Minimum Wage, Maximum Discrimination (mises.org)

Since the days of Adam Smith, economists have sought a set of social institutions which permit “neither dominion, nor discrimination,” to use Nobel Prize–winning economist James Buchanan’s phrase. In this, economists are joined by all people of goodwill—including those in the Biden administration, which has enshrined equity and inclusion as cornerstones of how they’ll govern.

What separates the economist from other social do-gooders, however, is an unflinching focus on the means used to achieve noble goals. It’s therefore with alarm that I consider the Biden administration’s dual focus on “diversity and equityand its doubling down on the “fight for $15.” I’m alarmed because the minimum wage impedes our ability to foster a society genuinely built on “diversity and equity.”

Here’s the straight talk on the minimum wage that you probably didn’t learn in school: the minimum wage has been a powerful weapon in the arsenal of racists and bigots. Economists have illuminated the devastating effects of the minimum wage on minorities with empirical evidence and entire books on the subject, but to see one reason why the policy targets minorities, first consider a little basic economics.

Consider the demand side of the labor market. Firms will hire fewer workers if the government criminalizes voluntary agreements to work for less than $15 per hour. This is an uncontroversial point to make about virtually any other market. If the price of apples doubles, people buy fewer apples. They buy more oranges instead. Employers do the same thing. Under the minimum wage, they start buying more machinery, like the kiosks you see in Panera. The upshot: fewer jobs.

Now let’s consider the supply side of the labor market, where the higher minimum wage attracts new workers to the labor market—those, like college students, who might have sat on the sidelines otherwise. The upshot: more job seekers.

Fewer jobs plus more job seekers means that more people will be searching for jobs than there are jobs available—a labor surplus. In other words, the minimum wage creates a “buyer’s market” in labor, because it causes job seekers to line up in front of employers who have limited jobs to offer.

Suppose an employer receives a hundred applicants for a job opening. How does he choose whom to hire? Without the minimum wage, whoever wants the job most will outcompete other jobseekers by offering to work for less.

With a minimum wage, the employer can’t say: “Who will work for $14.95?” If he does, he’s a criminal; he literally violates the law. Since he can’t just pick the most eager job seekers, he needs some alternative way to select from his hundred applicants. When you have a surplus of labor in a market with a minimum wage, prices aren’t allowed to adjust, so the employer picks from that surplus based on personal preferences. These may include race, sex, gender, religion, or other personal characteristics that have little to do with productivity. In fact, in the past, it has included just that. Faced with more job seekers than there are jobs available, a bigoted employer bears little cost when he refuses to hire a member of a group he dislikes. He knows someone else in the applicant pool will be from his preferred group….[    ]

What do you think?

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giddyup
8 months ago

This would be $20 CAD…lots of Canadian low wage workers would flood the US for this…

ipost
8 months ago

‘Fight for $15’. Like punching yourself in the face or running headlong into a brickwall? 

Nailed It
8 months ago

you could give a jogger millions of dollars. It would be gone tomorrow.

intelli
8 months ago

Nothing will change until the Fed stops inflation targeting and the idea of a “neutral interest rate” goes into the trash can where it belongs. At that point no one will be manufacturing anything in China.

Kinda
8 months ago

At least 50% of all high school graduates are un-employable. They are un-educated, cant read, write, or do simple math. They lack basic people skills. And worst of all they lack a work ethic…

last word
8 months ago

You know, its the ratio between the highest paid employee and lowest paid employee that needs to be addressed (30:1-273:1).
 
The production to wage ratio should be addressed as well.
https://www.epi.org/productivity-pay-gap/

Money is a ratio.

Says Who
8 months ago

Store with 5 employees @$9/hr receives new law mandating $15/hr. Can you let the employees choose the two who are now out of work ?

Mik P
8 months ago

Robots are coming everywhere over the next decade, I’m all for raising the minimum wage to $20 or more to accelerate the process

teg
teg
8 months ago

If the employees are going to be on their phones all day…you might as well hire the phones.

real2211
8 months ago

Why are only White people’s taxes expected to pay for our assimilation out of existence from the third-world flooding into EVERY White country and ONLY White countries? Nobody demands that the Chinese must pay for their assimilation out of existence by breeding with millions of non-Chinese in their own country.

Deepend
8 months ago

After the left gets their $15 minimum wage law their next agenda will be a law forcing all businesses no matter how small to have racial quotas.

RV
RV
8 months ago

Problem is that people are lazy for 7.25 an hour and they are going to be just as lazy at $15.00 an hour.

Raising the minimum wage doesn’t create work ethic, or willingness to do a good job.

People don’t want to work their way up the ladder anymore…… they want someone to give them the ladder.

Search This
8 months ago

Personally I don’t want anyone touching my food so I welcome automation.
also, who is going to pay $10 for a fast food burger at Burger King or mcdonalds or Wendy’s?

paradox
8 months ago

Hamburger flipper jobs were never meant to raise a family. People have a misconception what they are fighting for. Automation will surge with $15/hr jobs disappearing.

brian
8 months ago

Ironically, they were the same people who’re insisting higher minimum wages had no problem with offshoring all of the good paying career manufacturing jobs.

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