter Block replies to two inquiries in economics:
Q.If the minimum wage goes up, fewer people will be hired.I have understood that for a while...
And the left seem to call for a really high minimum wage but it seems to me that if say minimum wage was £15:
1 essential items would stay the same price
2 some non essential items might become too expensive for people on welfare
3 the £15 might then become the new bread line and the left might push for £20 an hour
Do you see these points as logical? Am I getting it? Thanks for reading
WB: People ignorant of economics think that the minimum wage is like a floor; raise it, and everyone gets paid more. If so, why not raise it to $1 million per hour, and we could cure poverty with one stroke of the legislative pen. No, the minimum wage is not like a floor. It is akin to a high jump bar, or a hurdle: it creates unemployment for all those unable to jump over it. If it is set at, say, $10 per hour, then all those with productivity below that level will tend to be unemployed. If
raised to $15, then all those whose productivity is between $10 and $15 will also lose their jobs. The only just and economical policy is to repeal this vicious law that attacks the unskilled.
If it is so bad, why do we have this law? Who benefits from it? Mainly unions. Organized labor is always in competition with the unskilled. There is no better way to eliminate this competition than by pricing the unskilled out of a job: the minimum wage law. There are dozens of excellent essays on this subject. Go to Mises.org, and search for “minimum wage.
Q. I watched your debate on the minimum wage law with the Law Professor Bill Quigley. At first I considered it would be a better debate if he were also an economist. I watched anyway and it became one of those situations where I was often stunned by his approach. It was an economic question and to argue it with morals and ethics and not economics just seemed to... Well I suppose it demonstrates the academic view of the simplistic left wing do gooder approach that we see in everyday life and from ill informed politicians that throw out slogans like "we must look after the most desperate in our society." Maybe this should be called "the undeniable positive" where a proponent of a political agenda uses it to try and outflank an opponent. If on a political panel show for example if one politician uses an undeniable positive their opponent is automatically bad if they don't agree! It's then hard to explain logic (that people are often inept at understanding anyway) after such a political tactic. Not that the politicians I see on tv mostly would really know much about the logic of economics anyway... They just seem to throw out buzz words / slogans.
I realized from a question you took at the end of that debate that inflation is caused by central banks. I knew this of course but I forgot the central logic. But I guess you are saying the ultimate rule of the central bank controlling inflation supersedes the market? And minimum wage law causes more unemployment than there otherwise would have been... This is always the rule and inflation is another matter mostly.
Funny how ages ago in my taxi I worked out that minimum wage increases would cause less people to hire... Just thinking about it in my head... Now with some refinement from your online talks I can articulate that much better.
WB:Thanks for your kind comments. I was delighted to debate Loyola law professor Bill Quigley on the minimum wage law. His views are emblematic of what most people think. I couldn’t get a Loyola economist to debate me on this issue since all five of us (Bill Barnett, Stuart Wood, John Levendis and Leo Krasnozhon) are staunch free enterprisers and would fully agree with me that the minimum wage is a horrid law, one that unemploys the unskilled. As for inflation, roughly speaking, it is a matter of how much money there is in the economy versus the quantity of goods and services. The latter change very slowly compared to the former, under central banking, so inflation is virtually always and ever a monetary phenomenon
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