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Dont Minimize the Negative Effects of Minimum Wages

Posted: 01 Nov 2019 03:18 AM PDT
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(Don Boudreaux)




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In my latest column for the Pittsburgh Tribune-Review, I review some of
minimum-wage’s negative consequences for low-skilled workers beyond (or,
often, instead of) unemployment. A slice:

When government raises the minimum wage, employers can reduce the amount of
nonwage benefits paid to employees. And so even workers who keep their jobs
at the higher minimum wage might nevertheless be made worse off because of
reductions in the value of their nonwage benefits.

A similar dynamic operates on the requirements side of jobs. Employers,
obviously, expect their employees to produce enough to make their
employment worthwhile for employers. And so if the minimum wage is raised,
employers can work their employees harder.

Employers can become more strict in demanding that workers arrive on time
and in punishing workers who leave work a few minutes early, or cracking
down on personal texting, telephoning and emailing during work hours. This
intensified strictness enables employers to get more output per hour from
each worker.

In short, employers can respond to hikes in the minimum wage by employing
fewer workers, cutting the value of workers’ fringe benefits or working
employees harder. Most employers will use some combination of these three
options. And to the extent that employers either cut the value of fringe
benefits or work their employees harder, they will have less incentive to
reduce the size of their workforce.

But make no mistake: Employers will adjust in one or more of these three
ways — each of which makes workers worse off.




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Quotation of the Day

Posted: 01 Nov 2019 02:30 AM PDT
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(Don Boudreaux)




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is from page 396 of George Will’s splendid 2019 book, The Conservative
Sensibility:

If you discount the importance of individuals and their utterances their
choices, and the rhetoric that justifies and elicits support for them you
discount the importance, and perhaps even the possibility, of democracy, a
regime of persuasion.




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Marx

Posted: 31 Oct 2019 03:23 PM PDT
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(Don Boudreaux)




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Ages ago, as a grad student at NYU in the early 1980s, I took a course in
Marxian (or was it called Marxist?) Economics from NYU Econs resident
Marxist, Prof. James F. Becker. I enrolled in this course in order to give
myself sufficient incentive actually to read Marxs key works.

I recall very much liking Prof. Becker and his text, but finding not to my
surprise Marxs writings to be turgid, profoundly confused, and mostly
downright absurd. I dont remember the precise grade that I earned to pass
the class, but if Marxs labor theory of value were correct, then that grade
damn well ought to have been an A+. Reading Marx was a struggle. Its a task
at which one must labor hard.

I am now again reading many of Marxs scientific economics writings (in
preparation for a conference that Ill attend next week). What a crock!
Marxs ramblings are far more ridiculous and difficult to penetrate than Id
recalled.

Im astonished that Marxs lumbering, thick, repetitive, and entirely
inelegant prose somehow won for him any popularity beyond a tiny handful of
crazed and semi-literate followers. Reading Marx is a figurative form of
grinding red-hot embers into ones eyes and trying to make sense, through
the pain, of the resulting confused and distorted scene.

More than one person whose opinion and judgment I greatly respect insist
that Marx, for all of his many mistakes, is nevertheless a thinker with
some worthwhile ideas a thinker worthy of careful study and respect. Well,
if so, Ive missed something. Ive not come close to stumbling upon any
original thought in Marx that is worth the ink used to record it onto
paper. Nothing in the old fools oeuvre that Ive read is remotely worthy of
respect. Its all, as far as I can tell, nonsense that is more difficult to
digest than cement and with less intellectual nutritional value.

ARGGGHHHH!




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Bonus Quotation of the Day

Posted: 31 Oct 2019 12:15 PM PDT
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(Don Boudreaux)




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from page 117 of David Mamet’s 2011 book, The Secret Knowledge:

The Left’s current sentiment for the confiscation of benefits legally
earned, but to them offensive, is Greed.

DBx: Unlike some economists and advocates of free markets, I do indeed
believe that greed, as such, is bad; greed is not good. What is not bad
what is natural and unavoidable is human self-interest. But self-interest
isn’t greed. Self-interest is the sentiment highlighted by Adam Smith in An
Inquiry Into the Nature and Causes of the Wealth of Nations as motivating
butchers, brewers, and bakers and, we might add, also book sellers,
baseball players, bond traders, and everyone else earning a living in
private markets to improve their own lots in life by helping countless
fellow human beings improve theirs.

In contrast to self-interest, greed is an anti-social sentiment. For you to
be greedy is for you to demand more than you deserve a demand that can be
satisfied only by leaving other people with less than they deserve. We all,
quite rightly, disapprove of greed and of greedy people.

How ironic, then, is the popular notion that business people who
relentlessly work hard to satisfy consumers in order to earn more wealth
and who protest attempts to seize some of their wealth are greedy (and,
hence, deserving of our disapproval) while politicians, pundits, preachers,
and professors who clamor to seize some of this wealth in order to give it
to people who didn’t earn it are selfless public servants (and, hence,
deserving of our admiration)?

For the likes of demagogues such as Bernie Sanders and Elizabeth Warren to
call for the seizure of some of the wealth of very successful business
people is loathsome, as are similar calls by academics such as Thomas
Piketty, Emmanuel Saez, and Gabriel Zucman. But to then regard these and
others who advocate the seizure and redistribution of wealth as selfless
public servants who fight greed is downright Orwellian.




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The American Middle Class Is Doing Just Fine

Posted: 31 Oct 2019 11:13 AM PDT
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(Don Boudreaux)




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Some Links

Posted: 31 Oct 2019 11:08 AM PDT
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(Don Boudreaux)




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Walter Olson is truly frightened by the ghoul that is Elizabeth Warrens
proposed tax on wealth.

My intrepid Mercatus Center colleague Veronique de Rugy reminds us that
Milton Friedman was correct to argue that the burden of government is
measured by how much it spends rather than by how much it rakes in as tax
revenue during the current period.

Also from Veronique is this sensible call to end the experiment with
renewable fuels. A slice:

A recent Cato Institute report by Arthur Wardle highlights the impact of
expanded land use for corn—with the increased application of nitrogen
fertilizer leading to runoff that contributes to the hypoxic dead zone in
the Gulf of Mexico and kills sea life—as evidence that the research on the
Renewable Fuels Standard is clear that it degrades the environment. The
Cato report also cites a meta-analysis, published in the American Journal
of Agricultural Economics, of studies that modeled the life cycle
greenhouse gas emission of ethanol versus gasoline and found a meager
reduction of only 0.23 percent.

Vincent Geloso thoughtfully explores wealth inequality.

In Open Borders, Bryan Caplan and Zach Weinersmith talk about at least 127
different topics surrounding immigration.

George Will salutes baseballs unwritten norms.

Megan McArdle reminds Californians that reality isnt optional.

Deirdre McCloskey responds to a recent uninformed piece on her in First
Things. A slice:

Mr. Schmitz read a little of the reissue in its twentieth year of Crossing:
A Transgender Memoir, with its brief Afterword. The rest of my politics and
scholarship he gets on the fly. He calls me throughout a “conservative,”
which I have never called myself, though willing to chat politely with such
folk. The error shows anyway the problem people have trying to force
“classical” liberals like me onto the silly spectrum from left to right.
The spectrum is only about in what direction a massive state is to enforce
illiberal schemes, such as the left’s takeover of free speech (of which he
accuses me) and of economic life; or the right’s takeover of bedroom
behavior and of irritating foreigners.




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Reality Remains Mandatory

Posted: 31 Oct 2019 09:14 AM PDT
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(Don Boudreaux)




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Here’s a letter to the Palm Beach Post:

Editor:

For the sake of all low-skilled Floridians, let’s hope that the attempt to
raise Florida’s minimum wage fails (“Florida $15 minimum wage drive gains
enough signatures,” October 30). If this attempt succeeds, many of
Florida’s poorest workers will be cast into the ranks of the unemployed.

The case, theoretical and empirical, against minimum wages is solid. It’s
simply untrue that minimum wages help all low-skilled workers without
harming any of them. But reviewing this case can be tedious. So here’s how
I now summarize it to my students:

Suppose government were to mandate that everyone who gives money to buskers
and other street entertainers may deposit into the entertainers’ open
guitar cases or hats no sum less than $15. That is, while no one is obliged
to give anything at all to these entertainers, each person who does give is
legally obliged to ensure that each contribution is no less than the
minimum required $15.

What will happen to the amount of income earned by buskers and other street
entertainers? While it’s easy to fantasize that this income will rise this
intellectual feat can be performed by preschoolers the answer obvious to
adults is that this income will fall. Nearly everyone who finds it
worthwhile to contribute on each occasion $1 or $5 will, with the
minimum-contribution requirement in place, contribute nothing. They will
not contribute the minimum mandated $15.

Although differences do separate employees from street entertainers, in
this way they are identical to each other: government diktats can no more
determine the total amounts that employers pay to workers than such diktats
can determine the total amounts that pedestrians contribute to street
entertainers. And just as attempts to compel pedestrians who contribute to
contribute minimum amounts would backfire and harm the people meant to be
helped, so too do attempts to compel employers to pay minimum wages
backfire and harm the people meant to be helped.

Sincerely,

Donald J. Boudreaux

Professor of Economics

and

Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at
the Mercatus Center

George Mason University

Fairfax, VA 22030




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