Wednesday, June 24, 2015

Bob Murphy takes apart both the morality and economics of Robert Reich’s case for a $15-per-hour minimum wage

From Cafe Hayek.
"Reich addresses the obvious objection that raising the minimum wage to $15/hour will reduce employment among low-skilled workers. Reich dismisses this as fear-mongering and claims, “More money in people’s pockets means more demand for goods and services, which means more jobs.”
This proves too much. Notice that Reich doesn’t make a nuanced argument, balancing certain quantitative factors where the increased demand for goods and services offset the disemployment effect of more expensive labor up until $15/hour, but then flips if the wage rate were pushed to, say, $16/hour. Given the arguments Reich has presented, it’s a mystery why we are settling for $15/hour. Why not push for a $20/hour minimum wage? It can’t be that such a move would cause disemployment–Reich just told us, with no caveats, that more money in people’s pockets means more demand for goods and services.
Indeed, Reich ends his video saying, “It’s the least we can do.” Okay then, Mr. Reich, what’s the most we can do, according to your worldview? Once you admit that, we can at least see how there are downsides to your proposal, and the viewer can start wondering whether $15/hour–the alleged “least we can do”–is such an unambiguously “moral” proposal after all."

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