Bastiat and the Minimum Wage or Don’t Forget the Unseen!

Los Angeles became the third city to implement a $15 minimum wage, following Seattle and San Francisco.  With all three cities, the rise is phased in.  Far smarter people than I have addressed this phase in and potential reasons for it, but I’d like to address this while channeling Bastiat.

The phase-in helps hide the effects of minimum wage.  By relying on arbitration (not replacing a worker who has left, or replacing him with automation), firms can adjust their employment to the new wages.  If, indeed, the wage were hiked immediately to $15/hr, disemployment effects would be obvious.  With the phase-in, they become hidden.  This is a big reason why so many minimum wage studies find only small/no effect on employment stemming from the price increase.

But the poor economist looks only at the seen.  Bastiat teaches us to look beyond what is obvious.  What is not seen by many proponents of minimum wage is the potential number of jobs that are now lost.  Sure, jobs may have increased by 400, but absent the minimum wage increase, they’d have increased by 800.  That is a loss of 400 unseen jobs.  The poor economist misses this.

4 thoughts on “Bastiat and the Minimum Wage or Don’t Forget the Unseen!

  1. By relying on arbitration attrition (not replacing a worker who has left, or replacing him with automation)…

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  2. Jon

    Apparently there isn’t enough unemployment within the city limits of Los Angeles, so the wise city fathers will move to increase it by raising the min wage.

    If you look at a map of Southern California you will notice a HUGE metropolitan area surrounding L. A. as far east as San Bernardino and Riverside, and south to Oceanside.

    L.A. city alone, is a relatively small part of this geography, and it’s easy to imagine future employment flowing like water into the surrounding areas.

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  3. The localities where the economy is not doing so well will hear the loud concerns of businesses about the effect of any increase in the minimum wage. Where the economy is doing well, the voices of concern about inequality are loudest and their influence is for increasing the minimum wage. Because the likelihood of voting for a raise is affected by how well the economy is doing, a negative correlation (in any large scale statistics on the effect of minimum wage) would be masked.

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  4. Whether the economy, local or national, is doing well or not, those that “benefit” from the increase in minimum wage always want more. That is the real problem of the modern welfare state in America.

    Of course, the ignorant voters support the increase when the economy is doing poorly. And the politicians can be seen “doing something”.

    Of course, what they are doing is causing many current workers to lose their jobs and those seeking entry into the job market to remain unemployed.

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