What About Maximum-Work-Effort Legislation?

(Don Boudreaux)

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This young man insists that my “neoclassical free marketeer opinion of the minimum wage is outdated and invalid”:

Mr. A___:

Your persistence in defending minimum wages is admirable. However, I find none of your defenses credible.

Upon reading my recent post on Walter Williams, you say that you “don’t understand” what I mean when I describe minimum wages as policies that artificially and cruelly handicap low-skilled workers as they compete for employment. Yet my point is a simple one, which is this: One means for a worker to make himself or herself more attractive to potential employers is to agree to work at a lower wage. And so by prohibiting workers from offering to work at wages below the government-dictated minimum, the government steals from each low-skilled worker an important bargaining chip for use in competing for employment. How is such theft in the best interest of low-skilled workers?

To better see my point, suppose that government instead imposed, and can easily enforce, “maximum-work-effort legislation.” That is, suppose government can and does prohibit each low-skilled worker, while on the job, from exerting effort above the government-dictated maximum. Although such a policy would surely be sold to the public as being “pro-worker,” do you not see that such legislation would artificially diminish low-skilled workers’ ability to compete for employment?

“I’d like to work very hard for you if you hire me,” says a low-skilled worker to a prospective employer, “but government prohibits me from working as hard for you as I’m able and willing to work. But please hire me anyway.” I trust that you see that this low-skilled worker’s prospects of finding employment under maximum-work-effort legislation are lower than they would be absent such legislation. For the same reason – grounded in the reality that no employer will pay a worker more than the value of that worker’s output – low-skilled workers’ prospects of finding employment under minimum-wage legislation are lower than they would be absent such legislation.

You see minimum-wage legislation as a policy that only transfers income from employers, and perhaps also consumers, to low-skilled workers. I see such legislation very differently. I see minimum-wage legislation as a government-imposed restraint on the ability of low-skilled workers to compete for jobs. And I believe that my understanding of this legislation is much more realistic than is your understanding.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030