In a "Letter of Opinion" (4/14/96), Dr. Charles Britt offered his thoughts on wages and employment. While his concerns strengthen a very different concern of my own, the way he expressed them provids a perfect teaching aid for use in my introductory economics course at Auburn University. At Auburn, as elsewhere, students first learning about markets are taught to mind their Ps and Qs, where the Ps are the prices paid and the Qs are the quantities bought: Under given circumstances, an increased price means a decreased willingness to buy. This is the Law of Demand.
        The Law of Demand holds for everything from cauliflowers to workerhours. We can apply it to labor markets by recognizing that an increased wage rate means a decreased willingness (on the part of business firms) to hire.
        Dr. Britt is concerned with (1) the failure of Congress to raise the minimum wage and (2) the laying-off or firing of workers. The Law of Demand links these two concerns in a way Dr. Britt seems not to comprehend. If Congress were to remove his first concern, it would intensify his second one. A legislated increase in the wage rate for unskilled labor would lead to more lay-offs and firings. While some workers' wage rate would go from $4.25 to $5.15, other workers' wage rate would go from $4.25 to $0.00. Dr. Britt, like so many other supporters of minimum-wage legislation, dwells on the happy consequence but remains blissfully unaware of the tragic consequence.
        I cannot say that the case he presents for raising the minimum wage involves bad economics; it involves no economics at all. He asks the reader to think about the minimum wage of $4.25 and helps the reader in his thinking by multiplying this hourly figure by 8, then 5, then 52 to get the corresponding daily, weekly and, yearly figures. He compares the annual figure to Congressional salaries and suspects, bitterly, that Congressmen spend more on alcohol than minimum-wage workers earn. He hints that a wage above the current minimum could more easily pass some fairness test, but he offers no standard of fairness which we might actually apply. (The term "fair wage" appears only in the title of his article.) Significantly, Dr. Britt does not endorse--or even mention--the $5.15 figure that is current being considered. His opinions could condemn that figure with near-equal force; he would have to favor $6.15 or even $16.15.
        If increasing the minimum wage were simply a matter of weighing the happy consequence against the tragic consequence as mentioned above, we might find respectable, informed opinion on both sides of the issue. But the happy consequence is less happy, the tragic consequence more tragic than they first appear. There are two groups of workers earning low wages: (1) the poor, as conventionally defined, and (2) young entry-level workers from middle-income households. Business firms have a strong preference for the second group, whose members show much promise for the future; the first group are disproportionally represented among those actually laid-off or fired. Also disproportionally represented are blacks, women, and other victims of discrimination. The most visible of the tragic consequences are these actual lay-offs and firings. More significant, however, is the would-be entry-level jobs that simply aren't created--the young workers (especially the young, black, or female workers) that aren't hired. Minimum-wage legislation cuts the bottom rung off the economic latter for the very people in our society who are most in need of upward mobility.
        Dr. Britt suggests that in lieu of Congressional action, municipalities, Auburn in particular, might want to impose minimum wages of their own by mandating that business who have contracts with the city pay their worker an above-market wage. Although he doesn't mention it, this kind of legislation already exists at the federal level in the form of the Davis-Bacon Act (1931),  an act whose dramatic inequities and inefficiencies were exposed in a segment of ABC's 20-20 the evening before Dr. Britt's opinion appeared in print.
        Auburn students are taught to ask: (1) What are the intentions of a particular piece of legislation? and then (2) what are its actual consequences? A good student is one who provides an answer to this second question that squares with both theory and history. It is not that Dr. Britt provided a bad answer to the question. Rather, he, like so many other well-intentioned citizens not trained in economics, simply failed to see any need to ask it. This is my concern. How can we have sound social policy in a society where opinion makers--and hence voters--treat good intentions as if they were actual consequences?

1. At my current salary of $5.00 per hour, I am making $200.00/wk. and $10,400/yr.
2. If the government raises the minimum wage to $6.00/hr., I will make $240.00/wk. and $12,480/yr
3. If the government raises the minimum wage to $7.00/hr., I will make $280.00/wk. and $14,560/yr.
4. If the government raises the minimum wage to $8.00/hr., I will make $320.00/wk. and $16,640/yr.
5. If the government raises the minimum wage to $10.00/hr., I will make $400.00/wk. and $20,800/yr.
6. If the government raises the minimum wage to $15.00/hr., I will make $600.00/wk. and $31,200/yr.
7. If the government raises the minimum wage to $20.00/hr., I will make $800.00/wk. and $41,600/yr.
8. If the government raises the minimum wage to $50.00/hr., I will make $2,000.00/wk. and $104,000/yr.
9. If the government raises the minimum wage to $100.00/hr., I will make $4,000.00/wk. and $208,000/yr.
10. If the government raises the minimum wage to $500.00/hr., I will make $20,000.00/wk. and $1,040,000/yr.
11. If the government raises the minimum wage to $1,000.00/hr., I will make $40,000.00/wk. and $2,080,000/yr.
12. If the government raises the minimum wage to $5,000.00/hr., I will make $200,000.00/wk. and $10,400,000/yr.

i. Did you follow this daydreamer to statement #12?
ii. Did you follow him to statement #2?
iii. Is there some statement between #1 and #12 that has a special claim on our attention? That is, is there a minimum wage  rate above the market wage rate that will not cause unemployment (even though we have to admit that wage rates higher than that rate will)?
iv. Can you draw supply and demand curves for labor such that a minimum wage set $1.00 above the equilibrium wage causes no unemployment?
v. Can you articulate--or even imagine--an "optimal minimum wage rate"?