[deansopko]

I often hear people argue against government-imposed minimum wage with an argument like the following: “If raising it to $10 an hour is good, why not raise it to $20, $100, $1000, etc.” While I am indeed against a minimum wage, I sense that there is a fallacy in this particular argument, but I can’t seem to put my finger on what it is. Can anyone chime in on this?

[gerard.casey]

Sorry for the delay in responding to your query, Dean. I’ve just got home to Ireland having attended the 2013 Austrian Economics Research Conference at Auburn. I had a wonderful time (as usual) not least occasioned by the company and conversation of the proprietor of this Classroom! While I was away normal service was somewhat disrupted but I’m back at work now. However, I’m still a little jet-lagged so let’s hope I don’t make some madly egregious blunder! And I know you addressed your query to all and sundry not just to me so let’s see what others have to say.

I’m not sure there’s a logical fallacy of any kind here though a defender of a minimum wage (MW) might respond that he’s promoting a minimum (underscored) wage, not a large, handsome or quasi-maximum wage (as would be the case with $100 per hour or $1,000 per hour) and so might take exception to your rhetoric.

The economic argument against MW is simple and elegant and takes the form of a trilemma: (1) If MW equals the (discounted) marginal value product (DMVP) of labour, then it’s redundant; (2) if MW is less than the DMVP then it’s again (economically) pointless; (3) if MW is greater than the DMVP then it will reduce employment (actual and/or potential), labour-retention laws to one side. The more MW exceeds DMVP, the greater the unemployment effect – hence the typical argument strategy you started with.

[deansopko]

Dr. Casey,

Thanks for the reply. Glad to hear you had a good time in Auburn. I have to admit I’m a bit envious as I would love to have been there, too!

I appreciate your economic argument against the minimum wage. For me, actually, the moral argument is most significant. As I see it, if two parties voluntarily agree to an arrangement that doesn’t initiate–or threaten to initiate–force against any others, then no one should be able to interfere with it. Period.

At any rate, my question wasn’t really concerning the legitimacy of the minimum wage. It was about what I sense to be a logical fallacy in one of the arguments against it that I frequently see/hear. Namely, this– “If a $10 minimum wage is beneficial to low-skilled workers, then why not raise it to $100 or $1000? Wouldn’t that be even better??” This doesn’t seem to be a logical argument to me. It would be the same as arguing against the efficacy of taking two aspirin to relieve a headache by staying “If taking two aspirin is beneficial, why not take 20, or 200? Wouldn’t that be even better?”

It’s this argument that a certain amount of something must be wrong because more of it wouldn’t be even better that I’m having trouble getting my head around. Can you understand what I’m getting at? Isn’t there some kind of logical fallacy here?

Dean

[gerard.casey]

Hello again, Dean.

Someone might respond that your analogy of the aspirin is significantly disanalogous to the MW case. Drugs interfere with the body’s natural operation and may (and generally do) have side effects. Usually, you want to take the minimum amount of the drug to produce the beneficial effect and avoid side-effects.

This would not seem to be the case with MW. Other things being equal, higher wages are better (for the worker) than lower wages and there is no necessary element, as there is in the case of drugs, of any side effects that need to be avoided.

The anti-MW argument (which appears again in today’s Mises Daily by Walter Block) is effectively a challenge to the MW proponent to say just why the MW should be set at X rather than at X+delta. If, as is expected, the answer is that X+delta couldn’t be afforded by employers, then the anti-MW arguer will continue the challenge and ask why the MW proponent thinks that X can be afforded. This then focuses the argument on economic rather than on social factors and the discussion can proceed from there.

Anyway, there you have my 2-cent’s worth for the moment. I’d be interested to see what others have to say.

[deansopko]

Thanks, Dr. Casey.

[msickmeier]

I see where Dean is coming from with this. I myself, have used this argument more then once and have, at times, received the reply that I was using a reductio ad absurdum. I do, however, understand the economic rational behind said argument with Dr. Casey’s second post. It brings the defendant to a point where they should question why X amount of MW is sufficient, and not completely arbitrary. But to Dean’s original point, would this be considered a reductio ad absurdum rebuttal to the MW?

[porphyrogenitus]

IMO they have to explain why they think it is a reducto ad absurdum, if their argument is (as has been made by Progressives and their “studies show”) that “raising the minimum wage doesn’t affect employment,” or even “raising the minimum wage increases demand and thus helps the economy and produces employment” (this is also their argument for things like food stamps, unemployment insurance, &tc).

That is they’re argument rests on a belief in upward sloping demand curves for labor (or, at best, flat demand curves for labor) in the first place, so in order for the counter-argument “if it is true that raising the minimum wage doesn’t reduce employment, then why not make the minimum wage $1,000,000/hour and call for a 1/hour work week and we can just vote ourselves rich?” to be a reducto ad absurdum, they have to argue why raising it by X won’t reduce employment, but raising it by N+delta would cause all the problems they claim that raising it by X would not cause.

[msickmeier]

Very interesting.

[swalsh81]

To continue with Porphyrogenitus’ post. The use of the argument “why not raise it to x million” is arguing against the type of statement that seems to be used by most of the defenders of minimum wage: a categorical statement. It seems that most of the time you hear people defend minimum wage it is presented in such a way that minimum wage is necessarily good and cannot have negative consequences. Thus, using a reductio ad absurdum statement like, “well good then, lets raise it to 1 million so everyone can be millionaires” is what their argument can be reduced to. And, using their same logic, taking 100 aspirin would be better then taking 2.

On the other hand, if a person argues that there should be a modest minimum wage that does not exceed some low amount, then using the “raise it to 1 million” argument isnt legitimate because they are themselves stating that they are not talking about excessively high amounts. At that point, we move on to a real economic discussion.

[porphyrogenitus]

In that case, the argument would be that if it is low enough to not have negative economic consequences, then that also indicates it is useless (except as a feel-good sop for the advocates; much of what Progressives do is done so they can feel good about themselves, with out any reference to the actual affects – good or bad – on the targets of their attention). That is, if it is “a modest minimum wage that is of such a low amount that it does not adversely affect employment or the economy,” then that means it is so low as to be superfluous.

If it is high enough to have any effects, then some of those effects will be the same negative ones they claim they want to avoid.

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