We have seen the future, and it sucks.

The Minimum Wage as a Tax

24th February 2013

Don Boudreaux, a Real Economist, elaborates.

Many people – including a seemingly growing number of economists – intuitively sense that a mandated higher minimum-wage will have little or no negative impact on unskilled-workers’ employment options.  For the person-in-the-street, this intuition, I suspect, springs from the common perception that employers generally have some sort of undue power over both workers and consumers and, as a result of that power, rake in excess profits.  These profits can therefore be tapped into by government diktats such as minimum-wage legislation without causing employers to adjust their operations in response.  For example, a minimum-wate diktat simply effects a redistribution of wealth; employees’ gains are employers’ losses, but losses only of some surplus that serves no economic function.

The intuition of economists who support the legislated minimum-wage is not much different from that of the person-in-the-street, although it is expressed more analytically.

My suspicion – and that is all it is, a suspicion – is that some of the more thoughtful proponents of the minimum-wage would pause to realize that, when seen as a a kind of tax upon the employment of unskilled workers, a minimum-wage hike might not be so lacking in negative consequences after all.

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