Tuesday, December 26, 2006

What the minimum wage really is
Mike Rappaport

Greg Mankiw describes an economic policy to help poor workers:

1. A wage subsidy for unskilled workers, paid for by
2. A tax on employers who hire unskilled workers.

Now, if you think like an economist, you might wonder about the logic of part 2 of this proposal. You might say, "A tax on the hiring of unskilled workers would discourage their employment, offsetting some of the benefits they would get from the wage subsidy. It would be better to finance the wage subsidy with a more general tax, rather than with a tax targeted specifically on employers of unskilled workers."

Of course, that economic policy?  The minimum wage. 


| Permalink

TrackBack URL for this entry:


Listed below are links to weblogs that reference What the minimum wage really is
Mike Rappaport


Where is Tom Smith these days? We miss his posts!

Posted by: Big Fan of Tom Smith on the Right Coast | Dec 27, 2006 11:31:42 AM

So, that is a Harvard professor does with his free time? He simply restates the law of supply and demand as applied to the minimum wage. I learned this 25 years ago in Econ 101.

Posted by: David C. Brayton | Dec 29, 2006 8:49:16 AM