Answer Me This About Mandated Minimum Wages

Don Boudreaux, Professor of Economics at George Mason University, made this excellent point earlier today regarding the minimum wage:

You should ask these minimum-wage supporters the following questions: “If government enacts legislation setting the minimum price that people can pay for a new car at $50,000, do you – you confident supporters of government-mandated minimum prices – believe that this legislation will result in people paying $50,000 for the likes of Toyota Corollas and Ford Fiestas?  Or do you realize that if government obliges car buyers to pay at least $50,000 for a new vehicle, these buyers will choose to buy no low-end cars and opt (if they buy a new car at all) instead to purchase a new BMW, Lexus, or other luxury model?”

 

And here’s a follow-up question that you should ask: “Do your answers to the above questions change if the minimum-car-price legislation applies only to high-income people?  That is, do you think that merely because an attorney or surgeon earns, say, an annual salary of one million dollars – and, hence, can “afford” to pay $50,000 for a Corolla or Fiesta – that that wealthy car buyer will be prompted by minimum-car-price legislation to fork out $50,000 for the likes of a Corolla or Fiesta, especially given that he or she can buy the likes of a BMW or Lexus for the same money?”

 

Unless you find a minimum-wage supporter who can plausibly explain why a legislated minimum price for cars will not reduce the quantity of low-end cars demanded by car buyers, you should be more skeptical of the analytical abilities of those who insist that a higher minimum wage will lead to more take-home pay for low-skilled workers.

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