Home > Fiscal Policy, Labor Markets, Price Controls > Minimum Wages to Rise in 2013

Minimum Wages to Rise in 2013

There are reports in the news media that minimum wages, a type of price control, will rise in a number of U.S. states in 2013 (here is a link to one such article). This is yet another example of the destruction of economic lives by governments. There is a substantial body of evidence compiled by labor economists that minimum wages create unemployment beyond what would otherwise occur. This is a classic “winners and losers” scenario as there will be workers earning higher incomes as a result of the policy but those losing their jobs will also not acquire the human capital (knowledge) that they could use to improve their economic prospects in the future. Yes, the reason for minimum wages is the desire to help those at the low end of the income scale (although not everybody favors minimum wages for this reason). But as they say, the road to hell is paved with good intentions. There are other ways to improve the prospects of low-wage earners that do not require the creation of more unemployment. For example, a negative income tax would do the job (government gives money to individuals below some level) or the government’s subsidies for education can be viewed as an attempt to raise incomes.

The minimum wage is also an example of a market intervention by economic illiterates. As I have argued elsewhere on this blog, many people practice economics without a license. When this happens, there are always unintended consequences and, sadly, young people at the low end of the wage scale will experience these unintended consequences caused by minimum wages.

 

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  1. John Seater
    January 3, 2013 at 2:39 PM

    Is it true that proponents of the minimum wage want to help poor people? My understanding of the origins of the minimum wage is that it was a union effort to keep low-wage black workers out of the labor force back in the 1930s. I bet that the reason unions support it nowadays is to keep low-wage workers of any color or national origin out of the labor force. So the proponents are trying to help some people – themselves. As usual, the poor are being used as an excuse for something that ends up hurting them but that does help some other people feather their nests and some politicians get re-elected. Other examples are teachers’ unions, subsidies to sugar producers in the form of import restrictions, and affirmative action.

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  1. January 3, 2017 at 9:14 AM

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Economics One

A blog by John B. Taylor

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One economist's views on economic policy.

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