Economists for People Putting Their Own Money Where Their Mouths Are
26th July 2012
Don Boudreaux, a Real Economist, puts the boot in.
But why don’t you – as, presumably, the owner of your own business – raise the wages that you pay to your employees? You’re perfectly free to do so.
You’ll reply that such arbitrary increases in wages by individual employers put firms that so raise their wages at a competitive disadvantage relative to firms that don’t raise their wages. That is, you understand that there’s a cost to arbitrarily raising wages – and it is a cost that you seek to shove off of yourself and onto others by having government oblige all firms to pay a higher minimum-wage.
Why, though, should I endorse a policy that shifts much of cost of arbitrarily raised wages from you to other people? A rise in the legislated minimum-wage will oblige your customers to pay higher prices (given that firms will be unable to gain competitive advantages by hiring workers at wages below the minimum). A big chunk of the cost of such an arbitrary hike in wages, therefore, will be shifted by legislation from you to consumers. Worse, to the extent that such cost-shifting is avoided, a higher minimum-wage will likely condemn many low-skilled workers to the hell of longer periods of unemployment.
July 26th, 2012 at 06:49
No link.
July 26th, 2012 at 07:06
“and it is a cost that you seek to shove off of yourself and onto others by having government oblige all firms to pay a higher minimum-wage”
Fuzzy thinking. As a rising tide supposedly lifts all boats, a falling tide lowers them.
The higher wage paid by one employer puts him/her at a relative competative disadvantage. When all employers raise their wages, there is not change in the relative postition of the two employers. There is no transfer of cost from one employer to another employer as implied.
“firms will be unable to gain competitive advantages by hiring workers at wages below the minimum” Then they’ll have to find some other basis on which to gain advantage. It’s not like wages are the only lever available; it’s just the easiest.
“A rise in the legislated minimum-wage will oblige your customers to pay higher prices” As has been mentioned before regarding corporate taxes, its a matter of indifference to the business whether their wages or taxes go up. They set their prices to accommodate these costs of doing business. If all businesses are subject to the same inputs, all will adjust at the same rate.
“a higher minimum-wage will likely condemn many low-skilled workers to the hell of longer periods of unemployment” Not if we stop paying CEOs at the rate of 250 times the pay of the average worker. Too much is being siphoned off the top. If CEOs would lower their compensation to, say, 100 times the average worker, they could hire 150 more workers.
Besides, no one on the right ever gave a shit about the poor (Unworthy!) unskilled worker. When ‘Personnel’ departments turned into ‘Human Resource’ departments, the worker ceased to be a human being; now he/she is just another widget in the mix to be manipulated and adjusted for Optimum Profit.