David R. Henderson  

Kid Takes on Ben Barber

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On John Stossel's show last week, a young girl put political scientist Ben Barber on the spot after he had advocated a minimum wage law. It starts at the 37 second point. Notice how clear she is in posing the question while still being friendly. Nice combination.

Also, notice Barber's answer. I don't think it's my imagination that he plays the class card. He contrasts her desire for a job watering her neighbor's plants for $5 an hour with the desperate need of some unnamed 13-year olds in New York City who want a job. He suggests that maybe it's because she wants "extra dough." And that seems to make it alright for the government to price her out of a job. And somehow that magically prices those desperate 13-year olds in?

Also interesting is that somehow he suddenly wants these desperate 13-year olds to have jobs. This, after having complained [at the 3:10 point] about teenagers in 19th century Britain working long hours at low wages instead of going to school. [As if that was an option during that much-poorer time.] And this after having earlier asked the audience rhetorically if they wanted their children working.


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CATEGORIES: Labor Market



COMMENTS (16 to date)
Unconformist Sheep writes:

What about Barber's point that only democratic organizations are "accountable" and can make the proper trade-offs involving pollution? According to his logic, it's fine if I individually, say, decide to start a wild fire. Or should we "collectively" also vote on individual behavior? Has this guy never heard of the rule of law?

Boonton writes:

Actually the Fed. min wage does not apply to businesses that make less than $500K a year or are not engaged in interstate commerce (see http://usgovinfo.about.com/blminimumwage.htm). A 13 yr old collecting $5 an hour to water plants for her neighbors would probably be exempt from min. wage laws. On the other hand who has so many plants in NYC that they have to pay by the hour to have them all watered?

asg writes:

Ben Barber produces some of the most content-free and vague arguments I've ever seen. The amount of distance between what he writes and a simple premises-and-conclusion treatment is greater for his writing than for that of almost anyone else I've read.

Ray writes:

Such conversations are frustrating because such populist views are already divorced from rational processes.

I could deeply explain without exaggeration or slant how we truly do vote every day for or against this company or that, and the person that already buys into the populist belief just won't hear it.

Popper has a good quote that says something to the effect that "the irrational are not going to listen to rational arguments." (His actual quote is much better.)

Lori writes:

Minimum wage and child labor are of course separate issues. Minimum wage or minimum age? Both are artificial constraints. But 'natural' constraints can also hold people back.

mulp writes:

The opposition to minimum wage, like the opposition to minimum price, assumes willing buyer and seller.

Of course, if we substitute good for labor, then we can argue the GDP would be higher, and employment higher, if goods were sold at lower and lower prices until the capacity of the capital and labor were fully employed. As the housing industry has lots of excess capacity, the solution is for housing to be sold for lower and lower prices. At $5 a house, houses would certainly be sold in sufficient quantities to fully employ all the capital resource and labor.

Now don't argue that the costs prevent housing from being sold for $5 when you are arguing that the minimum wage is preventing full employment. If the wage has nothing to do with cost, the the price of goods has nothing to do with cost.

The minimum wage is the poorly designed method of solving what all other developed nations do by having a social welfare system that provides the means to meet the cost of living without being forced into a labor agreement at a slave labor wage.

Supply curves never have a price point of zero, and for many people, the wage price point is far above the minimum wage because their marginal cost forces their price to be higher. To argue someone should be willing to take a wage below marginal cost is to argue firms should sell their goods below marginal costs.

The dilemma for labor is defining what it means for a person to go out of business. Are we talking Soylent Green. Euthanasia and sale of body parts to satisfy creditors?

Sure, let's eliminate minimum wage laws and replace them with a social support system which ensures incomes meets the cost of living. But then you will be faced with employers of certain types of labor paying far less than the value because the government will make up for the price being set too low.

ben writes:

if its an issue of justice i think the tax and transfer system is much better solution than minimum wage.

Boonton writes:

Interestingly the 13 yr old girl is probably benefiting from the min. wage law. A 'plant watering service' company would most likely have to pay ites employees the min. wage and would probably have a hard time legally employing a 13 yr old girl. Because the 13 yr old girl doesn't work for such a company, she is able to offer her services directly to her neighbors for a straight $5/hr thereby undercutting the best price any plant watering company could ever offer.

mark writes:

Great post. I am still trying to figure out how the 13 year old in New York who apparently "desperately needs a job" benefits from the minimum wage and child labor laws.

Silas Barta writes:

Boonton, the minimum wage law means whatever the government feels like it means, and it's a bit naive to think that if you don't hire people "by the hour" you'll be off the hook, once you upset those who are politically connected.

Imagine that I hired farm workers to pick fruit for me. Imagine that instead of paying them by the hour, I paid them at a piece rate (money per unit weight picked). Let's say that working at a moderate pace will amount to earning less per hour than the minimum wage. Do you really think the DoL will leave me alone, or do you think it will consider this circumvention of the law, and re-define the employment to be hourly?

John Fast writes:

mulp wrote:

At $5 a house, houses would certainly be sold in sufficient quantities to fully employ all the capital resource and labor.
You mean if we set a *maximum* price of $5 per house? No, that would cause a shortage because nobody would want to sell their house for $5, and because (even worse) no construction company could afford to build one for only $5. Therefore, the construction industry would stop building houses, and rather than full employment there would be *zero* employment of labor and capital on building houses.

This is probably the most elementary stuff in economics; more importantly, it is simple common sense.

Were you talking about setting a maximum price of $5 per house? If not, then please clarify what you *do* mean.

Now don't argue that the costs prevent housing from being sold for $5 when you are arguing that the minimum wage is preventing full employment. If the wage has nothing to do with cost, the the price of goods has nothing to do with cost.
I don't understand your argument here; maybe you can enlighten me, because I'm still stuck in simple basic economics.

First: Who said that either that price has nothing to do with cost, and/or that wages have nothing to do with cost? It wasn't me, and as far as I can tell it wasn't anyone else here (except maybe you).

Second: If the government forces an artificially-low maximum price (such as $5 per house, or $5 per automobile), there will be a shortage, because there will be both more demand and less supply than at the free-market equilibrium price.

And if the government forces an artificially-high minimum price (such as $15 per hour for unskilled labor), there will be a surplus a/k/a excess labor a/k/a high unemployment, because there will be less demand for unskilled labor at $15 per hour than at $5 per hour.

The minimum wage is the poorly designed method of solving what all other developed nations do by having a social welfare system that provides the means to meet the cost of living without being forced into a labor agreement at a slave labor wage.
I agree with you (and ben) that a minimum wage law is worse for solving poverty than a social welfare system. I do not agree that if there were no minimum wage law people would be forced to work at slave labor rates.

I assume what you mean by "slave labor rates" is "only enough money to stay alive, i.e. enough to pay for the bare minimum of food, clothing, and shelter necessary to avoid dying or getting sick from malnutrition or exposure. Why do you think people would only be paid that much? In fact, I'd like to know why/how, according to your view, there are any workers who get paid more than the legal minimum wage. And then I'd like to know why the same explanation doesn't also explain why other workers would be paid above "starvation wages" even without a minimum wage law.

Or when you say "starvation wages" is that just an exaggerated way of saying "less than I think they should be paid, even if they don't produce enough to cover the cost, so that it loses money to employ them"?

Supply curves never have a price point of zero
Really? What about free goods such as air?
for many people, the wage price point is far above the minimum wage because their marginal cost forces their price to be higher. To argue someone should be willing to take a wage below marginal cost is to argue firms should sell their goods below marginal costs.
I will happily argue a firm should sell its goods below marginal cost, i.e. sell them at a loss, when the alternative is not selling them at all, because it's better to sell below cost, or even sell for scrap, than to throw them away for nothing, or to keep them in storage (which costs money) and never sell them.

I will also argue that if someone is (for example) completely inexperienced, unskilled, and unqualified -- for example, a recent graduate of some worthless government school in the inner-city -- and are living with their parents or friends, it's better for them to take a job that pays for at least part of the cost of their room and board, rather than sit around doing nothing at all.

Sure, let's eliminate minimum wage laws and replace them with a social support system which ensures incomes meets the cost of living.
I think you and I and ben are all in agreement about that.
But then you will be faced with employers of certain types of labor paying far less than the value because the government will make up for the price being set too low.
No, because in a competitive market employers always end up paying based on the value of a worker, i.e. the worker's productivity.

The_Orlonater writes:

I had an enjoyable time watching that episode of Stossel, but everything that Barber said about "deregulation, anti-trust laws in place to prevent 'monopolies', democratically elected institutions as being held 'accountable,'" ad naseum are all issues that John should dedicate an episode of his show to. They're not rather easy to refute in a sentence. All in all, they just are broad political slogans that caricature economic life through a childish Manichean world view.

Boonton writes:

Silas,

My point wasn't that you can dodge min. wage laws by paying by the piece. My point was that the Fed. min wage law would apply to a company that hired people to water plants for houses but wouldn't apply to the 13 year old girl selling directly to the customers (namely because the Fed. min wage law only applies to businesses grossing over $500K or engaged in interstate commerce, an individual homeowner hiring a plant waterer wouldn't qualify, I'm not going to bother looking up individual state laws).

The 13 yr old girl would be able to offer her customers $5/hr while a company could not.

Jeremy, Alabama writes:

I love Stossell but thought his questions to Barber were weak. I would have started with

- how much coercion is in that 70,000 pages of regs?

- how much of that 70k have you read? How would you know if you are breaking the law? How can you say it is good? How can you assert that "people can vote out regulators or politicians" based on kilopages of unreadable legalese?

- If something applied badly to your circumstances, e.g. you would be satisfied with 10 pCi/L Radon in your holiday home instead of a mandated 4 pCi, how would you "vote" to have that reg repealed?

- How many regulations were purchased for the benefit of companies, instead of for the benefit of consumers? (see Radon above)

Silas Barta writes:

@Boonton:

I'm not going to bother looking up individual state laws

Why not? Don't you want to verify if businesses really have it as easy as you claim?

The 13 yr old girl would be able to offer her customers $5/hr while a company could not.

Until someone politically connected complains.

Boonton writes:

Silas,

You're missing it. If the girl is hired by Plant Waters Inc., she is their employee and the neighbors are customers of the company. If the girl goes directly to the neighbors she is, at most, an employee of each individual neighbor whose total pay to her per year is probably trivial. Since the individual neighbors are small enough to exempt themselves as 'employers', the girl is able to win customers the company cannot by keeping the price below min. wage.

Why not? Don't you want to verify if businesses really have it as easy as you claim?

No I don't really want to verify it. I already verified the state level and I don't really care. Even if its technically illegal in NYC the law is probably not even enforced at that level. (And no I doubt even NYC has 'politically connected' plant watering companies). But I see no reason why you can't verify the state law of NY since I did the Federal.

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