Price Controls on Labor
Few employers, if any, knowingly buy labor that costs more than it produces, just as few workers are likely to purchase consumer goods which, in their judgment, cost more than they are worth. Yet, economists who dare to point to labor legislation and regulation as important causes of mass unemployment are criticized, denounced, condemned, and vilified as callous and ruthless agents and spokesmen of greedy employers. FULL ARTICLE
Comments (15)
Quite so.
Published: June 27, 2006 9:07 AM
Seems like some people consider it more "moral" to have an inexperienced worker sit on the couch all day, receiving welfare, than to have him work for a meager salary (about as high as unemployment welfare, and which could probably be increased by the worker going into an area with more demand for labor).
So we just prohibit the alternative. After all we all know what's good for the less fortunate: seems to be the couch. It's just awesome how some intellectuals and political demi-gods decide over the lives of others they don't know AT ALL. Anybody who knows ANY unemployed people knows that it's not about money; it's about being able to earn your own living by taking part in society, as someone with a job.
Published: June 27, 2006 9:17 AM
That may be true what is written here. However among enormous amount of attact against minimum wages there is very little analysis of the salaries received by politicians. A fish starts rotting from a head. I believe it's Thomas Di Lorenzo said that politicians should be paid next to nothing ("don't incourage them with money"). Imagine if minimum vages are removed but politician's salaries keep their exponential growth. What does that have to do with austrian economics? Why only one half of the problem is being discussed? Why don't we start from the intelectuals??? It appears politically more convinient to attack workers. But real change can happen only when higher layers of society are changed. Lead by example.
Published: June 27, 2006 9:18 AM
James, I think if you read some more articles on this site, you will see that the Mises Institute does work on the intellectuals as well as the workers. Plus, nowhere in this article was the author attacking workers. I guess you feel that since he is attacking the law which you believe protects workers, you equate that with attacking the workers. But you've missed the whole point of the article: he's calling for repeal of minimum wage laws in order to raise employment for the workers. That's good.
And in my opinion, regardless of whether studies show good or bad about the unemployment rate due to minimum wage laws, it is not RIGHT to have such a law. It violates people's rights, and therefore it should be repealed.
Published: June 27, 2006 10:14 AM
Can I ask a stupid question here? Before I ask (and this really isn't necessary except that some people have a chronic inability to read what I write without inventing absurd meanings), let me say that I *agree*, whole-heartedly, with repealing all labor regulations, including the minimum wage. So please, do not engage in any personal attacks against me on the grounds that I'm a "statist" or "socialist" or "hippie" or "thief".
Now, with that out of the way, my stupid question goes as follows and begins now. Why does a minimum wage hike increase anyone's wage? If competition for labor really does swiftly bid up everyone's labor to its marginal product, why wouldn't everyone making min. wage get fired after some e.g. adjustment period? Am I supposed to believe that every time they hike it, every working person's labor advances in value exactly to the new minimum wage, or inflation exactly eats away the new dollars paid? I ask this because it's so hard to explain this effect to people when it doesn't appear to happen.
Before you answer(and this really isn't necessary except that some people have a chronic inability to read what I write without inventing absurd meanings), let me say that I *agree*, whole-heartedly, with repealing all labor regulations, including the minimum wage. So please, do not engage in any personal attacks against me on the grounds that I'm a "statist" or "socialist" or "hippie" or "thief".
Published: June 27, 2006 10:26 AM
Person, you long-haired, state-loving socialist :~),
The effect is small, and unnoticed by most, because a small percentage of the population actually earns wages that fall within the range defined by the old and new minimums. In addition, the wage increase can be met by many different adjustments other than simply firing those who no longer are judged to be "worth" the new, higher wage or by raising prices of products: (1) the employer simply accepts a lower profit; (2) the employer adjusts downwards any ancilliary benefits; (3) the employer uses technology to enhance productivity.
If the minimum were raised to, lets say, $25/hour, I am willing to bet the effects would immediately be obvious to all.
Published: June 27, 2006 11:04 AM
This is easy. Do people have faith in the government or reality. If they have faith in government then expanding the minimum wage makes sense. That logic being that "Government helps people. Government would never hurt people by taking away their jobs. So raising minimum wage only helps minimum wage earners."
Of course reality is that when you increase the cost of workers you hurt those who have the lowest cost. If my labor is worth $50000 per year then I do not care what the minimum wage is until that wage plus benefits equals 50000.
Also the Mises institute has not pointed out the racism in the minimum wage. The minimum wage attacks those who sell their labor for a price under the wage. Those folks are not only the least productive but also have the highest probability of battling racism in the work place. The minimum wage is a racists dream because it eliminates any gain by paying a minority group worker less than a majority group worker.
Published: June 27, 2006 12:27 PM
I've worked at minimum wage, but never for long. I think that's the factor that Person is hinting at taking into account.
The "work worth less than $5/hr" will get done, but it will raise costs by requiring extra hands or by taking the time of someone who would be better utilized doing something else. A good lathe operator does not do the company any favors by sweeping up the shavings, but someone has to do it. A minimum wage raises the costs of doing business, period.
So now we're back to "what is unseen". What if I want to learn how to operate a lathe? How about I sweep up the shavings and otherwise watch the experienced operator and maybe ask questions sometimes? Sorry, that opportunity would cost the company too much. Not only am I left unemployed, I am missing the opportunity to learn and the company is missing an opportunity to bring someone in who wants to learn but cannot do any valuable job _yet_.
From the outside, raising the minimum wage doesn't have any effect. I'm still unemployed, the company still loses their best lathe operator ten minutes out of every hour to sweep up shavings.
Published: June 27, 2006 2:05 PM
Depending on elasticity of demand,wages above productivity are sustainable because they are born by all the other actors in the economy who must now reduce consumption in other areas, or reduce ther savings.Thus minimum wage laws hurt
capital accumulation and slow down economic growth.
The sub-marginal worker keeps his job at the expense of another worker elsewhere in the economy.
Published: June 27, 2006 2:07 PM
This story has been added to digg.com. Please go digg it there if you have an account.
http://digg.com/politics/Price_Controls_on_Labor
Also, we are forming a libertarian network on Digg. Send me your Digg Member Name and I will add you (Stephen at RadicalLiberation.com). See the stories the network is digging.
Published: June 27, 2006 2:11 PM
Curt Howland,
Good point about the ability of janitorial types no longer having the chance to "hang around" and learn new skills that would seriously increase their earning potential.
I'll have to steal that idea sometime. :)
Published: June 27, 2006 3:45 PM
HappyJuggler, it's not just "hanging around", it's also been the demise of the entire field of "apprentice". Well, the combination of forced public schooling and minimum wage do the greatest damage to this most traditional of ways to learn skills.
It's also an excellent way for wisdom to be communicated. The younger gets to learn not only the task at hand, but also to chat over lunch with people who have experienced life.
Much better than being trapped in a small room full of people all the same age, with one tyrant at the front lecturing them on some dull pointless subject.
Published: June 27, 2006 4:02 PM
Governments usually make it difficult to fire people, especially in response to government actions such as increases in minimum wage (can you imagine?!), so the effect is delayed and no longer obviously attributable to the cause. Also, if some people making less than the current minimum wage lose their jobs, the value of other people in similar jobs increases (reduced supply, demand unchanged), so their wages can go up: people brainwashed by government schools see that they still have jobs even in the long term, and think that's evidence that minimum wage can be increased without causing unemployment.
Published: June 27, 2006 7:29 PM
Here's a thought for you: what if the powers that be know full well that an increase of the minimum wage increases unemployment? Such a premise being true implies:
a) the pro-minimum-wage-increase cohort wants America's answer to Britain's old Gin Lane to become more populated than it otherwise would be;
b) the pro-minimum-wage-increase cohort wants to grow that new proletariat, presumably, for the benefit (given their rhetoric) of those who would subsequently keep their jobs.
In other words, hiking the minimum wage is a status treat for the union circuit if the premise which started off this line of reasoning is accurate.
Note that I have abstracted from a broader goal: making unemployment perpetual through state action, so as to buttress other (relatively affluent) client groups.
Published: June 28, 2006 11:52 AM
If every highschool student were required to take a civics class in which these kinds of topics were taught, what a difference it would make! But then, if wishes were camels.... Well done!
Published: September 17, 2006 6:26 PM