Reply To: The Minimum Wage


If I was pro-MW, I would respond to Michael’s first point by saying that if employers hire employees for extraordinarily low wages, a minimum wage will bump them up to a level closer to their respective MRPs rather than unemploying them.

In response to that, as a anti-MW, I would ask what evidence there is that a person’s current wages and MRPs are actually such an amount that the MW would not unemploy them and would actually raise their wages instead. I’d then ask them why they’re not in favor of more business competition through lower regulations, since competition for workers drives up wages. After all, if employer A can make a $5.00 profit from hiring a specific worker (for a wage $5.00 less than his MRP), employer B would also see a profit opportunity, and hire that same worker for a $4.00 profit. And as such, wages would tend toward the MRP.

And after all, isn’t the MW itself a regulation that reduces competition? A MW decreases the number of people a business can profitably hire. By making it harder to take advantage of low skill, low wage employees, the MW makes it more difficult to start new businesses. In his desire to raise the wages of those being “exploited”, he is instead making their “exploitation” all the more worse.

I made two blog posts (here and here) in the past about the minimum wage, so if you’re interested in that, feel free to read. If that’s the case, I’d also encourage you to point out any mistakes I made or anything you may disagree with. I only try to look for the truth but I definitely have biases I sometimes don’t think about, so I don’t want to make false arguments.

If they bring up the welfare argument while simultaneously arguing the MW, they are actually making an irrelevant statement. In the first link above, I state:

“Another line of argument would follow: well, we can just put those individuals unemployed under the minimum wage on welfare. Although I am not a proponent of welfare, I won’t argue against it here because it is irrelevant for this discussion. Even if we think welfare is good, it is not an argument for the minimum wage. This is because we could eliminate the minimum wage and still give out welfare. Instead of saying (for example), that everyone unemployed because of a $x minimum wage receives a certain amount of welfare, we could say that people earning under $x dollars receives that same amount of welfare (or perhaps less than that if we want to simply make it so that their total income (wages + welfare) equals the $x of the earlier minimum wage).”