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Let us accept the premise that having a minimum wage is “good” on whatever grounds you want to wish this. When I am in Congress I will introduce legislation that requires two things:

  1. That the minimum wage and the poverty line move together, and have a direct, clear relationship to one another. So, if the poverty line for an individual is deemed to be $18,000 per year, then the minimum wage ought to be set at $9.00 per hour (that means a worker with a full-time job would escape poverty on the minimum). And yes, I understand that this becomes difficult when we are talking about different family sizes. And yes, I know that a minority of the minimum wage earners are not poor but those arguments do not seem to drive discussions of the minimum wage today, so let’s just stick our heads in the sand now.
  2. My major beef with the minimum wage, aside from the economics of course, is that it allows for a lot of moral and monetary free riding among the electrorate and political class. It is costless for me to support the minimum wage, after all, I don’t have to pay the higher wages. At worst, my prices go up by a little bit. The burden falls entirely on the firms and workers in those markets. But if “we as a society” agree that it is our “obligation” to take care of folks with low incomes, then oughtn’t “we as a society” bear the costs? My proposal – allow employers and workers to agree on any wage, right down to zero. The taxpayers should be asked to fund, out of general tax revenues, the difference between that negotiated wage and the wage that society itself feels is “just.” Or better yet, these wages ought to be paid in part by the politicians who are imposing the laws on employers. Don’t argue with me that this is bad economics, of course it is, we are merely trying to figure out a way to have some consistency in our arguments here. In any case, a little diagram would demonstrate how a general wage subsidy program is “better” than a mandated wage program, on a variety of grounds. But I had a friend who worked in DC in the early 80s and I will never forget one of the first things he told me about his experience: “there is no constituency for efficiency in Washington.” Right he was.

4 Responses to “Policy Proposal, A Continuing Series”

  1. Harry says:

    The problem is “society” determining what is “just”. Who is society — the U.S. Congress, the same people who banned the sale of incandescent light bulbs? Or the EPA, the Department of Labor, which would rule on non-farm hourly wages, or the USDA, which would rule on farm wages? This is a Hayekian problem.

    Solyndra is a recent example, where even after huge financing, and I assume paying their employees well, they were unable to produce solar panels that delivered power below $200 per megawatt hour.

  2. sherlock says:

    Wouldn’t all wages paid by the employer (where the market price was below minumum wage) now be $0? This may be arguing the economics of it, but what incentive is there for a firm to just not hire someone as all the costs would be born on the taxpayer? The only way I see them not doing it, is if they realize that if every other firm does this, our country would in shambles.

  3. jb says:

    Sorry to redirect this back toward the economic question, but since Wintercow is now representing us, please fix the following disfuntion while you are at it there in DC 🙂 :

    Why is there a FEDERAL minimum wage at all? Assuming a minimum wage in principal somehow does some good, why should we assume that the labor market in, say, Caribou Maine is the same as that in Los Angeles? Wouldn’t one expect a lower wage in Maine? Granted Californian’s are apparently free to set their own state minimum wage as long as it EXCEEDS the federal rate (the one in Mass exceeds the federal minimum wage I am pretty sure), but shouldn’t we expect that the singel federal minimum wage to distort the picture worse versus a state only minimum wage?

    I guess you could extend that argument to exclude the states from setting a minimum wage also, and instead let local governments do it. But why not go further and extend it only to firms and individuals … hey, wait a minute….!!!!

  4. Rod says:

    When I owned the newspaper, I never paid the minimum wage, as it was necessary to pay more than that to get the help I needed. I paid my advertising salesmen the most, and the rest I paid as much as I could afford. I paid myself the least. Contrast this with your average characterization of the evil capitalist exploiting his workers.

    On our farm, I violated minimum wage laws regularly when it came to kids working on the farm. I would pay them a dollar an hour to start, and then when they could do anything — anything — without having me to tell them every move to make, I’d give them a raise to three dollars an hour, which at the time was well above the minimum wage. Only one time did I pay a kid for more than a day at a buck an hour, and that was because he was unable to figure out that one quart was the same as 3/3 quart. (He was feeding milksaver to our baby calves and needed to measure milksaver powder with water.)

    BTW, in the news today, Roseanne Barr said there should be a maximum wage of $100 million. I guess that would apply mostly to Hollywood celebrities.

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