We are supposed to believe that if minimum wage laws are not found to harm small businesses or lead to rising prices, then they must be ok? Tom Lehman says this is just wrong. We must learn to always make the strongest and most consistent arguments against the enemies of free markets, or we will lose the battle. As Mises himself always reminded us, that requires constant study and a steadfast pursuit of the truth. [Full Article]
Source link: http://blog.mises.org/2321/the-wages-of-sinful-economic-arguments/
The Wages of Sinful Economic Arguments
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It seems that we are past the point we argue about fundamental truth. General wage and trade restrictions are objectively evil. But we don’t say “evil” or are embarrassed. Even the “Evil Empire” was only accepted as “evil” by most because they pointed nukes at us, and maybe repressed their citizens, not because they were evil from the core through the periphery.
So arguments are forced into pragmatism. Minimum wage laws destroy jobs. When it isn’t shown to be true in whatever example case, the whole argument folds. Or the counter argument is to subsidize minimum wage jobs, adding yet another layer of government.
But if you ever concede the principle – which is the stragegic goal, you will eventually lose enough tactical, pragmatic battles to lose the war.
That is what attracted me to Mises and Hayek and the Austrians – there is a bass ground theme that continually asks “but is it true? – this is true – this is how ordinary people, not angels or devils or idealists or geniuses, will really act in the real world”.
They had no fear because even the most subtle lie eventually contradicts itself, which pure truth does not.
If people make bad decisions, it is usually more proper to inform and thus transform the people than to transform the law or the market. Ordinary people suffer from concupisance but aren’t stupid.
I would, if I could, amend the article in one small detail: It is those employees who APPEAR to be least employable who are hurt by minimum wage legislation, not necessarily those who ARE least employable. For example, there may be teenagers, even black ones, here and there who would make superb employees–better than their grown-up co-applicants. They may be more conscientious, more intelligent, even more familiar with the kind of work being done. –But since they are members of categories not LIKELY to have these traits, minimum wage laws penalize them and render them unemployable. Once I knew, in a court-reporting school, a shy, pretty, very young girl with blonde curls. Middle-aged men with marginal court-reporting credentials (and skills inferior to hers) dropped out of the school to become court reporters at once. This young girl, however, remained in school until she could achieve maximum credentials, knowing that she did not APPEAR to be the most viable of employees and would therefore be left behind in a business climate where starting at low wages is not permitted. (And she may have been left behind anyway, despite the excellent credentials she ultimately did achieve). Employers and econometricians are not omniscient and do not therefore always knw who is most employable. There are others besides those they point to, whose lives are blighted by minimum wage legislation.
Also, we should point out the economic fallacy involved when somebody argues that raising (or setting) minimum wages will not reduce employment. Because, it is simply law of demand and supply that if price is set or raised (minimum wage) then quantity exchanged will be reduced. See my blog for detailed articles.
A simple argument to use against those who advocate the minimum wage is to ask them if the minimum wage should be $20/hour, $100/hour, $1000/hour, etc. Once you have reached a point where they relent, you have won the argument. Ask them why they arbitrarily selected that wage as satisfactory. When they can’t give a reasonable answer, educate then that the only reasonable way to establish what a person should earn is to allow the market to determine that price.
I often use the following example to demonstrate how the minimum wage creates unemployment. Assume as a small-business owner that I have $20 to pay out in wages per hour. If the minimum wage is set at $7/hour, I can only hire two employees. Is it reasonable to assume that I will use all that $20 to pay two employees, or will I pocket the remaining $6/hour? The answer is probably obvious. However, if I have the flexibility to create my own wages, I can hire two workers at $7/hour and one at $6/hour, or four workers at $5/hour or many other combinations. I have successfully added more jobs to the workforce by determining my own wage scale. Now extrapolate this scenario to the macroeconomic level and the effect is obvious. The minimum wage is a job-killer.
Again, an issue that has nothing to do with capitalism and the only reason it exists is because capitalism in the United States does not.
There are no official voices heard defending capitalism because it has become a dirty word that nobody understands, least of all Prez. Bush.
There is a minimum wage because in statist systems, there exists special interest groups. And this is what America has become – a collective of special interest groups all striving for the loot taken by force from their fellow citizens.
So if the minimum wage is eliminated, then so will ALL OTHER special interests, and in 21st century America or anywhere else in this world today, this is not going to happen.
Is the minimum wage wrong? Yes it is, but far worse is the social welfare and corporate welfare that consumes billions through force.
At least the minimum wage is passive by comparison.
Quick comment: David, I’m pretty sure there are plenty of people who understand ideological capitalism less than “Prez. Bush”. Nice epithet and quaint cheap shot though. Just trying to pick up the dialogue, is all.
See yas,
The article makes the point that the most effective argument always proceeds from first principles. Applying this recommendation makes every argument regarding proposed legislation easily defended or advanced, simply by understanding and referring to Frederic Bastiat’s enduringly timely essay “The Law”. The minimum wage law does not prevent plunder, it promotes it by forcing one individual, the employer, to pay more than he might desire. You are not to make one man better off economically by forcing another to be worse off, for if you do you open the door to the conception of government as a clearinghouse for special interest groups (which it has indeed become) when its true purpose, according to Bastiat, should only be to act as the collective mechanism for the establishment of a secure environment in which men are protected from the plundering propensities of their fellow man.
Great article by Prof. Lehman. So the key emphasis in conversation must be that wage controls cause unemployment, I conclude so far.
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