Wednesday, 20 August 2008

Does it help the poor if you clear your own table?

A great example of how the minimum wage destroys jobs, courtesy of Art Carden at Division of Labour.

I was at a coffee shop yesterday when I noticed a sign saying "please bus
your own tables" (I paraphrase). I saw a similar sign at an ice cream place last
week; I interpret both as examples of the deadweight loss from the state's $8.00
per hour minimum wage. Someone somewhere might be willing to bus tables at
coffee shops for $7.00 per hour, but they are prevented from doing so by state
law.

Granted, cleaning my own table at a coffee shop is at best a trivial
inconvenience, and it's something I usually try to help with anyway. However,
when you add up the number of possible mutually-beneficial trades that are ruled
out by government fiat, then you're dealing with potentially substantial
leakages from the prosperity pool.

5 comments:

dreamingspire said...

An example of unintended consequences? The minimum wage here in the UK appears to have been applied in order to stop near slavery, but in the USA that $58 level appears to be a way to avoid having to have all those complex tax credits and other benefits for the low paid that weigh down the public sector here. Think that I prefer the USA method, so what say you, Tom?

Tom Papworth said...

I prefer an utterly different model.

Minimum wages are the Devil's work: they render those with the least skills unemployable and so discriminate against the weakest within society.

dreamingspire said...

Apologies for the typo on the number in my first comment - I'm sure that the basics of surviving cost less in the USA than they do here. I still don't understand why it is right to make people work for almost nothing (and also why its right to create fiendishly complex socialist schemes to try to top up their income). Interns who need rich parents to subsidise them, civil servants asking expert people to do substantive work for nothing, close to slave labour rather than have no income from work at all... So how, Tom, are those with the "least skills" to have a decent standard of living in your model?

Tom Papworth said...

I utterly agree that it would be positively wicked to “make people work for almost nothing”. However, if people choose to work for a wage that you consider to be too low, that is a private matter between themselves and their employer. As the example above made clear, the alternative to paying a “bus boy” (which I presume is somebody who clears tables) at $7 an hour is not paying a bus boy $8 an hour; it is not paying a bus boy at all and requiring customers to clear their own tables.

The result: one unemployed would-be bus boy and a few slightly less happy customers.

Minimum wages render those with the least skills unemployable, so instead of having a low income they have no income, or rather (in our social-welfare state) are obliged to live on benefits rather than through work. This is bad in and of itself (the welfare-state pays people not to work!) but it ignores the fact that (bus boys aside, perhaps) may low-paid jobs offer opportunities for advancement and the acquiring of on-the-job skills that can lead to more opportunities in later life.

The example of interns is an interesting one: it is actually illegal to pay a graduate £100 a week for 35 hours where they learn huge amounts (I’ve been one, and it was the making of my career) but you are allowed to pay them nothing but expenses. It’s daft!

Tom Papworth said...

I utterly agree that it would be positively wicked to “make people work for almost nothing”. However, if people choose to work for a wage that you consider to be too low, that is a private matter between themselves and their employer. As the example above made clear, the alternative to paying a “bus boy” (which I presume is somebody who clears tables) at $7 an hour is not paying a bus boy $8 an hour; it is not paying a bus boy at all and requiring customers to clear their own tables.

The result: one unemployed would-be bus boy and a few slightly less happy customers.

Minimum wages render those with the least skills unemployable, so instead of having a low income they have no income, or rather (in our social-welfare state) are obliged to live on benefits rather than through work. This is bad in and of itself (the welfare-state pays people not to work!) but it ignores the fact that (bus boys aside, perhaps) many low-paid jobs offer opportunities for advancement and the acquiring of on-the-job skills that can lead to more opportunities in later life.

The example of interns is an interesting one: it is actually illegal to pay a graduate £100 a week for 35 hours where they learn huge amounts (I’ve been one, and it was the making of my career) but you are allowed to pay them nothing but expenses. It’s daft!