Chapter 7: Minimum Wages and Wage Control 127

Further, if there is such a zone, why assume that workers will tend to come out at the low end of it? And, if they do, why is this a situation that requires state intervention?

1.	Why does minimum wage legislation hit teenagers and	?
	minorities especially hard?
2.	List various summer jobs that you have had. Would

changes in wage rates have led you to change jobs?

A COMMONLY MISSED POINT

You may be thinking, “as usual, he’s making too much fuss over a point that isn’t all that important. Perhaps minimum wage laws do cause unemployment. But, after all, most people earn substantially above minimum wage. Aside from teenagers—and they surely don’t matter—minimum wages do not have that much impact.”

But this objection construes “wages” too narrowly. Your wage is not only the amount of money you get, but your total benefit package. If you have a pension plan, health insurance, paid vacation, etc., these are all part of wages.

Why? Well, when you are considering a job, don’t you take these into account? And when an employer offers you a job, he must calculate the cost of all of these benefits.

In many cases, the government requires that employees be offered a certain benefit package. In the most famous instance, employers must contribute certain premium payments toward the employee’s Social Security account. These payments should be considered extensions of minimum wage legislation. Practically everyone is affected by them, and by other governmentally mandated benefits.

128 An Introduction to Economic Reasoning

?	1.	For various jobs, list the components of the “total benefit
		package.”
	2.	Do you think that workers would prefer more choice in
		their benefit package, rather than have the government

mandate what they must have?

LABOR UNIONS

As usual in this book, government has been the villain. But another sort of pressure can raise wages for some at the expense of others. Suppose Sam Stiltwalker says: “I don’t think $10.00 per hour is adequate recompense for my services. I want $25.00.” Well, he can say this—it’s a free country—but if $10.00 is the market price, he will find few takers.

Imagine, now, that Sam is a little smarter. He organizes a group of his fellow stilt-walkers and tells his employer, “Unless you raise our wages from $10.00 to $25.00 per hour, we will strike.”

Sam has been too clever by half. Remember, at the market price, all those who wish to purchase labor can find sellers. Sam and his friends will quickly be replaced. They have priced themselves out of the market.

Sam’s only hope lies in coercion. If he can prevent the employer from hiring replacements, he has a much better chance of getting the wages he wants.

Among ways that labor unions try to block replacements are legislation that forbids firing strikers and the use of force against replacements.

Chapter 7: Minimum Wages and Wage Control 129

	1.	Read The Kohler Strike by Sylvester Petro (Chicago: Henry
		Regnery, 1961) for an account of labor unions in action.	?
	2.	Replacement workers are often called “scabs”. In whose

interest is this pejorative language?

3.Why do you think labor unions usually support minimum wage legislation?