My latest episode of Sunday Morning with Robert Wenzel is out.
In this edition, I discuss slick lefties who will grant that some unemployment will occur with an increase in the minimum wage but, they argue, that the hikes for those who keep their jobs outweigh the losses of those who become unemployed.
This thinking must be smashed. This episode shows how to do it.
-RW
Good stuff, very interesting approach to explain this.
ReplyDeleteThe slice off of production from forced unemployment got me thinking of the black market and even Mises saying capitalism breathes through loopholes. Maybe an episode or two on loopholes and/or black markets not being "bad".
ReplyDeleteThanks, Eric Morris
Bob, what is your response to the lefty response of "the people who remain unemployed now have more money SPEND which will help everyone else (create more demand etc)".
ReplyDeleteTotally BS of course but curious to know how you would approach it.
Raising the minimum wage is always explained as making an employer pay more. But, it is equivalent to say it is a restriction on the employee. The prospective employee must demand the minimum or refuse to work, enforced by the state. That doesn't sound so good.
DeleteAssume some employees do get more pay. This doesn't change their productivity, so the company does not produce more to make more money. Any extra cash paid to the employee disappears from the income of other employees and the owners of the company. There is no overall increase in spending plus investment. Investment is even more productive to the economy than spending is, contrary to some popular fantasies.
Maybe the employer raises prices. So, the employee gets more to spend, but it comes from the customers who then have equally less to spend. There is no increase in total production or spending.
Activists argue that paying more to employees will raise production and business income, thus paying for the increase in wages. There is no support for this. If merely paying more would raise production, then companies need no outside pressure to do this. Minimum Wage activists imply they know more about running all business than the business owners, in the abstract,
A person's knowledge and productivity determines his wage, along with competition for productive skills. We know that this competition sets wages at the low end, because it sets all wages in the middle, high, and super high levels. People don't need government help competing for higher wages, and government mandates merely interfere with each person accepting the job that is best fit to his abilities.
@Matt
DeleteI assume you meant to say "the people who remain employed", not unemployed. And there are many issues with that logic. But for me the most obvious would be that, in order for aggregate demand to increase, aggregate productivity would also have to increase. This means that the people remaining employed would not only have to realize an increase in productivity, but such a substantial increase as to overcome all of the lost productivity from those thrown out of work.
And since minimum wage legislation simply decreases the universe of allowed compensation arrangements, one would expect a priori an overall DECREASE in productivity, and LESS aggregate demand.
Nice to see you entering into the youtube space. Keep it up.
ReplyDeleteLook forward to watching this when I get out of the stinking North Woods and back to hi speed intraweb.
ReplyDeleteYou're not going to win over lefties with logic and reason.
ReplyDeleteYou are correct that we are not likely to convert those who are either knowingly lying or have so deceived themselves to believe economic fallacies. The audience is always those people that are looking, seeking and listening for truth.
DeleteAs Wenzel mentions in the last 30 seconds...
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