Bryan Caplan  

The Punchline of Labor Market Regulation

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Last night, while rewatching the classic Simpsons "Saddlesore Galatica," I came across a great pedagogical moment that even Homer Economicus: The Simpsons and Economics misses.  In the episode, an abusive horse trainer flees from the state fair, leaving his mistreated equine behind.  Hilarity ensues:

Officer Wiggum: I'm afraid this horse is going to the dog food factory.

Homer: Good luck getting a horse to eat dog food.

Bart: You can't do that to Duncan. It's not his fault that his owner was a sleaze.

Officer Wiggum: Look. I just want the horse to have a good home or be food. If you want to take him, fine with me.

Though the Simpsons writers almost surely didn't intend this as a critique of labor market regulation, the shoe fits.  Imagine Officer Wiggum on...

The minimum wage: "Look. I just want the worker to make $15 an hour or be unemployed."

Health insurance mandates: "Look. I just want the worker to have free medical care or be unemployed."

Firing restrictions: "Look. I just want the worker to have complete job security or be unemployed."

Could legally imposing these stark ultimatums be good strategy for pro-worker policy-makers?  Anything's possible.  The point is that stark ultimatums are a double-edged sword, not a no-brainer.  A devoted horse-lover really could sensibly favor an option in between "good home" and "food."  A friend of the workers really could sensibly oppose the minimum wage.  It all depends on something almost no human being even understands, much less measures: elasticities.




COMMENTS (11 to date)
Michael Crone writes:

One of my small joys is the way we can comment today on a post that hasn't been made until tomorrow.

Harold Cockerill writes:

Proponents of market regulation are only responsible for the positive outcomes of regulation. Negative outcomes are the responsibility of greedy businessman and simply point to the need for more regulation.

ThomasH writes:

First, I'll repeat my ongoing amazement at what seems to me the disproportionate attention given on this blog to the minimum wage issue.

But ..... This is a nicely false analogy of the issue, so thanks.

In the abandoned horse analogy a more perceptive Officer Wiggum would have said "I just want all horses like Duncan to have a good home or run the 1/n risk of being dogfood."

To which a more perceptive Homer might have asked "Why does Springfield not just pay someone to provide Duncan (if he is the 1 in n) with a good home?"

My sense of the real political issue about the minimum wage is not a blind insistence on the minimum wage and no other way of increasing incomes of low-wage workers, but that proponents believe that other ways of increasing the earnings of low-wage workers -- a wage subsidy or a higher EITC -- are not politically feasible right now (most of the pre-candidates of one of the major political parties in the US believe that the personal income tax schedule should be even less progressive that it is) and that the numbers of workers harmed by a specific minimum wage is pretty small. A few of the proponents may actually think the number is zero, but one need not think it is zero to favor a minimum wage. In politics, there is almost never a free lunch.

As for the system of subsidizing a system in which employers use employees' wages to transact for health insurance for them (especially egregious when the employers then claims a "religious liberty" to object to the contraception coverage purchased), please do help change that system, for example, to one in which the the subsidies go to everyone to purchase their own health insurance.

A writes:

ThomasH, your depiction seems less common than the "living wage" argument, which isn't an argument at all, but rather a stated aspiration ambiguously connected to minimum wage increases. If your depiction were more accurate, then you would expect minimum wage increases to be conditioned upon effect studies. But the $15 Now crowd has not mentioned data dependent rollback provisions.

christopher fisher writes:

Listen. I just want the baby to have a good home or be aborted.

Jon Murphy writes:

The Simpsons can be very useful for teaching economic lessons: (shameless self-promotion link)

Anonymous writes:

If I were to make an argument for the minimum wage, I think it would have to be something like this:

Obviously, large increases in the minimum wage cause unemployment, which is bad. Obviously, small increases in the minimum wage cause non-wage benefits to be taken away. But this is actually a good thing. People on low-wage jobs might think they prefer a low-stress working environment, a cafeteria, and a staff discount, over a slightly higher wage, but they're mistaken. This is an irrational belief, perhaps due to these kinds of non-wage benefits being immediate and the benefits of a good wage occurring only at the end of the month. So, a minimum wage forces all low-wage employees to be paid as much as possible in money rather than other benefits that those employees wrongly think they prefer.

ThomasH writes:

@A
I guess in the horsey example the two could be confused. That's why I prefer to think about minimum wages as second best policies to raise the incomes of low-wage workers. The motive for exactly how high to raise them (back to some historic level or percentage or according to a senes of a non-poverty level) is not central. Rather they help some people while harming others. Of course you can throw in uncertainty about who is harmed to claim that in an expected value sense a minimum wage benefits all, although by how much depends on the level and the elasticity.

Dan Jennings writes:

ThomasH, why does a low wage worker's income need to be increased via diktat? A low wage worker's income can be increased through their own increase in productivity, gained skills, and seeking out of better accommodations for their increased productive potential. In other words, a low wage worker will earn a 'living wage' by having ambitions beyond checkout clerk, re-stock, and sandwhich maker.

Sean L. writes:
To which a more perceptive Homer might have asked "Why does Springfield not just pay someone to provide Duncan (if he is the 1 in n) with a good home?"

Maybe Homer has enough sense to know that for Springfield to "pay for" a good home it has to first take from his neighbors without their consent -- violently, if necessary.

ThomasH writes:

@ Dan Jennings,

I've got no objection to there being no low-paid workers and so no need for the desire to raise their income. What's your policy for "increase in productivity, gained skills, and seeking out of better accommodations for their increased productive potential?"

@ Sean L

I'm sure Homer knows that paying someone to take care of Duncan will require Springfielders to pay the taxes necessary to fund the expenditure. He just may consider that a better outcome than the dog food factory.

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