The debate about a “living wage” or the “minimum wage” isn’t a logical, it’s political. Like most political arguments these days the discussion about the minimum wage is emotional.
The idea that the state can control the price of labor is comical. If the state could set labor costs, why stop there? Let the state set food, gas, and airline prices. Over the last few months I have found myself discussing the minimum wage with several people and almost all of them didn’t understand how it negatively affects low skilled workers. There’s nothing wrong with not knowing, but there’s another problem: people who want to believe.
The minimum wage is a popular policy. Most Americans think it’s a good idea. Who can blame them? Who doesn’t want to help the poor? What I really mean is that most Americans would rather help the poor in an indirect way. Supporting the minimum wage is easy enough. Since the average American isn’t required to take any economics courses it’s not surprising that one of the most basic principles of economics is under constant assault by liberal economists.
For most people the minimum wage isn’t a real issue. When government increases the minimum wage unemployment increases among low skilled workers.
A fundamental law of economics—the law of demand—states that when the price of anything (including labor) increases, the quantity demanded will decrease, assuming other things affecting demand remain unchanged. In the case of labor, this means as the price of labor (the wage rate) increases, the number of jobs will decrease, other things constant. Moreover, the decrease in employment will be greater in the long run than in the short run, as employers shift to labor-saving methods of production.
This isn’t a really complicated subject. It’s one of the first things I learned in economics when I studied it for the first time. The study of the minimum wage is a great example of how liberalism has destroyed our higher education system. The minimum wage isn’t a liberal vs. conservative question. It’s a question of the law of demand. If a liberal economist says that the minimum wage is good policy then they’re abandoned the field of economics altogether.
The best example of how politics has poisoned the debate is Paul Krugman. Mr. Krugman carries a significant amount of influence on the left because they’re mostly clueless about economics. He’s their go-to Nobel Prize winner in economics. In 1998, Krugman said:
So what are the effects of increasing minimum wages? Any Econ 101 student can tell you the answer: The higher wage reduces the quantity of labor demanded, and hence leads to unemployment.
Now Krugman believes that the minimum wage is good policy. He bases his conclusions on “new research.” Apparently this new research ignored the fact that teenage employment dropped after the last minimum wage increase. What other evidence do we need? How many more times do we have to prove that 2+2=4? How many times will some liberal think-tank look at the numbers and tell us it’s actually 5 because those evil conservatives can’t be right. It’s easy to believe when there’s a never ending stream of studies published and reviewed by people who think exactly the same. This is what happens when there’s no respect for intellectual diversity.