Civitas Review

Minimum Wage Means Maximum Government Control

By | Posted in Economics |
3
Feb
07

The N&O today reprints a Washington Post article advocating for in increase in the minimum wage. To their credit, they do quickly acknowledge that "minimum-wage increases probably destroy jobs in small restaurants, landscaping and janitorial firms."  Unsurprisingly, however, the rest of the article is completely devoid of any rational economic thought.

Think of the minimum wage as the price of a basic economic input – entry-level labor – plus the social value of preventing unfettered competition for that input. If government is going to set that price, it ought to do so in a rational, consistent manner.

Well, we certainly wouldn't want "unfettered competition" for any input would we? Of course government should step in and artificially distort prices of business inputs. But why stop there? If competition for inputs is bad, let's be consistent and set price floors for other inputs like steel, cement, lumber, computers, land, etc.

The fear of a competitive labor market is what is truly irrational. The article's author already admits that the minimum wage destroys jobs. Something else it does is to limit employer investments in worker training. With more money tied up in paying government-imposed wages, there is less money for employers for other investments is its workers, such as training. Therefore, not only does the minimum wage put more low-skilled workers out of work, it also limits the amount of skills low-skilled workers can acquire on the job – keeping them trapped in low-skilled jobs. But central planners can not be bothered with the very real human sacrifices made to their grand designs.

Fact of the matter is this: the government can not establish pricing for labor or any other resource in a "rational" manner. Any pricing they set up will be completely arbitrary, and override the preferences of peaceful, voluntary agreements between workers and employees. To criminalize such voluntary agreements should not be tolerated in a free society.

3 Comments on this post

  • Cameron says:
    Feb 07 at 10:07

    Good grief, do people still talk about "rationalizing" the "unfettered competition" of the market?

  • randwrong says:
    Feb 08 at 17:10

    Tell me again how free-mkt capitalism is working for us again? Since Reagan's days the middle and working class in America has been in the conservatives cross-hairs- and they are winning the workers of the world are losing possibility of the American Dream in fact my Republican Senator told me that the American dream is no longer possible for most people and that is just the way it should be… nice huh ? real patriotic.

  • Zach says:
    Feb 09 at 11:53

    We increased the minimum wage to 7.25 recently, but now we have even bigger gaps between the haves and haves nots, with even fewer jobs… Doesn't seem like a minimum wage seems to help much.