Wednesday, January 24, 2007

On the minimum wage

There is no good purpose served by complicating matters. By definition, the minimum wage bans jobs below the prescribed minimum wage. So those jobs are destroyed as a first effect. More people, primarily kids, are out of work, replaced by cheaper alternatives, such as automation. Illegal and black market employment increases. Product prices go up to reflect the higher cost of inputs.

So why do some economists still support it? I figure because it makes them more powerful. Tyler discusses Dan Klein's research, which, as always, is a fascinating look inside academia. It reminds me of Joan Robinson's quote on economics:

The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.

Addendum: Tyler and Don Boudreaux skillfully discuss the heart of the issue: How concerned about inequality should we be?

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