Here The Economist reports on the minimum wage debate. Some in the academic community have managed to convince themselves that unlike any other market, in the labor market, setting a price floor does not lead to lower demand. How does one come up with such a half-baked theory? The data we are told. The data doesn’t show any deleterious impact from minimum wage hikes.
Yet, if you asked this same crowd what they thought of a minimum price for tea by example, you would get an earful on why such a policy would lead to more supply and less demand. As far as the laws of supply and demand are concerned, is the market for jobs really that much different than the market for tea?
Too much of mainstream economics has turned into empirical analysis run-amok. Thomas Sowell’s Basic Economics will tell you everything you need to know about the minimum wage—much of it grounded in common sense and sound economic theory developed in Adam Smith’s time.