Sunday, June 25, 2006

Minimum Wage

Here is a decent illustration of the idea of minimum wage. I borrowed this passage from the guys over at EconLog. I'd love to get a little dialogue going with this idea...because most people don't realize: 1. how a minimum is an example of the government meddling with the free market and prices, thus causing artificially high wages, and 2. the fact that many, many economic studies have determined that, contrary to popular belief, most wage earners who are receiving minimum wage are in fact not the poorest people in this country, but rather teenagers of non-poor families, and/or college kids working in the summer.

Allow me here to spin the core argument -- that minimum-wage legislation prices many low-skilled workers out of their jobs -- by wondering aloud if proponents of higher minimum wages would ever make the following claim:

The market prices of most used-cars are too low for sellers of those cars to support their families. This fact is especially true for poor people, who, when they sell their old cars, almost always have only old, high-mileage, often dilapidated used-cars to sell. These people aren't selling two-year-old Lexuses or BMWs. They're selling 15-year-old Chevys and 20-year-old Hondas. So let's enact legislation mandating that no used-car can sell for less than, say, $25,000. That way, anyone who sells a used-car is assured that he or she will earn at least enough money to support a family for a year.

I doubt that many people would argue that government should legislate a minumum price for used-cars. But why not? If merely identifying a problem with a low price (such as "At the current minimum wage, even full-time workers can't support a family of four") is sufficient to justify legislative action to raise that price, why won't such action work for used-cars as well as it will work for labor hours?


Anonymous said...

The goverment shouldn't force companies to install smoke detectors, fire extinguishers, safety equitment or follow OSHA guidlines either. Having these things cost American companies millions of dollars a year and all they do is ensure the well being of the workers like a minimum wage. Just another example of the government putting its nose up a rich person's asshole.

Internet Esquire said...

Quite surprisingly, libertarian economist Steve Landsburg convincingly argues that the minimum wage is not the job killer that most economists believe it to be. Nonetheless, an expansion of the Earned Income Tax Credit would be much more effective and equitable way of helping the working poor than an increase in the minimum wage.

Anonymous said...

I don't really know much about this stuff, but the example of setting a minimum price for the sale of a used car kind of makes a government-set minimum wage seem stupid. In Connecticut, the mimimum wage is around $7.40. To me, the work that a McDonalds worker does is not worth $7.40 an hour, just like a 15-year old chevy is not worth $25,000.

Anonymous said...

While the minimum wage may not actually have a point, I don't exactly think you can directly compare it to the selling of a used car. People may count on a minimum wage to help them get through the year, and as a matter of fact, there are many parents of low income families who will work 3 low wage jobs just to get by, but one is not going to count on the selling of a used car to make a living.

Anonymous said...

It is not up to the US government to provide a safety net (ie. minimum wage) for people to "count on" to get them through a year. Nor should the lowest price of a used car be determined so that someone can "count on" the sale of the used vehicle to purchase a next vehicle. This whole lacking person responsibility and relying on Uncle Sam is rediculous. One should not "count on" anything except themselves. Ralph Waldo Emerson wrote the book on it...quite literally..."Self Reliance"