Thursday, August 13, 2015

Minimum Wage Alters Who Gets Hired

Suppose the government passed a law that required that whenever anyone buys a tv set, they must pay at least $ 2,000 for the tv.   Would you still buy a set that, prior to the law, costs $ 500 and pay $ 2,000 for it?  Or, would you say to yourself, "heck, if I have to pay $ 2,000 by law, then I am going to choose a completely different set -- maybe one that already costs $ 2,000 or perhaps even more."

No one would sensibly buy a tv set that previously was sold for less than $ 2,000, if the law required them to pay at least $ 2,000 whenever purchasing a tv set.  Agreed?

Something very similar happens with the imposition of a minimum wage.  The current wave of movements to boost the minimum wage from $ 7.25 to $ 15.00 would dramatically alter who gets hired.  If you have to pay $ 15 per hour anyway, why keep the guy or girl on the payroll who was making $ 7.25 -- time to scale up.  With a $ 15 minimum, you can hire much better talent than you did before.  And that's exactly what businesses do and will do.

Businesses will hire fewer people and they will hire people who already are competing for $ 15 per hour jobs.   As for those currently making $ 7.25, they are quickly going to find that they are out of luck.  At $ 15 per hour, the business can do better than keep them on the payroll.

The exact same argument applies to the "living wage" proposal.  If you succeed in forcing up wage levels to radicals' idea of what a "living wage" amounts to, you will end up employing an entirely different group of people, who would never have worked at the lower wage in any event.

So, overall employment declines, the higher talented folks benefit, and, once again, the folks at the bottom of the economic pile get kicked to the curb.  It is pretty obvious why the union movement likes minimum wage proposals.  The war on the poor continues.

No comments: