Not all 'productivity' is created equal: Another case against government-dictated minimum wages
Governments shouldn't set wage floors; markets should. Wages should be set not by government fiat but by a respective employee's worth to a business, based on skill set and productivity.
Wages by diktat that ignore those factors perversely have the opposite effect of government beneficents' intentions.
Oh, some will see their wages rise. But others, and typically on the lowest rung of the employment ladder and those seeking their first footing on that ladder, pay a steep price. The cost of labor arbitrarily increased by the government for some will mean fewer jobs for others. The government has priced the entry-level and least-skilled worker out of the market.
Minimum-wage aficionados long have argued, usually with faulty data, that such a scenario is unfounded. Economic scholarship says otherwise. And while proponents are not yet ready to concede the point, and likely never will be, they've taken to lifting the area rug and sweeping the point under in pursuit of another, though equally specious, point.
“Ha!” they exhort. “The simple matter of fact is that the minimum wage has not risen by as much as overall worker productivity.” Thus, the minimum wage should be raised to keep pace.
Some refer to this as the “black hole theory of the minimum wage.” Or as liberal blogger Denis Drew defined it recently at allthingsdemocrat.com: “When the minimum wage falls far enough below what the market would bear, the laws of supply and demand break down.” Had the minimum wage kept up with productivity, today's minimum wage should be $22 an hour, goes the argument.
But overall productivity is not the proper measure, reminds Don Boudreaux, the regular Trib columnist and renowned professor of economics at George Mason University in Fairfax, Va.
“The productivity that's relevant ... is marginal productivity,” Mr. Boudreaux told Mr. Drew in a Thursday letter that the professor shared with me. “Namely, the value that ‘the last' worker added to a class of production projects adds to the market value of those projects. But not all workers and not all production projects are alike.”
That is, trends in overall worker productivity should not be confused “with that of the marginal productivity of low-skilled workers,” Boudreaux says.
Theory and gobbledygook, you say? Here's a real-life example from Boudreaux:
“If, all other things unchanged, consumer demand for neurosurgeons rises relative to that for general practitioners (GPs), the wages of neurosurgeons will rise relative to that of GPs. The reason is that the marginal productivity of neurosurgeons will rise relative to that of GPs. The same result will occur if, all other things unchanged, the number of GPs increase relative to that of neurosurgeons.”
Furthermore, “If the average productivity of physicians as a group rises over time, nothing in economic theory says that the productivity or the wages of all physicians must rise by equal amounts — by amounts equal to the rise in average physician productivity and average physician wages. And nothing says that the wages of some kinds of physicians cannot fall even when average physician productivity is rising.”
What's true for physicians is true for workers generally, Boudreaux says.
Thus, the real black hole of the debate is believing that all productivity is created equal.
Colin McNickle is Trib Total Media's director of editorial pages (412-320-7836 or email@example.com).
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Pirates will play NL wild-card game at PNC Park after shutting out Reds
- Nothing normal about Steelers’ standard as backups fill vital roles
- Penguins notebook: Farnham relishes making opening-night roster
- Penn Hills man allegedly robs Wilkins eatery
- Pitt notebook: Panthers keeping many players involved
- Deal close on Pacific free trade pact
- Man’s body recovered from river in McKeesport
- Steelers cut Scobee, sign free agent kicker Boswell
- Faith a comfort in aftermath of Oregon shooting
- MLB notebook: Miami’s Gordon sweeps NL batting, steals titles
- Penn State notebook: Franklin cautious regarding injuries