Alchian and Allen On Minimum Wage Laws

From Cafe Hayek

[This] is from page 441 of the 3rd edition (1972) of what is regarded by many (including me) to be the greatest economics textbook ever written, University Economics by Armen Alchian and William Allen:

If a uniform or minimum-wage law is effective in raising wages, discrimination will be transferred from wage rates to employee types.  Fewer “inferior” people will get jobs.  Therefore, pressure mounts for “fair-employment laws,” prohibiting employers from choosing employees on the basis of any criterion ruled unethical – usually race, creed, age, and sex.  These laws probably reduce the extent of observable discrimination among employers.  But they are incredibly difficult to enforce.  How can one tell whether an employer is hiring as many workers as his customers consider “inferior” as he would if he really didn’t think them “inferior”?  Furthermore, the employer will be even more reluctant to observe the spirit of the law when he knows it will be more difficult to fire those whose services are unsatisfactory.

Here is what Christina Romer wrote in the NY Times earlier this year. It is similar:

"Some evidence suggests that employment doesn’t fall much because the higher minimum wage lowers labor turnover, which raises productivity and labor demand. But it’s possible that productivity also rises because the higher minimum attracts more efficient workers to the labor pool. If these new workers are typically more affluent — perhaps middle-income spouses or retirees — and end up taking some jobs held by poorer workers, a higher minimum could harm the truly disadvantaged."

See The Business of the Minimum Wage. Romer was the first chair of the Council of Economic Advisors under Obama.