Saturday, April 6, 2013

The illogic of the minimum wage...

Every now and again a reader will share with me how one of my essays, or series of essays, has helped clear up a particular misconception he or she had held for years---often having to do with international trade. Otherwise, the feedback I receive either comes in rousing sympathy or damning condemnation. While like-minded folks seem to appreciate articles with titles featuring adjectives such as clueless and idiotic, and phrases like heads up their a**es, readers who are not predisposed to what I believe to be a free-market way of thinking (they, btw, particularly when it comes to trade, hail from both sides of the political fence), or lack appreciation for the occasional sarcasm, can find such articles offensive.

Now of course those who are not only not predisposed to free-market thinking, but rather are committed to what they like to call "progressivism" wouldn't drink this Kool Aid (be it spiked with sarcasm or utmost respect) if their lives depended on it. But then there's the tweener, the uncommitted, if you will. The individual who goes about his business, who makes his way in the world without strong political bias, without giving much concern to the goings on in Washington. Who either resigns to a lack of understanding (I hear that often), or is the ultimate cynic when it comes to all things political, or, worst of all, tends to accept the predominant message proffered by the media. At first blush, for example, it sort of makes sense that if Washington sets a higher minimum wage, more people---as the President suggests---will have more money to spend, bringing greater revenues to our businesses and thus growing the economy. But at second blush, it sort of makes sense that if they raise the minimum wage (the cost of labor), directly-exposed businesses will suffer declining profits, and, therefore---as directly-exposed business owners suggest---will cut their employees' hours and/or their employees themselves. Funny how some execs of some very large (politically influential) companies that don't pay minimum wage are proponents of raising it. Do they presume that they'll somehow stand to gain at the expense of minimum wage-paying businesses? Could it be that, in their naïveté, they believe they'll see more business as some folks see higher paychecks, or more business from an endeared ("hey, Costco lobbied to raise my paycheck so I'm shopping there"), yet uninformed, consumer, or less competition as smaller companies suffer under the weight of higher labor costs? Could it be that the push for raising the minimum wage is all about vote-garnering ("hey, he voted to raise my paycheck so I'm voting for him") and crony capitalism?

So much of what passes the media's muster as good economics at the hands of politicians, or their appointees, or, alas, their crony economists, when exposed to the light of everyday commonsense is easily debunked. The ambitious goal of this blog (in addition to making sense of the financial markets), and my new book (this isn't the shameless plug, that's coming soon :)), is to reach the uncommitted and bring them to a free-market way of thinking.

For more on the illogic of the minimum wage, here's an excellent piece by Russ Roberts.

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