Thursday, January 11, 2007

Minimum Stage

The new Congress is well on their way to increasing the minimum wage and Mike mentioned briefly that he's had frustrating conversations about the subject with his peers at law school. They tend to focus on the person that will benefit from the rise of wages, a common (and incomplete) argument to defend the rising wages. I argue that his peers don't care about the arts. The logic is actually pretty straight forward (and hopefully I'm not missing any bits).

1) Pay more for people to work and a firm has less money to spend on other things. (For some reason that continues to be beyond me, some people have a hard time understanding this. I wonder how they stay in their budgets.)

2) There are very few artists who are critical to the success of a company; most can be fired--or be turned down for hiring--with relativity little pain.

3) With less money in their pockets, firms will hire fewer artists and, thus, society will have less art.

This basic idea is hard to directly observe because we live in such a vast and complicated economy, hence why the "mere" story is so critical. But the logic holds. People and firms tend to buy art (everything from advertising to paintings to theater) when they have disposal income. The minimum wage diminishes that income. If the populace has a difficult time understanding why the minimum wage hurts the economy as a whole, then perhaps economists will have an easier time explaining it if people see why it hurts this one section.

(A related argument against the minimum wage is the point that the higher the wage, the fewer employees firms are willing to hire but for some reason, people have an even harder time understanding this truth.)

1 comment:

Ryan said...

How about this: most of the transfer in a minimum wage is from the lowest marginal product workers to the slightly more productive workers. If you hire the first group, they'll spend the money on silly things, like food and rent. But if you don't hire them and instead raise the wages of the other workers, they'll have disposal income (since they have a job anyway, they already meet their necessities), some of which might get spent on art. So maybe people who want a higher minimum wage just want more money spent on art and less money spent on food.

Personally, I support a big minimum wage jump. The bigger the better. Not because it'll make American workers better off (only some of them), but because I like more illegal immigration. Here's my logic: the higher the minimum wage, the bigger the shortage of legal workers. One way to get around a shortage is to use the black market -- i.e., get some workers who will work for something less than the minimum. The most obvious such group is illegal immigrants. Higher minimum wages thus draw more illegal immigrants (now they can also do the jobs only worth $5.50 an hour). Since I like illegal immigrants (and only illegal ones) more than Americans, this works out well for me.

(NB: all statements are made with tongue firmly in cheek. As far as you know)