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The minimum wage consensus

If a minimum wage of 15 dollars per hour won’t kill jobs then why not increase it to 100 dollars?

Yeah, I know, it’s a strawman argument. Everybody agrees that a 100 dollars minimum wage would massively destroy jobs (anywhere on earth) just like everybody agrees that a one dollar minimum wage wouldn’t have any effect whatsoever on employment (at least in the United States). As far as reasonable and economically literate people are concerned, the debate is about the 15 bucks threshold. Call me Dr Obvious if you want but I think there is a very important point here: both side of the argument agree that, above a given threshold, a mandatory minimum wage would destroy jobs.

Let me summarize. On one side, Team Free Market (and, to be clear, I’m part of that team) argues that by raising the minimum wage to 15 dollars the US government will outlaw the employment of people whose skill-sets is worth less than 15 dollars an hour — that is unexperienced and/or underqualified workers. On the other side, the advocates of the raise argue that this “cost of labor” effect will be negligible and that it will be offset by an increase in aggregate demand (because low-income households have a higher marginal propensity to consume).

But both sides agree that, somewhere between 1 and 100 dollars, there is a threshold beyond which the minimum wage will start destroying jobs — that is, above that point the “cost of labor” effect will outweigh the “aggregate demand” effect. I guess it’s fair to assume that most of the supporters of the raise think 15 dollars is a reasonable threshold given current US market conditions (I guess further that they would not support that proposal for lower productivity countries such as India). To me and to most of Team Free Market, it looks way too high. But at least, we all agree that there is a threshold. That’s a consensus. Let’s celebrate!

Commentaires

  1. The problem is similar with Basic Income... 500$/m may work, but at 10,000$/m, the incentive to work is 0 for most people.
    Which shows Basic Income incentivizing work is pure fantasy.

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