Wednesday, July 12, 2017

Encouraging Marginally Productive Robots

Standing in line
Marking time
Waiting for the welfare dime
'Cause they can't buy a job
--Bruce Hornsby and the Range

Prof Williams reiterates a point made by these pages before (e.g., here, here, herehere). Minimum wage laws motivate producers to look for labor substitutes--such as robots. These investments would not be economical except for the fact that a floor has been forced under labor prices.

Marginally productive people that would have been employable at lower labor prices are no longer in demand at the higher labor price manipulated by law. And marginally productive robots that would have been bad investments when labor prices were unhampered are now attractive at the manipulated labor price.

Both of these--marginally productive labor unnaturally forced to the sidelines and marginally productive machines unnaturally put into action--are undesirable over time. Marginally productive labor grabs no toehold in the market and likely heads to welfare to live off the production of others. Marginally productive machines are vulnerable to economic shocks due to their inflexibility.

Over time, minimum wage laws constitute economic malpractice. They discourage marginally productive workers and encourage marginally productivity robots.

No comments: