Why It’s Safe to Raise the Minimum Wage
Jason Green-Lowe
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Hello, Xerographica. Thanks for your articulate response! I think the place where you and I disagree the most is over the relative importance of (1) price signals and (2) fair wages.

Yes, to a certain extent, any government activity in the marketplace will distort price signals. It may be very slightly less clear whether people should open new restaurants as a result of the minimum wage, and as a result, we may get a slightly sub-optimal number of restaurants. You might find, for example, that you have to wait 5 minutes to get a table, or that the price of dinner goes up by 25 cents because too many tables are empty.

In a perfect world, we could try to eliminate those problems. In this world, though, I think it’s more important to eliminate the problem where low-wage workers get trapped in a desperate struggle to pay their bills because they don’t have enough bargaining power to demand a wage that captures anywhere near 50% of the surplus created by their labor.

It’s not accurate to say that wages are “just” prices. Yes, wages are the price of labor, and they serve an important purpose in keeping the labor market running smoothly…but wages are also the most important way of getting money into the hands of the poor and the working class. Until someone comes up with a better way of making sure that ordinary people have a place to sleep and enough food to eat, we can’t afford to treat wages purely as a price signal…we also have to pay attention to how wages affect poverty.

Charles Darwin was not an economist, but even if you apply Darwinian ideas of natural selection to the economy, there’s no reason to think that evolution favors the use of academically pure price signals. The species — and the societies — that survive will be the ones who pay attention to the real-world effects of their policies.

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