Economic Malpractice

Drawn into the stream
Of undefined illusion
Those diamond dreams
They can't disguise the truth
--Level 42

Prof Walter Williams discusses the epidemic of economic malpractice related to minimum wage laws.

What these pages have frequently viewed as basic ECON 101 principles, Prof Williams calls the first fundamental law of demand. The higher the price, the lower the demand, and vice versa. The higher the price, the less people will buy, and the lower the price, the more people will buy.

This law is grounded in basic axioms of the human condition.

Thus, we know that when the price of jewelry, cars, houses or any other scarce resource capable of satisfying human needs and wants increases, demand will decrease.

Yet, the argument put forth by proponents of minimum wage laws is the opposite. Raising the price of labor will not change employer demand--in fact it might even increase it.

To any reasoning mind, such a proposition should ring hollow. After all, if raising labor prices slightly prompts no reduction in worker demand, then why not raise wages to the moon? Why stop at the current legal minimums if buyers will take the same amount of labor or more at higher prices?

The train of thought is silly, of course. Meanwhile, proponents of minimum wage laws scratch their heads and demonize employers that implement automation and/or move jobs offshore in response to laws that raise minimum wages. These individuals either don't understand or simply ignore the reality that minimum wage laws constitutue compulsory unemployment.

As Prof Williams observes, economists who contend that the first law of demand doesn't apply to wages are engaging in economic malpractice.