One of the ideas that economists are most sure of is that when the price of something rises, other than due to something that shifts the whole demand curve, the quantity demanded falls. Conversely, when the price of something falls, the quantity demanded increases. This is not controversial in economics. Moreover, it’s so clear that it is part of our mutual understanding, even for non-economists. When you hear that Macy’s is having a sale, you don’t say, “Oh, I’d better not shop at Macy’s during the sale because the prices are temporarily higher.” No. You understand that Macy’s is having a sale in order to sell more and that the way to sell more is to lower their prices. Or consider what we all know to be true when strawberries are out of season: their price will be higher than when they’re in season. In other words, a reduction in supply, all else equal, will lead to a higher price; the way to sell the lower amount and have all demanders satisfied is to increase the price.

This is the opening paragraph of my latest Hoover article, “High Minimum Wage Laws Hurt Many Workers,” Defining Ideas, April 25, 2024.

In it, I discuss the effects, some of which have happened already, of the April 1 increase in the minimum wage for fast-food workers in California to $20 an hour. After quoting a news writer named Jack Birle suggesting that the higher minimum wage will make it harder for school cafeterias to compete for labor, I write:

Give Birle a little credit. As least he understood that school districts are competing with fast-food employers. But then he forgot to follow through on what the minimum wage increase is doing to job opportunities in the fast-food industry: it’s reducing them. So the minimum wage increase will make it easier, not harder, for school districts to find employees. There will be a reshuffling of workers. Higher-productivity workers will find it more attractive to work in the fast-food industry. They will displace some less-productive workers who are not producing enough to make it worthwhile for fast-food employers to hire them. But the overall net effect will be fewer jobs in the fast-food industry and, therefore, more workers looking for work in other industries.

I excerpted different parts of my article on my Substack. But if you want to read the whole thing, which is only about 1,800 words, go here.