Pushing to Other Margins

This Dilbert strip (which I stole from Greg Mankiw’s blog), is a nice illustration of what Russ Roberts and Mike Munger discuss in this EconTalk podcast.

Especially how interventions into the market with price controls just winds up pushing differentiation to another margin.

One example they give is minimum wage.  By setting a floor on the price of labor above the value that some labor is worth, that results in fewer job opportunities for folks with productivity that is worth near or below that floor.  So, now employees put up with their bosses poinking paper wads off their heads because the employees have fewer job options.


1 thought on “Pushing to Other Margins

  1. The minimum wage is an interesting notional quasi-concept. It distorts labor markets. It’s a price fixing scheme.

    However, the same price fixing scheme can be used as “price fixing leverage”. How? One example is unions negotiating to tie their base labor rate [as a component of the negotiated pay formula] to the minimum wage. Minimum wage rises, your unionized pay rises. Very nice!

    How about negative effects. One example is teenage unemployment. Those young people that need exposed to the labor market thereby gaining skills are left with no opportunity.

    Finally, the idea that the minimum wage is somehow a “living wage” is politics not economics. Its actually political nonsense. Most people earning minimum wage do not remain at this level of pay. The vast, vast majority move on to become larger wage earners. You see, they are 16, then 26, and soon 66. Are we suppose to start at the top?

    The minimum wage is regular rocket science!


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