Doug Henwood writes (and others agree) >> >What made you turn around? >> > >> >What began to change my mind was working in the summer of 1960 as an intern >> >in the federal government, studying minimum-wage laws in Puerto Rico. It was >> >painfully clear that as they pushed up minimum wage levels, which they did >> >at that time industry by industry, the employment levels were falling. I was >> >studying the sugar industry. There were two explanations of what was >> >happening. One was the conventional economic explanation: that as you pushed >> >up the minimum-wage level, you were pricing people out of their jobs. The >> >other one was that there were a series of hurricanes that had come through >> >Puerto Rico, destroying sugar cane in the field, and therefore employment >> >was lower. The unions preferred that explanation, and some of the liberals >> >did, too." >> >> So how is incompatible with Marxism that raising wages above market >> levels can reduce employment? He just decided that the living >> conditions of sugar workers were less important than the needs of >> "the economy." >> >> Doug
Some times you guys are just insufferable -- must you always resort to caricature? Read the entire exchange!! The relevant factor wasn't that minimum wage laws (not raising wages) reduce employment. It was the reaction of the government bureaucrats to his suggestion of an empirical test to determine why employment was falling, which led him to philosophically shift from the importance of goals to incentives: "I spent the summer trying to figure out how to tell empirically which explanation was true. And one day I figured it out. I came to the office and announced that what we needed was data on the amount of sugar cane standing in the field before the hurricane moved through. I expected to be congratulated. And I saw these looks of shock on people's faces. As if, "This idiot has stumbled on something that's going to blow the whole game!" To me the question was: Is this law making poor people better off or worse off? That was the not the question the labor department was looking at. About one-third of their budget at that time came from administering the wages and hours laws. They may have chosen to believe that the law was benign, but they certainly weren't going to engage in any scrutiny of the law. What that said to me was that the incentives of government agencies are different than what the laws they were set up to administer were intended to accomplish. That may not sound very original in the James Buchanan era, when we know about "Public Choice" theory. But it was a revelation for me. You start thinking in those terms, and you no longer ask, what is the goal of that law, and do I agree with that goal? You start to ask instead: What are the incentives, what are the consequences of those incentives, and do I agree with those?" BTW, the Reason review of Doug Henwood's book is now online: http://www.reason.com/0406/cr.co.that.shtml David Shemano
