The Minimum Wage
7th March 2015
Suppose a doctor told a two-pack-a-day smoker not to worry about his tobacco addiction because smoking another half-pack per day would shorten his life expectancy by only six weeks. What would you think of that physician? The physician may have been telling the literal truth; the additional damage done to the health and life expectancy of smoking an additional 10 cigarettes per day on top of the 40 (two packs) already consumed is relatively small.
But this ignores well-documented evidence that consuming two packs per day reduces life expectancies by more than 10 years. Any doctor focusing solely on the additional (marginal) negative impact of smoking could be accused of incompetence and medical malpractice. Yet this is precisely what economists do whenever they assess the damage done by minimum-wage legislation. Their analysis focuses on the additional harm done by an increase in legislated wages; it completely ignores the impact that existing minimum wages impose upon society’s most vulnerable.
And what might that be?
Economic analysis focuses almost exclusively upon what will happen to unemployment with an increase in the minimum wages; ignored is the harm that current levels create. Minimum wages deprive the mentally and physically disabled, the least skilled, least educated and most inexperienced workers a chance to compete with more able, skilled, educated and experienced workers for jobs by working for lower wages.
The “low” wages the disadvantaged are paid do not reflect the dollar value of the additional training, skills, education and experience they receive. Focusing solely on money wages obscures economic reality; the disadvantaged receive both money and additional human capital that only comes from being employed.
Benefits that don’t come from being on the government dole. But of course having more people depending on Free Stuff From The Government is the whole point of the exercise, all the sentimentalist bloviation notwithstanding.