Mar

15

Paychecks to be signed by Tooth Fairy, delivered by Loch Ness Monster

Filed Under Regulation | 

A recent WallStrip piece on AutoZone mentioned that the company is counting on the increase in minimum wage to drive teen spending on shiny things. One expects politicians to live in the sort of fantasy world where wealth is created by the magic of legislative fiat. It is more disturbing to see a business placing this kind of bet. Perhaps the good folks on AutoZone are simply counting on their target market temporarily having more free time to work on their cars.

The ultimate effects of price controls on something that has the substitutability properties of labor will largely consist of things that don’t happen, things that we can’t see. It may be useful, though, to think about exactly what it might be that we aren’t seeing. Here’s Mises (from Chapter 3 of Human Action):

What happens is that labor is rendered more efficient by the aid of machinery. The same input of labor leads to a greater quantity or a better quality of products. The employment of machinery itself does not directly result in a reduction of the number of hands employed in the production of article A concerned. What brings about this secondary effect is the fact that — other things being equal — an increase in the available supply of A lowers the marginal utility of a unit of A as against that of the units of other articles and that therefore labor is withdrawn from the production of A and employed in the turning out of other articles.

So resources get misdirected, we’re all a little worse off, but (particularly given the apparently tight labor market) those who are displaced by technology end up doing something else. Enterprises that can invest in technology that makes their workers 30% or so more productive can probably absorb the hit. Wal-Mart and the other big box retailers will probably be fine. Their employees will just have to do more. If the change drives enough of their smaller competitors out of business, the big guys may not even have to reduce the size of their workforces. Whoever makes those wretched self-checkout machines will probably be ok, too.

This last point is where it gets interesting: Figuring out how to make minimum wage labor more productive isn’t a bad thing. This is, however, where I think the unseen effects get us. If it is suddenly (and artificially, by coercion) more profitable to build scanners for automating checkout than, say, building the next generation of MRI machines, we’ve lost out. Critics — or proponents, depending on perspective — will point out another possible unseen, that the more mundane technology will lead to advancements in areas that are ultimately more valuable. These are the kinds of vaguaries that blunt the will to fight against really horrible ideas.

Comments

Comments are closed.