Is This a Good Way to Help the Downtrodden?
My latest article at FEE poses some hypotheticals:
Or consider families who adopt children from war-torn regions. These actions, though seemingly noble, are clearly a drop in the bucket, with hundreds of thousands of orphans left behind. What if the government passed a law saying that US families were only allowed to adopt foreign children if they did so at least 15 kids at a time? Would activists agree that such a “pro-adoption” measure would increase the number of adoptions and be an unmitigated boon for foreign orphans?
Currently there are people who volunteer to teach adults how to read. But adult illiteracy is still a vexing problem in certain communities, so clearly these volunteer efforts have been inadequate to overcome the challenge. The obvious, pro-literacy way to fix things is to pass a law saying volunteers must give at least 15 hours of tutoring per week. If they are caught only teaching adults how to read for, say, 14 hours, then the volunteers will be heavily fined.
You see where I’m going with this?
“What if the government passed a law saying that US families were only allowed to adopt foreign children if they did so at least 15 kids at a time? Would activists agree that such a “pro-adoption” measure would increase the number of adoptions and be an unmitigated boon for foreign orphans?”
-15’s definitely a bad idea, but wouldn’t it be possible that 2 or 3 might raise the total number of kids adopted?
Yes Bob forgets about the monopsony power of the families who adopt children. 15 is obviously too much, but 2 to 3 would work for sure!
Not monopsony power; inelasticity of demand for children.
I don’t know if you were serious, but it seems pretty obvious to me that adoptions would still be less if they made the minimum 2 or 3. Many families simply can’t afford or would be able to handle that many new children at once.
But would that cancel out the parents who, when planning to adopt only one child, end up having to adopt another one or two?
Yes, I am serious. We need an econometric study.
So we put the burden of help on less people.
Obviously it is theoretically possible to have certain unique configurations when the effect is positive (or neutral for MWs). However but aside from the quite questionable morality behind this (burden fewer people with help) it should be obvious that usually it will be negative.
And the most important point is, that even if you could find this out via econometric studies with 100% certainty, you would only get the anwser for one single situation after the fact! You can’t know the outcome will be the same next time due to changes in the market data. So it is just shooting in the dark with very bad odds on your side.
In short policies based on “it could theoretically be positive once in a while” is not good policy.
E. Harding
Monopsony power is used to justify MWs right? If I can use it there, then I can use it in the adopting case as well.
Steve Landsburg made this argument in one of his old blog posts:
http://www.thebigquestions.com/2013/02/18/thoughts-on-the-minimum-wage/
“An analogy: Some people voluntarily go out on Sundays and pick up trash in the park. If we collectively decide that we need more trash pickup, do we turn to the people who have been doing this by choice and demand that they do more? Or do we decide that maybe the rest of us should pitch in as well (either by getting out there ourselves or paying others to)? Some people voluntarily pay wages to unskilled workers. If we collectively decide that we need more wages paid to unskilled workers, should we turn to the people who have been paying wages by choice and demand that they pay more? Or should we decide that maybe the rest of us should pitch in as well (say via the Earned Income Tax Credit)?”
Thanks Keshav I’ll link from my next Potpourri.
Don’t give them any ideas, Bob.
Economic theory says that all else being equal, minimum wage must reduce employment. If modest increases do not raise unemployment, there must be a reason. Minimum wage may be a correct response to that reason.
You cannot argue against this by using the very same economic theory that must be wrong if the result is no increase in unemployment. You can of course dispute the result.
However, for those that do believe the apparent findings of the studies your analogies are not accurate.
Why not?
They use as examples people who are giving their time to help others and comparing them to employers, who are giving up their money to help others. Each gets back equal value – in productivity or satisfaction. If you try to force the volunteers to give more, then some will drop out, and you end up with less. Similarly, if you make the employers give more, some will drop out, and you get less. If the economic model has somehow failed, such that minimum wage does not cause unemployment, then that equality no longer holds. You have demonstrated that by forcing them to give more you don’t get less.
I am not trying to explain how that may happen – but if the minimum wage did not cause unemployment then it must have happened somehow.
As I said, this argument depends on believing that modest minimum wage does not cause unemployment.
Actually it doesn’t demonstrate any such thing.
All employers under a certain jurisdiction will adjust their business to the regulation at hand. They keep prices at a level that is competitive *against each other*. Change the regulation and they all raise prices together — the consumer ends up paying for it. Alternatively they all lower some other aspect of working conditions, perhaps expectation of some degree of unpaid overtime, or they squeeze the suppliers so if gets passed up the line, or many other things.
The larger the region of common jurisdiction, the worse this effect becomes.
The other problem is that adjustment to new regulations takes time, maybe the adjustment is more automation, but there’s a few years delay implementing that. So the actual effect of regulation change doesn’t show up for some random length of time.
You aren’t measuring what you think you are measuring.
“Change the regulation and they all raise prices together — the consumer ends up paying for it.”
But should this not be reflected in reduced employment?
It might raise employment as people are forced to work overtime or work second jobs to pay for their essential daily goods that are now at a higher price (as an aside, commonly quoted statistics ignore how hard people work, but let’s presume it shows up somewhere).
Depends on whether there’s an easy substitute… if restaurants charge more for lunch, then people will bring lunch from home instead, and some restaurants will close. There will be a delay in that, so might not show up for a few years. Government might come back and regulate that people are not allowed to carry lunch to work, or regulate that employers must pay a lunch subsidy… then the end effect moves to someplace else.
BTW, on Cato, Nicole Kaeding gives a good talk about how the federal minimum wage has damaged the economy in Puerto Rico. It’s a good example of why a “one size fits all” centrally planned regulation is pretty stupid.
I think a slightly better analogy would be to say that you can adopt whatever number of orphans you like, but for every one you do adopt the government will insist you spend at least $100k per annum on upkeep (with receipts given to the IRS as proof).
When someone complains that this doesn’t sound like a bad policy, they get “What? What? What? You don’t think that orphan child is worth it? How heartless are you?”
I really love this perspective, Dr. Murphy, I’m sure it’ll help a lot of people connect with arguments against the minimum wage.