How Not to Argue against the Minimum Wage
Among the hotly contested list of Joe Biden’s promises is an increase of the federal minimum wage to $15 an hour.
There are plenty of sound reasons to oppose government minimum wage laws, but there is one objection making the rounds that is based on bad economics and should be avoided, and that’s the “businesses will pass on the costs to consumers” objection.
For instance, a now deleted tweet by someone claiming that a $15 minimum hourly wage will cause Taco Bell burritos to explode in cost was shot down in short order by the tweet below. Scrolling through the replies also shows hundreds of other similar responses from people in cities that already have a $15 minimum wage. Indeed, the responses were so decisive and numerous that the original poster deleted his tweet to avoid further embarrassment.
Don’t make the same mistake.
There are two main reasons why the “but tacos or hamburgers at fast food joints will cost $10” argument is easily shot down. First, it is bad economics.
If Taco Bell or McDonalds could charge $10 per taco/burger, they already would be, regardless of wages and the costs of other inputs. But businesses can’t just unilaterally increase their prices without a response from customers. The law of demand tells us that consumers will demand more of a good at lower prices and less of it at higher prices, other things held equal. Taco Bell doesn’t charge $10 for a burrito, because customers won’t pay that price.
To illustrate this point, imagine if the government ma
Article from Mises Wire
