Minimum-Wage Proponents Continue to Believe in Free Lunches – Cafe Hayek

Source: Minimum-Wage Proponents Continue to Believe in Free Lunches – Cafe Hayek

Here’s a letter to the Wall Street Journal:

In “The $15 Minimum Wage Crowd Tries a Bait and Switch” (Sept. 26) David Neumark explains the challenges facing today’s minimum-wage researchers. Yet the difficulty of quantifying the consequences of minimum wages is even more daunting than Prof. Neumark’s excellent essay reveals.

First, because minimum wages in the U.S. have been in place for more than a century (Massachusetts enacted the first American one in 1912) and have consistently risen over time, employers long ago learned to adjust to their existence. Business decisions – especially the choice of how much labor to use relative to machines – are made with the expectation that minimum wages will rise. Thus, because firms adjust the sizes of their work forces in anticipation of minimum-wage hikes, measuring changes in employment after any given minimum wage hike fails to account for the jobs that were never created because employers expected the minimum wage to rise.

Second, while fewer jobs for low-skilled workers is a chief and especially unfortunate result of minimum wages, it isn’t the only negative result. Many other responses to minimum wages are possible instead of, or along with, reduced employment opportunities. My colleague Dan Klein offers some examples: the extent and difficulty of work duties grow; flexibility in employee scheduling lessens; fringe benefits and on-the-job training decrease; lockers, free food, and other amenities for workers are cut; workplace safety, comfort, and amiability decline. Because most of these other possible downsides of minimum wages are practically impossible to capture in empirical data, studies of minimum-wages’ effects almost certainly underestimate the harm inflicted on low-skilled workers by minimum wages.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s