The Law of Demand Applies to Labor

A foundation of economics is the law of demand: at higher prices, less of a good or service will be purchased than at lower.

While most people comfortably accept the law of demand for most goods and services, many resist accepting it for low-skilled labor. They don’t want to believe that minimum wage laws, by forcing up the price of low-skilled labor, reduce the number of workers hired. They see the higher wages for some; they don’t see the elimination of wages for others.

A case of such inability (or refusal) to see was published in my hometown paper, the Baltimore Sun, in March (“A $15 minimum wage benefits Baltimore business”). Here is a slice of my response to its author, published at Learn Liberty:

Dear Ms. Murray,

… You write that “[t]he proposed law would raise the wages of tens of thousands of workers in Baltimore City. That means more people will be able to reduce their reliance on public assistance programs.” No, it does not mean that. While higher minimum wages do “raise the wages” of some, you ignore that they eliminate the wages of others laid off or never hired. Those lost wages might mean more reliance on public assistance overall, not less.

You write that “[c]ity residents will use the extra salary in their pockets to purchase goods and services at the local level, right here in Baltimore, bringing more business to stores like mine.” Are you sure there will be “extra salary”? You ignore that those laid off or never hired would have no salary at all, let alone extra. Those losses might mean less business on net for stores like yours.

You write that “wages for many Baltimore residents remain painfully low even though the economy has recovered to some extent since 2008.” Agreed. And it’s a shame. But you imply that a government decree raising wages paid would raise wages in general. It wouldn’t. You ignore that such a decree would lower to zero the wages of those laid off or never hired.

Facebook Twitter Linkedin Email

Does the FDA’s Monopoly Increase or Decrease Public Health?

A dear friend of mine (and fine physician), Dr. Chris Granger, took issue with this article I wrote with Patrick McLaughlin and Jonathan Nelson at the Mercatus Center: “Markets Can Protect Patients Better than the FDA.” He responded as follows on Facebook: My dear friend … each major stage of the FDA’s history of providing aContinue Reading

Crowd-Sourced Regulation of Ride-Hailing

I am increasingly persuaded that free-market forces regulate safety and quality better than government agencies can, so we should get rid of government regulatory agencies that “protect” consumers by taking away the freedom of consumers and businesses to make exchanges they both desire. In an op-ed posted at “The Hill,”  Patrick McLaughlin of the Mercatus Center andContinue Reading

Markets Can Protect Patients Better than the FDA

The good people at the Mercatus Center have been helping me get my academic work on regulation by market forces into policy discussions. Here is a slice of the most recent effort, posted April 5 to coincide with hearings on the nomination of Scott Gottlieb to head the FDA: While safety and efficacy are important,Continue Reading

Yes, Free Speech for Fascists – a Confession

Last week, when one of my students caught sight of me approaching on a campus walk, he pulled out his smartphone to show me a picture he had taken. “Look at this,” he said, disgusted. “It was in the Liberal Arts Building.” The picture showed a hand-lettered sign, hung over an atrium railing, that read,Continue Reading

Central Planning Does Not Work for Schooling, Either

Here is the opening of a recent post at Learn Liberty’s blog: In Kentucky, says scholar Caleb Brown, it’s easy to find a barista who has a bachelor’s degree, but manufacturing companies can’t find the machinists they desperately need — whose pay would start at $60,000–$80,000 a year. That slice of modern economic life comesContinue Reading

Great Book: The Moon Is a Harsh Mistress

This past Christmas break I treated myself to a (third?) re-reading of Robert Heinlein’s science fiction classic, The Moon Is a Harsh Mistress. What a yarn. The rising generation needs to know about it, I thought, so I wrote a plug for it at Learn Liberty. A slice: [D]on’t miss this book. Not only is itContinue Reading

Trump’s Proposed Wall and Tax Are Folly

After “The White House … floated the idea of imposing a 20 percent tax on goods from Mexico to pay for a wall at the southern U.S. border” in January, I went on record about the idea at FEE.org. Learn Liberty also posted the piece. A slice: [Y]es, immigrants do take some jobs that peopleContinue Reading

Senator Tom Cotton and Rep. Mike Pompeo Spread Four Myths About Immigration

In September 2016, Senator Tom Cotton and Rep. Mike Pompeo advocated immigration restrictions in a Wall Street Journal op-ed. Their argument reaches wrong conclusions from wrong premises, as I explain in a letter to the editor. Here is the abbreviated version of the letter published in the WSJ. Learn Liberty published the full text of the letter in October. AContinue Reading

Profits in “Perfect” v. Actual Competition

“I learned in economics that in ‘perfect competition’ profits are zero, so any actual profits come from some kind of monopoly power. So how could profits be good?” This question was asked of me by a student at a recent economics seminar hosted by the Institute for Humane Studies. The simple explanation is that whileContinue Reading

availableonamazon
Contact Dr. Baetjer

Enter your email address:

Skip to toolbar