New Illustration of the Folly of the Minimum Wage
Don Boudreaux has come up with the first new way to explain the folly of the minimum wage I’ve read in years:
Allow me here to spin the core argument — that minimum-wage legislation prices many low-skilled workers out of their jobs — by wondering aloud if proponents of higher minimum wages would ever make the following claim:
The market prices of most used-cars are too low for sellers of those cars to support their families. This fact is especially true for poor people, who, when they sell their old cars, almost always have only old, high-mileage, often dilapidated used-cars to sell. These people aren’t selling two-year-old Lexuses or BMWs. They’re selling 15-year-old Chevys and 20-year-old Hondas. So let’s enact legislation mandating that no used-car can sell for less than, say, $25,000. That way, anyone who sells a used-car is assured that he or she will earn at least enough money to support a family for a year.
I doubt that many people would argue that government should legislate a minumum price for used-cars. But why not? If merely identifying a problem with a low price (such as “At the current minimum wage, even full-time workers can’t support a family of four”) is sufficient to justify legislative action to raise that price, why won’t such action work for used-cars as well as it will work for labor hours?
Good question. I may have to add it to my Labor Economics lecture on regulation. It would fit well next to my discussion of the Bryan Caplan Anti-Exploitation Act, a law which makes it illegal for anyone to hire me for less than $1M/year, and requires any employer to give me a support staff of ten RAs, ten TAs, and a chauffeur.