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Tuesday, November 8, 2016

Even Victorian England Knew the Minimum Wage Was a Bad Idea

Even the intellectual champions of the minimum wage conceded that it would not compel firms to hire.

The following is from page 160 of Princeton University economist Thomas Leonard’s splendid 2016 book, Illiberal Reformers (footnotes excluded):

The theory that minimum wages discharged the least productive workers had been a constant of Anglophone political economy, dating to John Stuart Mill’s (1848) Principles of Political Economy. When England established a minimum wage with the Trades Board Act in 1909, it did so notwithstanding the objections of a generation of England’s most eminent economists – Henry Sidgwick, Alfred Marshall, Philip Wicksteed, and A.C. Pigou – all of whom observed that while the law could make it criminal to pay a worker less than the minimum, it could not compel firms to hire someone at that rate. Even the intellectual champions of the English minimum wage conceded the point.

As Leonard shows in his book, beyond any reasonable doubt, the fact that minimum wages cause the least “desirable” people to be priced out of jobs was, for “Progressives” of a century ago, a feature of minimum wages, and not a bug.

This first appeared at Cafe Hayek.

  • Donald J. Boudreaux is a senior fellow with the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center at George Mason University, a Mercatus Center Board Member, and a professor of economics and former economics-department chair at George Mason University.