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Is the minimum wage coercive?
Over at CatoUnbound, Dan Klein writes:
In 2006 there appeared a “raise the minimum wage” statement signed by 659 economists. I wanted to know why they favored the minimum wage, so I wrote up a questionnaire and sent it to them. But I also used the occasion to get their views on a very important matter: Did they view the minimum wage law as coercive?
Ninety-five graciously completed the survey. Very few of them simply accepted that the minimum wage law is coercive. More than half said the law is not coercive in any significant sense.[1]
But the minimum wage law (and concomitant enforcement) threatens the initiation of physical aggression against employers who pay less than the minimum wage. It threatens physical aggression against people for engaging in certain kinds of voluntary exchange. To me, that is coercion. Just imagine if your neighbor decided that he would impose a minimum wage law on us. Wouldn’t we all agree that he was coercing us? If it is coercion when he does it, why isn’t it coercion when the government does it?
Coercion is not always bad, all things considered, but surely Dan is correct. Ed Glaeser, Richard Epstein, and others are due to respond.
Posted by Tyler Cowen on May 7, 2007 at 10:33 AM in Philosophy | Permalink
Comments
all laws are coercive.
Boy you are really scraping the bottom of the barrel.
Posted by: spencer at May 7, 2007 10:45:07 AM
I disagree, because I'm obligated to deny that there is anything negative at all about the policies I favor,
even it requires massive surgery on the English language to maintain that position.
Posted by: Person at May 7, 2007 10:45:47 AM
This argument confuses legislation with enforcement. As a thought experiment, imagine that the state had the technical means at its disposal to produce "smart currency" that could prevent itself from being used in unlawful economic transactions, and as a result, it was not possible to pay an employee less than the minimum wage, at least not using currency. If the threat of armed force is removed from the equation, is the minimum wage still coercive? And if so, is the threat of force being directed against violation of the minimum wage, or simply against rebellion?
Posted by: Cyrus at May 7, 2007 11:24:39 AM
It's the "voluntary exchange" part. You may have no choice--be coerced--to take a job at crummy pay. Oh, I know -- you could vote with your feet! Think that's "voluntary?"
Posted by: Lee A. Arnold at May 7, 2007 11:34:28 AM
Next Up: Why the Clean Air Act should be repealed because its acronym doesn't spell anything, and why the Endangered Species Act should be repealed based upon poor font choices by the printer.
Posted by: Rich B. at May 7, 2007 11:36:26 AM
Worst commentaries. Ever.
Agree or disagree, don't act stupid.
Posted by: Erik at May 7, 2007 11:48:03 AM
http://maxspeak.org/mt/archives/002672.html
--this seemed like an appropriate response at the time.
Posted by: theCoach at May 7, 2007 12:01:44 PM
I agree with the general trend. I fail to see any difference in the level of coerciveness between the minimum wage and, say, tariffs, or food purity laws.
Posted by: Thelonious_Nick at May 7, 2007 12:05:54 PM
I think minimum wage laws are coercive not because of the effect they have on employers, but of the effect they have on employees. The minimum wage says that a worker may not accept less compensation for doing a job than the government decrees. To use Thelonious's example, food purity laws say that you may not sell rotten food. Would you call them coercive if they said you could not eat rotten food, even if you were starving? Laws are not coercive if they merely prevent one party from hurting the other. But when they prevent people from helping themselves even when it's not at the expense of someone else, yeah, that's coercive.
Posted by: Josh at May 7, 2007 12:29:42 PM
"I agree with the general trend. I fail to see any difference in the level of coerciveness between the minimum wage and, say, tariffs, or food purity laws."
I think you're missing that general trend--Cato would note that all those policies are coercive. Even if you favor those laws, we should at least be intellectually honest about their coercive nature. By denying their coercive nature, we pretend that the only points of debate are purely economic trade-offs.
Posted by: M. Hodak at May 7, 2007 12:38:05 PM
I think minimum wage laws are coercive not because of the effect they have on employers, but of the effect they have on employees. The minimum wage says that a worker may not accept less compensation for doing a job than the government decrees.
Yep, and real-world examples aren't hard to come by. The Coyote Blog had a classic case:
http://www.coyoteblog.com/coyote_blog/2005/03/case_studies_on.html
But there are plenty of others, mainly involving those who are not providing most of their own support with their earned income (retirees, teenagers, 'non-working' spouses). Many of these people would like to accept low wages in exchange for other benefits (congenial working conditions, slow pace, convenient hours, the opportunity to develop new skills, the opportunity to support a worthy cause, and so on). These people can now work for $0/hour (as volunteers) but may not accept $4/hour as a way doing something pleasant and useful while earning some pocket change.
Preventing these people from taking these kinds of jobs is obviously coercive. A minimum wage supporter might claim that the benefits outweigh these harms, but not that the harms don't exist.
Posted by: Slocum at May 7, 2007 1:15:47 PM
I am curious what the economic arguments in support of a minimum wage; I haven't heard any before.
Posted by: jsalvati at May 7, 2007 1:26:23 PM
There are no sound economic arguments for the minimum wage. However, people in support of the minimum wage base their arguments on views different in nature. I believe this to be true even of the answers given by economists in the survey published in the journal of libertarian studies (?) recently; the claims they made in support of their stance were not economic in nature and carried no such weight.
Having said that, I'm not going to defend the view that economic reasons are the only arguments important to the question of the minimun wage. I would, however, demand also some minimum level of intellectual honesty.
Posted by: Erik at May 7, 2007 1:45:33 PM
"coercion" and "initiation of physical aggression" are libertarian newspeak. Frames, phatic language, terms of art: very simply, they have a coded meaning for libertarians that is not standard English.
Very simply, it boils down to this: "Rights are force we like. Coercion is force we don't like."
Libertarians applaud initiation of physical aggression against people for the purposes of enforcing property rights. Libertarians applaud initiation of physical aggression against people who commit fraud, even though it is a voluntary act between two parties.
If a mall owner required his tenants to pay a miniumum wage, libertarians would not consider that coercive or initiation of physical aggression. But when a state requires payment of a miniumum wage, somehow that is entirely different to a libertarian.
Leave it to the CATO propagandists to insert their ideological frames everywhere they can.
Posted by: Mike Huben at May 7, 2007 1:53:37 PM
Okay: minimum wage laws are coercive, as are the laws preventing me from betting on sports games, and those prohibiting me from buying drugs from my local drug dealer, and those prohibiting a 17-year-old from buying alcohol.
So what, exactly, has been gained from this admission? More important, what is surprising about it?
Posted by: K. Williams at May 7, 2007 1:56:51 PM
"So what, exactly, has been gained from this admission? More important, what is surprising about it?"
Because if you have to force pple to do something that they would not do otherwiase, rather than convince them to do it, it is a fair bet that it is not such a good thing for them. You are basically imposing your values.
And you definitely deserve to have it done back to you.
Posted by: flix at May 7, 2007 2:33:09 PM
The following was inspired by Gabriel Mihalache, and there is a good amount of stealing of his words and ideas here.
Imagine two worlds, one where the government controls all economic activity, and one which is minarchist paradise where the only laws are for enforcing commons problems, such as against predators.
Now also imagine that both of these worlds somehow managed to yield the exact same GDP in the exact same distribution. Which one would you prefer to live in? How much would you be willing to pay to live in that world?
How about a world where there is no "illegal crime", and the only crime is committed by the highest bidders getting vouchers with the right to murder, rape, assault, steal etc. from/to anyone they want, and where a limited number of citizens can bid to buy protection from these vouchers? How much would you be willing to pay to be free from such licensees, or to have your child safe from pedophiles?
I bet in the latter twisted world everyone except some mixed up masochists would be willing to pay huge somes for freedom from predation. Why then does economics as normally taught then assign a price of zero for when government uses its coercive power to fund things beyond a minarchist minimum? Or to prevent consenting adults from engaging in free association? Or prevent adults from the "crime" of making different risk/reward choices than the nanny state thinks is wise, such as smoking pot or doing heroin, and enacts a penalty of rape (i.e. prison time in our horrific prison system) for those who prefer to choose for themselves despite this coercion?
It seems to me that by revealed preference the vast majority of people are willing to pay a lot for an increase in safety from involuntary theft and rape. For example, we buy locks for their doors (indeed they come standard) to their homes and cars, some buy alarm systems, most people who can afford to simply refuse to live in a high crime neighborhood and pay a large premium to do so (when I moved to LA from the Boston area I saw in want ads $200 per month for an apartment, naturally it was in a very dangerous neighborhood in LA. I passed and paid multiples more, as do most people who can).
With the high price we are willing to pay via revealed preference for liberty from needless coercion, we ought to mentally subtract a huge amount from the benefits from non-minarchist government spending and regulations. Only after factoring in the huge negative price for restricting our liberty can we properly assess whether "luxery" government spending and regulation are better than the minarchist alternative.
To make a long story short (I know, too late) liberty has a substantial value and the lack of that same liberty has a substantial cost. We ought not to fall into the trap of assigning it a price of zero.
Posted by: happyjuggler0 at May 7, 2007 2:33:56 PM
Once you admit the state has the right to impose a minimum ("fair"), why would it be wrong to impose a maximum?
Posted by: joe at May 7, 2007 2:36:22 PM
Slocum, I like your case study. I have another one.
There is an organization called ACORN that fights for higher minimum wages. For other people. However, in their lawsuit "ACORN vs DEPARTMENT OF INDUSTRIAL RELATIONS, DIVISION OF LABOR STANDARDS ENFORCEMENT" in 1995, they sought to have themselves exempted from the minimum wage.
From their court papers:
"... this adverse impact will be manifested in two ways: first, ACORN will be forced to hire fewer workers; second, its workers, if paid the minimum wage, will be less empathetic with ACORN's low and moderate income constituency and will therefore be less effective advocates."
This is the lexis/nexis link:
http://web.lexis-nexis.com/universe/document?_m=138d9cfceb9dddb6cc7f8200f2ea1cee&_docnum=3&wchp=dGLbVtz-zSkVb&_md5=70370836edbe9916e9e891e1728a2412
-dk
Posted by: Dick King at May 7, 2007 2:39:55 PM
"minimum wage laws are coercive, as are the laws preventing me from betting on sports games, and those prohibiting me from buying drugs from my local drug dealer, and those prohibiting a 17-year-old from buying alcohol"
And you should all drive hybrids and not use incandescent bulbs. It's for your own good. SUVs should be banned.
Also, vegeterianism should be subsidised and fishing, hunting and bull-fighting made illegal.
Start with fines, penalties, etc.. ultimately jail is right for planet kilers.
Posted by: gr at May 7, 2007 3:32:04 PM
Freedom of speech and freedom of religion are coercive.
Discuss.
Everything is coercive. Everything. Whether you believe that the coercion is unwarranted is a matter of degree and perspective.
Posted by: Allan at May 7, 2007 3:41:37 PM
I agree with K. Williams above. Threat of state administered punishment alters my behaviors from my unconstrained utility maximizing optimum. The only non-coercive law is a uniformly non-binding law. They don't call it the "coercive power of the state" for nothing.
That said, are there meaningful degrees or categories of coercion? Otherwise, isn't the distinction mere semantics?
Posted by: MW at May 7, 2007 3:43:49 PM
"So what, exactly, has been gained from this admission? More important, what is surprising about it?"
I agree, nothing is gained by the admission. What's interesting or surprising, however, is that the economist signers wouldn't simply concede this point.
Posted by: josh at May 7, 2007 3:45:53 PM
Okay: minimum wage laws are coercive, as are the laws preventing me from betting on sports games, and those prohibiting me from buying drugs from my local drug dealer, and those prohibiting a 17-year-old from buying alcohol.
So what, exactly, has been gained from this admission? More important, what is surprising about it?
The fact that minimum wage proponents (in that survey) don't make that admission at all! In other words, that they won't adhere to a bare bones standard of intellectual honesty.
Posted by: Person at May 7, 2007 3:48:26 PM
Where's the dishonesty in refusing a loaded question? Minimum wage laws are coercive because of the syllogism, "All laws are coercive; the minimum wage law is a law; therefore the minimum wage law is coercive." So what's the point of making the specific statement without that context?
Suppose you received a survey asking if you thought that many African-Americans are dishonest. Now, it would be reasonable to think that many people of all races are dishonest, and that African-Americans are probably dishonest at about the same rate, so yeah, that statement is probably true. Would you just check off "Yes" next to the question? Wouldn't you wonder what the survey author intends to do with that answer?
Posted by: five toed sloth at May 7, 2007 4:17:15 PM
