print“Economic malpractice” in the Ivy League is nothing new. In promoting minimum wage laws, hundreds of so-called top economists have defied the “law known as the first fundamental law of demand.”
The law states that the higher the price of something the less people will take of it and vice versa.
Alas, members of “the brie, tofu, and champagne circuit” regularly pretend that this natural law, “to which there are no known real-world exceptions,” is unaffected by minimum wage legislation.
Now comes news that a California city is to raise its minimum wage to $16.00. This unemployment-causing folly is a good opportunity to revisit WALTER E. WILLIAMS’ magnificent, ongoing efforts to “embarrass the economists” who lie about the costs of raising the price of unskilled labor:
… Some people suggest that if the price of something is raised, buyers will take more or the same amount. That’s silly because there’d be no limit to the price that sellers would charge. For example, if a grocer knew he would sell more — or the same amount of — milk at $8 a gallon than at $4 a gallon, why in the world would he sell it at $4? Then the question becomes: Why would he sell it at $8 if people would buy the same amount at a higher price?
There are economists, most notably Nobel Prize-winning economist Paul Krugman, who suggest that the law of demand applies to everything except labor prices (wages) of low-skilled workers.
Krugman says that paying fast-food workers $15 an hour wouldn’t cause big companies such as McDonald’s to cut jobs. In other words, Krugman argues that raising the minimum wage doesn’t change employer behavior.
Before we address Krugman’s fallacious argument, think about this: One of Galileo’s laws says the influence of gravity on a falling body in a vacuum is to cause it to accelerate at a rate of 32 feet per second per second. That applies to a falling rock, steel ball or feather. What would you think of the reasoning capacity of a Nobel Prize-winning physicist who’d argue that because human beings are not rocks, steel balls or feathers, Galileo’s law of falling bodies doesn’t apply to them? …