“We find that this period’s binding minimum wage increases reduced low-skilled individuals’ average monthly incomes. Relative to low-skilled workers in unbound states, targeted workers’ average incomes fell by $100 over the first year and by an additional $50 over the following 2 years.” Workers with college education were pushed in part toward work without pay, such as internships, while workers with lower educational attainments simply experienced more joblessness. [Jeffrey Clemens and Michael Wither, Cato Research Briefs in Economic Policy, March]
Related: “Raise the Wage Act Is More Rhetoric than Reality” [James Dorn, Cato] “Promises Made, Promises Broken: The Failure of Washington State’s Minimum Wage Law” [Maxford Nelsen, Freedom Foundation of Washington]
4 Comments
Poor David Card and Alan Krueger. Aren’t they still beating that dead horse?
There is a fundamental problem with free market theory. Any provider of goods or services has to cover both its fix costs and its incremental costs. But prices are determined by incremental costs. Thus one see price collusion in the construction business. Otherwise bids in a surplus situation are set as to minimize loss. The cost of adding a customer to a trash collection route is low, thus trash collection companies often are associated with organized crime. Wages will be bid down where labor is surplus, and employers have to pay that wage to remain competitive. Minimum wage laws make sense to me
“Minimum wage laws make sense to me”
Quite so, the least productive elements of society are better off on welfare, essentially making them perpetual wards of the state by removing the only basis upon which they are employable: low cost. It is foolish to think otherwise.
Likewise there is much to be said for government incentivisation, via minimum wages and other regulatory measures that increase the cost of labour, for the development of fully automated fast food and janitorial jobs, given that this is now increasingly plausible technologically.
These sorts of things also have the added value of adding to the pool of citizens with a vested interest in maintaining the welfare system, without risking perverse incentivisation that productive economic activity sometimes causes, which may lead to socially inappropriate activities, such as increased carbon footprint or voting for incorrect political parties.
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