How the Minimum Wage Folks Think, And What Economists Think of That
Economists (the good ones, anyway) are often frustrated by the difficulty in explaining economics to people who put their good intentions or, in some cases their partisan political agendas, ahead of clear thinking.
Perhaps no issue provides a better example of this than the minimum wage. President Obama, in his State of the Union speech in January, reiterated his longstanding call for raising it-this time from the current $7.25/hour to $10.10.
If you're a lay person and are wondering how a good economist sees the way the minimum wage advocate thinks, the following will explain the matter. The good economists can't help but conclude that minimum wage believers are guilty of one or more of the following errors:
1. They believe in political law (edicts, orders, mandates, decrees and speeches) but not economic law (supply and demand, the allocative and market-clearing function of prices and wages);
2. They are superstitious when it comes to the economy, explaining it in terms of how they "feel" it should work instead of how it actually works;
3. They think that every job and every person is automatically worth at least as much as Congress decrees to be the minimum;
4. They believe that even if a person or a job is really worth less than the minimum, employers will still hire them and happily eat the loss;
5. They often have no clue that they're unwitting accomplices of organized labor, which favors a minimum wage hike as a way to disadvantage its lower-cost or less-skilled or non-union competition;
6. They usually oppose raising the minimum to $100/hour but can't figure out why the reasoning that leads them to that conclusion applies to any other increase too;
7. They never tell you that the seven countries in the EU that don't have a minimum wage have 1/3 lower unemployment rates than the 21 countries that do have one, as Cato Institute economist Steve Hanke recently showed;
8. They rarely care much about evidence, logic, reason, facts or experience if it won't fit on a bumper sticker;
9. They still feel good about themselves even when shown the negative consequences of their policies because only intentions, not outcomes, matter to them.
So, now you know why good economists get frustrated!
Editor's Note: Lawrence W. Reed is president of the Foundation for Economic Education, www.fee.org.