Monday, September 12, 2016

Considering the Government Policy of Mandated Theft by Workers

By Don Boudreaux

Suppose that government mandates that each and every low-skilled worker steal each hour from his or her employer some percentage – say, 33 percent – of his or her hourly wage.  Further suppose that government successfully enforces this mandate, and does so in a way that ensures that employers do not lower any of their workers’ nominal hourly wages.  Workers who refuse to obey this mandate are thrown in jail; therefore, most workers obey it.  Workers get to keep the stolen proceeds to spend however they choose.

Does anyone doubt that such widespread thievery by low-skilled workers would cause employers over time to use fewer such workers?  Would anyone argue that such government-mandated theft is ethical – that it is a morally justified means of dealing with income inequality or with poverty?  Would anyone insist that such thievery will pay for itself because it will increase the spending done by these workers?  Would anyone suggest that this government-sanctioned ability to steal would, by making workers more content on the job, so improve worker productivity that the theft pays for itself?

Would some economists maintain that we cannot predict the results of this thievery on employment levels of low-skilled workers until and unless we run econometric studies to discover what actually happens?  Would economists – and scientific-minded pundits and policy-makers – accept as reliable the results of such studies that find no clear employment effects of this state-enforced thievery?  Would these economists, pundits, and policy-makers infer from the results of these studies that monopsony power must infect labor markets?

Would anyone accuse opponents of this policy of state-mandated worker theft of being “anti-worker”?  Would anyone acknowledge that, yes, such state-mandated thievery will indeed reduce the employment of low-skilled workers, but if the total value of the amounts stolen by the workers who retain their jobs exceeds the total value of the income lost by workers who lose their jobs, then the mandated-minimum-theft policy passes a “cost-benefit” test and, hence, passes moral muster.


I’m pretty sure that the answer to all of these questions is “no!”  (Possible exceptions are the answers to the questions in the third paragraph above.  The number of scientifically naive economists is so great these days that I would not be shocked to discover some economists saying that no prediction is possible until and unless we first gather the results from econometric studies of the matter.  Such is the sorry state of my beloved profession.  For empirical evidence [!], see the many economists who assert that if some empirical studies find no negative employment effects of minimum-wage legislation, then minimum wages have no negative employment effects.)

And yet, although the answers to the above questions are clearly ‘no,’ when the policy for artificially raising employers’ costs of employing low-skilled workers is called “minimum wage,” lots of people – perhaps most people – seem to believe that a government-enforced minimum wage will unleash no ill consequences upon low-skilled workers or that the positive consequences from workers who keep their jobs might justify the negative consequences suffered by workers who lose their jobs because they are forced by the state to steal from their employers.


I am here not saying that minimum-wage workers are thieves.  I emphatically do not believe that they are.  Instead, I above point out that from the perspective of employers, the economic consequences of such a policy of mandated theft by workers and minimum wages are practically identical.  So it’s inconsistent for someone to assert that minimum wages have economic outcomes that differ in any meaningful way from those of a policy of mandated theft by low-skilled workers.

The above originally appeared at Cafe Hayek.

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