Suppose a fence can be produced by using either one high skilled worker or by using three low skilled workers. If the wage of high skilled workers is $38 per day, and that of a low skilled worker is $13 per day, the firm employs the high skilled worker because costs would be less and profts higher ($38 versus $39). The high skilled worker would soon recognize that one of the ways to increase his wealth would be to advocate a minimum wage of, say, $20 per day in the fencing industry… After the enactment of the minimum wage laws, the high skilled worker can now demand any wage up to $60 per day … and retain employment. Prior to the enactment of the minimum wage of $20 per day, a demand of $60 per day would have cost the high skilled worker his job. Thus the effect of the minimum wage is to price the high skilled worker’s competition out of the market. [Walter Williams. The State Against Blacks. 1982]

2 Responses to “[2254] Of Walter Williams on minimum wage”

  1. […] are other less publicly known effects. Discrimination against small firms is one. The adverse impact on low-skilled workers is two. There are […]

  2. […] same time, minimum wage puts a limit on the number of jobs or jobs creation. Walter Williams has explained how that is so. Williams explains it in a specific context, but the logic can be generalized beyond the […]

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