Why are we so in love with minimum-wage laws?

It seems like we’ve turned the first corner on price-control legislation — most people (absent perhaps those in the governments of Zimbabwe and Venezuela) have gone from blithe agreement that making shit they want cheaper by law is an obviously good think to being willing to entertain the notion that market prices might make some degree of sense in certain cases.  I still get weird looks when I reply to “Oh, sorry, we’re out of that” with “You should’ve made it more expensive”, but that’s entirely to be expected.  (I can only imagine how frustrated Russ Roberts gets when he’s grocery shopping.)

Minimum-wage laws, on the other hand, still strike the vast majority of people as a good idea.  They’re seen as one of the great social-justice successes of the democratic age, lifting destitute labourers from Dickensian penury under fat-cat robber barons to cheerful and salubrious 1950s-ish suburban prosperity, with a car in every cookie-cutter ranch-style house’s driveway and a chicken in every Bakelite-handled pot.  But they’re the same fucking thing as any other price-control law.

Let me spell this out.  If you raise the minimum wage, you raise the cost to employers of hiring minimum-wage workers — who tend to be short on experience, skill, credentials, or all three at once, and thus have less to fall back upon if they don’t get that job.  And since you’ve raised the cost of hiring but not given the employers any extra money to cover that increased cost, more of them won’t get that job, because employers (not being able to magick money out of thin air) won’t be able to afford to hire as much.  Raising the minimum wage doesn’t mean that kids working summers at McDonald’s will be better off — it means that a lot of those kids won’t be working over the summer, which is a bitch if they’re helping their parents make ends meet or trying to rustle up some job experience to improve their prospects.

“But!  But!  Butbutbut!” cry the Keynesians, at least until I hit them with my angry stick and dump them in the nearest landfill, “increasing minimum wage means minimum-wage workers have more money to spend, which increases aggregate demand, which eventually comes back around to make the employers rich enough to hire more workers at the increased minimum wage!”  I have a special hate in my heart for people who don’t know what hysteresis means but profess to talk about time-varying systems anyway, but in any case Nick Rowe has this argument handled six ways to Sunday:

You’ll perhaps be bewildered to discover that the Keynesians are not, at least for this post, my most-despised group.  That dubious honour belongs to social engineers like this fellow from New Zealand:

National MP David Bennett said the government saw a bright future for young people and wanted them to get the best skills possible through education and training rather than take up low-paid jobs.

“This bill says you need to pay people less to get them into their first jobs and into an unskilled future,” he said.

(Emphasis added.)

Eric Crampton (from whose blog I grabbed the above quotation) says it at least as well as I could:

Am I crazy in reading this as saying National sees high youth unemployment not as a cost but as a benefit? That they want unemployed kids so that the opportunity costs of schooling are lower?

He goes on to point out that minimum-wage laws, just like every other goddamn piece of labour legislation ever, were originally intended as forms of (usually racist, sexist, xenophobic, or all three at once) social engineering, to keep “undesireables” out of the work force.  He continues:

Recall further that while high minimum wages do push youth out of employment, that doesn’t set them on the path to education and high earnings. At least not for the folks hurt most by high minimum wages: low skilled minority groups.

(Then he cites a paper to support that claim.)

Do note the classist arrogance in MP Bennett’s statement — he blithely assumes that “the best skills possible” are only accessible through “education and training” rather than, say, on-the-job apprenticeship.  Where the fuck does he think buildings come from?  Giant storks carry them in diapers?  Tradespeople just don’t exist in Bennett’s happy little fantasy world, yet somehow he was elected to office.


1 Response to “Why are we so in love with minimum-wage laws?”

  1. April 24, 2010 at 09:20

    One of my pet peeves is the child protection law passed in Oregon. When I was ten years old, summer mornings started early, with a bag lunch in hand, walking to the pick-up spot so that I could spend most of the day picking strawberries. If memory serves–and it prolly doesn’t–in a good day I could earn ten bucks. Good pickers, normally the older kids, could double that.

    When older, I added beans, which had a later season. All you had to do was show up at the pick-up spot. You had to provide your own lunch. The grower provided the work, transportation, really bad outhouses and water from a hose. If you kept your head in, you could make fifteen to twenty dollars a day.

    Both jobs, as I recall, paid weekly. As a kid, getting a hundred bucks or so all at one time was pretty cool. Not that I could spend it. That money was for school clothes.It did mean that I could wear Levi’s jeans rather than those sharkskin Sears jobs. (And some Cokes and Twinkies were snuck out of the dosh.)

    The earliest lesson taught? The more you applied yourself to the task at hand, the greater the reward. Screw around in the field? Chances are your invitation to return would be revoked, and then, no money.Upshot?

    By the time I was 15 years old, I had my first “real” job, working at a car wash. Within a month I was the “front end manager.” At 15 I demonstrated to my boss that I “got it.” If a car was coming off the line, the owner of the car expected the car to be clean. Inside and out. My cars were clean coming off the line. (You jumped into the car as it entered the tunnel. Windows, upholstery all cleaned by the time the car left the tunnel. Then, wipe the inside of all the doors and frames, check for “clean” on the rest of the vehicle.)

    By the time I was fifteen, I was making twice the minimum wage and had guys up to eight years older than me as subordinates. I learned to lead by example rather than through exhortation.

    Today, you can’t work if you’re younger than 16 in Oregon, unless it’s for a family-owned business. All the ag guys, no longer assured cheap child labour, turned to illegals. Imagine that! Sure, our kids are protected from the evil of hard work. And, learning some basic principles about work.

    And that’s a good thing, isn’t it?

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