Sounding Silly

This is an audio segment from 2006 featuring Walter Block, scholar at the Mises Institute, and Jared Bernstein, a director at the Economic Policy Institute, debating the minimum wage and its effects on the employment of 'the poor.'

(8/13/2006, Marty Nemko radio show; Direct Link)

The federal minimum wage was recently raised to $7.25 an hour. I find it funny that those who support the minimum wage in general do it not on the grounds that it doesn't actually increase unemployment (some actually support that notion), but instead that the increase in poor-person purchasing power outweighs any loss in employment. Then they go on about empircal studies this and consumer spending that, blaze blaze. They never try to refute the fact that making it more expensive to hire somebody means employment necessarily decreases. I wish it was more complex than this, to make it somehow worth intellectual debate, but it isn't. If i'm a burger flipper, and I churn out $7/hour worth of value to the company, and if my employer is forced to pay me $7.25/hour, it really doesn't pay to keep me on the payroll anymore. Simple as that. We can quibble all day long about purchasing power effects and what's better or worse, but a priori minimum wage laws will cause the unemployment of marginal workers, that is, workers who barely pay for themselves.

The minimum wage hurts most those individuals who are unskilled, or handicapped. Whereas a restaurant could hire a blind man to roll silverware set-ups for $4/hour and it would add value to the output of the company, whereas hiring a young, unskilled floor sweeper for $3.50/hour would not only pay for itself in terms of restaurant cleanliness but also would teach that young man valuable work-ethic skills and discipline so useful for later in life, the minimum wage guarantees these things won't happen. These are marginal workers, who cannot pay for themselves in terms of employment after the minimum wage has been exacted. These are part of the unseen effects of intervention, and in unemployment statistics are often not counted, so as to make the picture seem a bit more rosy than it actually is.