George Mason Professor of Economics Donald Boudreaux asks President Obama to justify his proposal for increasing minimum wages with his policy of inflating the price of imported goods with tariffs:
Dear Mr. Obama:
In this year’s State of the Union Show you called for the hourly minimum-wage to be raised from $7.25 to $9.00. That’s an increase of more than 24 percent. Because you trumpet this proposal as one to assist low-paid workers, you, presumably, deny that such a hike in the cost of hiring low-paid workers will prompt employers to hire fewer such workers.
In last year’s State of the Union Show you bragged of your administration’s increase in the tariff rate on Chinese-made automobile tires. This tariff increase, which averages 30 percent over three years, is explicitly designed to dissuade Americans from buying Chinese-made tires – an effect that you recognize and applaud.
Question: If a government policy that artificially raises the price of Chinese-made tires reduces the quantities of such tires that are bought, why does a government policy that artificially raises the price of low-skilled labor not reduce the quantities of such labor that are hired?
I’m told that you’re a man of science. I await your response.
Donald J. Boudreaux
Professor of Economics
The whole idea behind tariffs is trade protectionism. We inflate the price of imported goods so that people buy more domestically-made goods. The price changes, and our behavior changes with it.
So why wouldn’t we assume that the same is true of inflating the price of low-wage labor by increasing the minimum wage?