In a Cafe Hayek post today on the minimum wage (“A Sufficient Reason to Oppose the Minimum Wage“), Don Boudreaux writes:
A sufficient reason to oppose the minimum wage is that it prices some people out of jobs that they would otherwise have voluntarily chosen to take. The number of people priced out of jobs is, for me, irrelevant to this assessment (although, of course, the greater the number of people priced out of jobs by the minimum wage, the worse is the magnitude of its undesirable and unwarrantable effects). Even if only one person is priced out of a job by the minimum wage (or more precisely, even if only one person is priced out of the job that he or she would have chosen to take in the absence of the minimum wage), I have sufficient reason to oppose it.
Nearly all politicians and popular pundits who endorse the minimum wage insist that it has no ill consequences for low-skilled workers. I have never heard the likes of Barack Obama, Hillary Clinton, Bernie Sanders, Andrew Cuomo, Jerry Brown, or Robert Reich ever, when pleading for a higher minimum wage, say something akin to “Many of you low-skilled workers will get a raise but some of you will be priced out of your preferred jobs. Indeed, some of you low-skilled workers are likely actually to be cast indefinitely into the ranks of the unemployed. But worry not, I’m guessing that each of you prefers to have a higher chance of being indefinitely unemployed because this higher chance of being unemployed comes along with a higher wage in the event that you do find jobs.”
At least the above announcement would be more honest than is the typical announcement that portrays the minimum wage either as a miraculous free lunch or as a policy the full costs of which are borne exclusively by people other than low-skilled workers. The above announcement would be even more honest if the pol or pundit making it would add that the increased prospects of being rendered unemployed by the minimum wage are not randomly distributed. In fact, those workers who are disproportionately likely to be rendered unemployed are workers who are least-attractive at the higher wage to employers (workers, say, such as inner-city minority single moms with neither high-school diplomas nor reliable means of personal transportation) while those workers who are disproportionately likely to remain employed at the higher wage are the ones who are most-attractive at the higher wage to employers (workers, say, such as retirees with long work experience who are drawn out of retirement by the higher minimum wage).
Don’s post made me think another way to view the arguments for and against the minimum wage.
Those who support increases in the minimum wage (Barack Obama, Hillary Clinton, Bernie Sanders, Andrew Cuomo, Jerry Brown, or Robert Reich) focus narrowly and almost exclusively on only one obvious and inevitable outcome — higher monetary wages for some unskilled and limited-experienced workers — while ignoring almost all other outcomes. Here’s how I would summarize the position of minimum wage proponents:
Maximize the monetary wages earned by some unskilled and limited-experience workers through government fiat, without regard to the many inevitable delayed, hard to measure, and invisible negative consequences of such policies on: a) unskilled workers and b) the companies that hire those workers.
On the other hand, I would suggest that supporters of a market-determined wage (minimum wage opponents) take a much broader and comprehensive view of the labor market for unskilled workers, and is a view that is much more humanistic and compassionate towards unskilled workers than the “greedy, grab as much money as possible” approach of Robert Reich et al. Here’s a summary of some of the goals of minimum wage opponents:
1. Maximize jobs and employment opportunities for unskilled workers.
2. Maximize the number of work-hours available to unskilled workers.
3. Maximize the chances that the highest number of unskilled workers will get the greatest amount of on-the-job training.
4. Maximize the chances that unskilled workers will get the greatest amount of non-wage fringe benefits (employee discounts, free or reduced cost meals, bonuses, raises, profit-sharing, healthcare benefits, etc.) and other non-wage job attributes (quality of workplace environment, flexibility in scheduling, upward mobility, etc.).
5. Minimize the likelihood that unskilled workers from minority groups will be victims of discrimination in the labor market.
6. Maximize the chances that existing small businesses that hire unskilled workers will prosper.
7. Maximize the chances that the greatest number of new small businesses that hire unskilled workers will emerge.
Bottom Line: Even though minimum wage proponents are generally characterized as being “compassionate” towards unskilled workers, I would suggest that they are primarily advocating a position of greed on behalf of unskilled workers by narrowly focusing on getting more money for some unskilled workers through a government mandate – without regard to the very un-compassionate long-term outcomes of such a mandate. Unskilled and limited-experience workers who want the greatest chances to gain job experience, get on-the-job training, and develop job skills that make them more marketable (and more highly paid) in the future, will be much more effectively served by the position of the supposedly un-compassionate minimum wage opponents.
In the end, unskilled workers don’t need our compassion. They need jobs. And the way to maximize employment opportunities and jobs for those workers is clearly a (compassionate) world without minimum wage laws government mandated price floors that guarantee reduced employment opportunities for low skilled and limited-experience workers, especially minorities.
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