Intended Unintended Consequences

People are often surprised by the unintended consequences of their actions. For example, it was forest management policy to aggressively put out wildfires for many years. That resulted in forests full of quick-burning fuel in the understory—and spectacular, devastating forest fires.

The government’s attempts to manage the economy have been no better. The more it has fiddled, the worse things have become. Now, the Brookings Institution is reporting an across the board decline in business dynamism around the country.

The Blue State Model suggests responding with more government intrusion into the economy. States such as Maryland are doing things such as raising their minimum wage above the national level. The unintended consequence will likely be that marginally skilled workers will be priced out of the legal job market to become more of a drag on a state budget starved because of reduced economic growth.

DaTechGuy suggests that the conservatives in the Blue States should call the Left’s bluff and let them pass such ill-conceived laws. He suggests that the result would be to drive economic and population growth to the Red State, increasing their clout at the national level. It’s a strategy not unlike letting a drunk keep going till he hits bottom.


Minimum Wage

A quick show of hands, please … how many of you have ever worked for 70 cents an hour? Not very many. That’s what I made at my first job as a high school student shelving books in a university library. The minimum wage back then was $1 an hour, but as a student trainee all I got was 70 cents.

By the time I got my next paying job, the minimum wage was up to a buck-and-a-quarter, but I got $2 an hour. That was not because of any generosity on the part of my employer. It was because I had a First-Class Commercial Radiotelephone Operator’s License from the FCC and could legally operate the transmitter at the radio station that hired me.

I’ve never had a minimum wage job. Since that second job, I’ve been overqualified, but for that first job, I was underqualified. Indeed, if the library had had to pay me more that I was worth, I never would have had that first job. I’d have been priced out of the market.

There’s another way to look at the minimum wage. Declaring that there is a minimum price which must be paid for labor has the effect of outlawing labor not worth that much. That can have two effects. One is to keep more low-skill persons who want to work unemployed. The other is to force more workers into the off-the-books economy. Neither strikes me as a good idea.

Fauxcahontas and Fuzzy Math

Prof. Jacobson at Legal Insurrection has been following the economic nonsense concerning Senator Elizabeth Warren’s claim that the minimum wage should be $22 an hour.

Let’s do some math.

There are roughy 135 million workers in the U. S. 22 bucks an hour works out to around $45,000 year, which would give a total U. S. payroll of a bit more than $6 trillion. That’s just about equal to the total of all wages and salaries paid in the country last year. In other words, in a struggling economy business would have to drastically reduce their unskilled minimum wage employment in order to have money left over to pay their skilled employees. One consequence of increasing the minimum wage is to outlaw jobs for workers with lower skills, increasing unemployment and slowing economic growth.

When Jobs Are Outlawed …

… only outlaws will have jobs.

The Minimum Wage Law does not create jobs. Rather, it outlaws jobs that are worth less than some arbitrary wage. When those jobs are outlawed, the market produces several responses.

Some folks give up and go on welfare.

Some low-paid workers continue to work in jobs that would otherwise be legal but are now off the books. That’s illegal, and they become outlaws.

Some turn to crime and become serious outlaws.

Do we really want to raise the Minimum Wage?