Reply to: Thank you for the response.
According to the Department of Complete and Utter Nonsense… limiting the wages of doctors to $10/hour would help a gazillion times more people than it would harm.
Look, this is really simple…
Is there a shortage of unskilled labor?
If you answer “Yes” then please explain why it would be necessary to artificially increase the wages of unskilled workers. If there was a shortage of doctors… would it be necessary to artificially increase their wages? Wouldn’t their wages already be high? Wouldn’t their wages already accurately reflect/communicate the fact that doctors were in short supply?
If you answer “No” then please explain why you’d want to artificially increase the wages of unskilled workers. If there was a surplus of doctors… why would you want to artificially increase their wages? If we had too many doctors…. why would you want to increase people’s incentive to become doctors? Can you imagine the problems with a society where everyone was a doctor?
Picture a world with two countries. One country has no doctors. The other country has all doctors. Would you want to live in this world? If not, then why not?
The point of prices is to help ensure that resources are efficiently allocated. If one country has a shortage of doctors while another country has a surplus of doctors… then there will be a disparity in their wages. In the country that has too many doctors (surplus)… their wages will be very low. In the country that has too few doctors (shortage)… their wages will be very high. This disparity in wages will incentivize the poorly paid doctors to move to the country where doctors are highly paid (in short supply). In a relatively short time… the disparity in wages will disappear. Prices helped facilitate the optimal (most valuable) distribution (allocation) of doctors (a resource).
In that scenario, in order to keep it simple, we assumed a fixed supply of doctors. But in reality… the supply of doctors is not fixed. People can study to become doctors… and doctors can go into other fields.
Whether people go into a field and/or stay in a field depends largely on wages. If there’s a shortage of people in a certain field, then we need wages to incentivize people to go into that field and/or stay in that field. If there’s a surplus of people in another field, then we need wages to encourage people to go into fields that have higher wages (shortages of people).
The beauty of markets is that wages adjust automatically…
It is thus that the private interests and passions of individuals naturally dispose them to turn their stocks towards the employments which in ordinary cases are most advantageous to the society. But if from this natural preference they should turn too much of it towards those employments, the fall of profit in them and the rise of it in all others immediately dispose them to alter this faulty distribution. Without any intervention of law, therefore, the private interests and passions of men naturally lead them to divide and distribute the stock of every society among all the different employments carried on in it as nearly as possible in the proportion which is most agreeable to the interest of the whole society. — Adam Smith, Wealth of Nations
Regarding the congressional budget report PDF document that you shared… I searched it for the word “shortage”. Guess how many results there were? ZERO.
When congress can be bothered to come up with some evidence that America is suffering from a shortage of unskilled labor then, and only then, will I be willing to entertain the notion that perhaps a minimum wage is the solution rather than the problem.
Now here’s something that’s going to blow your mind. The government doesn’t make decisions because they’re economically sound. It makes decisions because they are politically popular. And it’s rarely ever the case that politically popular decisions will be economically sound.
The only other possible explanation is that the government is entirely fucking clueless about basic economics.