Economic Alchemy
17 November 2006
Editor, The Los Angeles Times
Dear Editor:
Even allowing for Michael Moore's penchant for jesting, I must correct the film-maker's sloppy economic reasoning. In his open letter to conservatives, Moore writes "When we raise the minimum wage, we will raise it for your employees too. They will use that money to buy more things, which means you will get the money back!" ("Michael Moore's pledge," Nov. 17).
While it's not certain that a higher minimum wage means more money in the pockets of low-skilled workers as a group, suppose that a hike in this wage does indeed increase these workers' annual take-home pay - and consumption expenditures - by, say, $10 million. This money must come from somewhere: other persons as a group will spend $10 million less.
Legislating a minimum-wage is economic alchemy.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Editor, The Los Angeles Times
Dear Editor:
Even allowing for Michael Moore's penchant for jesting, I must correct the film-maker's sloppy economic reasoning. In his open letter to conservatives, Moore writes "When we raise the minimum wage, we will raise it for your employees too. They will use that money to buy more things, which means you will get the money back!" ("Michael Moore's pledge," Nov. 17).
While it's not certain that a higher minimum wage means more money in the pockets of low-skilled workers as a group, suppose that a hike in this wage does indeed increase these workers' annual take-home pay - and consumption expenditures - by, say, $10 million. This money must come from somewhere: other persons as a group will spend $10 million less.
Legislating a minimum-wage is economic alchemy.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Posted by Don Boudreaux on
Saturday July 7, 2007 at 11:23am