60 pages • 2 hours read
A modern alternative to SparkNotes and CliffsNotes, SuperSummary offers high-quality Study Guides with detailed chapter summaries and analysis of major themes, characters, and more.
The main argument of this chapter is that minimum wage increases unemployment by putting out of service those whose work performance is below the set minimum wage. Since wages are a price, he argues that raising it above market rates will cause similar problems as those mentioned in Chapters 13 and 16: It will increase unemployment and raise the prices of goods to cover for the increase in production cost from the higher wages. This will in turn negatively affect customers’ purchasing power and possibly decrease demand, at which point more marginal workers will be laid off.
Hazlitt allows that there can be instances where firms are underpaying their workers, but in such instances, rather than involve the government, it is infinitely preferable to allow those workers to unionize, to bargain together and raise their wages in that specific industry back up to market value.
Some people argue that an industry should die out if it cannot afford to pay more than starvation wages to its employees. Hazlitt counters this by pointing out that this decreases production and forces unemployment onto the workers, who only worked starvation wages because they could not find a better alternative. Paying unemployed or underemployed workers a relief wage is also not a remedy, as it risks encouraging people into idleness; it would have been better to subsidize their wages from the start than to raise the minimum wage, force them into unemployment, and then distribute welfare.