ECONOMICS: Thought Experiments About the Minimum Wage

(Don Boudreaux) Tweet Here’s a letter to a high-school senior in Wisconsin who (I boast) reads Café Hayek: Mr. S___: Thanks for your e-mail. I share your negative opinion of Pres. Biden’s proposal to more than double the national minimum wage to $15 per hour.

Source: Thought Experiments About the Minimum Wage

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I’m sure that many of your classmates earn income by doing odd-jobs such as babysitting, mowing lawns, and shoveling snow. So ask them what they think would happen if government forced them to double the amounts that they charge to do these jobs. Do your classmates think that parents with young children will continue to hire as many hours of babysitting at (say) $30 per hour as they hire at $15 per hour? Will homeowners’ willingness to hire neighborhood kids to mow lawns be unchanged if the price of getting a lawn mown is forced up from (say) $25 to $50? Will neighbors be just as willing to pay (say) $40 to have snow shoveled off of their driveways as they are when they must pay only $20?

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Here’s another thought experiment.

We know that few heads of households (I believe less that 1%) earn on the minimum wage.


Cui bono.

It’s a well known fact that when you increase the bottom of the pay scale all the level on top of that pay grade have to go up too.

So it’s union workers, politicians, and bureaucrats that make out the best.  Obviously, the taxpayers are much worse off, as well as a consumers, as price increases ripple thru the economy.



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