500+ economists assert the irrefutable laws of demand and supply, and slam the minimum wage hike as a jobs killer
Mark J. Perry | March 12, 2014, 8:33 pm
More than 500 economists, including three Nobel laureates (Vernon Smith, Eugene Fama and Ed Prescott, along with AEI scholars/fellows Andrew Biggs, Alex Brill, Bob Helms, Marvin Kosters, Tom Miller, Stan Veuger, and Ben Zycher) have signed this letter arguing that artificially raising the minimum wage to $10.10 per hour through a government mandate would have adverse effects on the employment opportunities for unskilled and low-skilled workers. The tragedy of this well-intentioned, but misguided legislation is that it would harm and disadvantage the very workers it is intended to help (see cartoons below from Henry Payne).
 
In voicing their collective objection to a government price control for entry-level workers, the 500+ economists asserted the Law of Demand and the Law of Supply, two fundamental and time-tested components of basic economy price theory, summarized graphically above. Following a 40% increase in the federal minimum wage from $7.25 to $10.10 per hour, we would expect two incontrovertible effects: a) the number of unskilled, low-skilled and entry-level workers hired by employers would decrease (a movement upward to the left from $7.25 per hour along the blue demand curve above), and b) the number of unskilled and low-skilled workers looking for entry-level jobs would increase (a movement upward to the right from $7.25 per hour) along the green supply curve above). In combination, those two perfectly predictable and unavoidable effects inevitably leads to an “excess supply of unskilled workers” in the graph above, which is just another term for “more unemployed unskilled workers,” and a higher jobless rate for those workers.
Bottom Line: No amount of wishful thinking or well-intentioned legislation will change the unavoidable outcome of reduced employment opportunities for entry-level workers in America illustrated graphically above. The 500+ economists who have signed the letter are in general agreement that economic reality and the laws of supply and demand are not optional, despite the arrogant attempts of economically-challenged politicians and progressives to circumvent or disregard the most basic economic theory, economic laws and economic logic.
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