Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Thursday, November 24, 2005

Wal-Mart and the Minimum Wage

There has been considerable discussion in the blogosphere of Wal-Mart's call for an increase in the minimum wage (e.g., see here and here). For a very cogent discussion of Wal-Mart's advocating an increase in the minimum wage, see this piece by T.J. Brooks:

Wal-Mart and the early 20th century progressives are not the only ones to try to use minimum wage laws to achieve their own ends. Unions and organized labor are also often at the forefront in support of raising the minimum wage.

Surely their motives are beyond recourse? The Neumark paper suggests that this is not the case. As it turns out, minimum wage laws raise the earnings of relatively low-wage union members at the expense of the earnings of the lowest-wage nonunion workers. Firms that face the higher labor costs are forced to fire some people, which tend to be the nonunion employees, allowing the union employees to step in and take on some of the extra work.

Now let me be very clear. I do not think our local progressives or our city council had the same nefarious motives the others have had. I really believe they want to help the working poor. But I also believe that a higher minimum wage will not achieve that goal. Economic theory, empirical evidence and nearly 100 years of history are on my side.

The purported rebuttal to T. J. Brook's piece was a boring and typical exercise in irrelevant, non-sequitured Bush-bashing coupled with a call for a higher social safety net without regard for the changes in incentives that would result.
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