Recently, there has been a push for a raise in student wages from the state minimum of $9.65 per hour to the current Minneapolis minimum of $11.25 per hour. Proponents claim this is justified out of student need. However, it is apparent to some that this claim is a scientific abomination, born out of emotion rather than reason.
It seems that proponents of this plan have either never been in an economics class or are deniers of economic science. For, if they recalled the basic principles, they would realize the price of labor is determined by the supply of and demand for labor. Fixing the wage above the actual price has the same effect as any other: either fewer people are employed or fewer hours are worked as would be otherwise. Any student in Economics 1101 could tell you this results in a decrease in welfare.
In other words, the claim that increased wages make people better off is correct only for the individuals who do not have their hours or positions eliminated. For those who do, I suppose that’s just tough. Why not maximize welfare by allowing wages to fluctuate?
Further, it seems they have forgotten the fundamental fact of scarcity; there is not a limitless amount of resources. Who is to bear the burden of an increased wage? The University will take some, but it will certainly pass some of it off to the rest of us. Indeed, the University takes the reasonable position: cut hours and positions. Contrast that with the students who beg for more and more without realizing we do not live in Cockaigne.
The claim is not that the current situation is ideal. To the contrary, it would be far better if wages were flexible, so that those whose labor is worth less than $9.65 are paid accordingly. Let wages fluctuate, so that what students earn comes as a result of merit, not of arbitrary and increasingly childish demands. However, it is also apparent that the jobs pay more than they would in a market; they are a form of financial aid and thus are charitable, not based on merit. Demanding more handouts from the hand which feeds you hardly seems reasonable.
Finally, I must ask the question, why stop at $11.25? Why not $20, $50, or $100 per hour? Why not $1000? I suspect the students realize that their claims are ultimately bounded by reality and hence scarcity.
In short, a higher wage floor will only lead to perverse consequences, necessitating a move from a dismal status quo to one that is even worse.
This letter has been lightly edited for clarity and style.
Jackson P. Mejia is a junior studying economics at the University of Minnesota.