On October 11th, American University’s YAL chapter hosted Cato economist Ike Brannon to discuss the minimum wage’s impact on the economy and the mistaken idea of income inequality.
Mr. Brannon discussed the economic theory behind why the minimum wage reduces employment. Minimum wages impose mandatory costs on hiring labor that negatively impact a company’s ability to hire its optimum number of employees. Mr. Brannon noted that most minimum wage workers are high school or college aged students without marital status. A high minimum wage would incentive these individuals, especially those with poor academics, to leave school in favor of work. Brannon claimed that liberal sob stories of single parents past age 30 working minimum wage jobs to feed their kids are myths at best. Barely any minimum wage workers match this description. The real compensation involved in working a minimum wage job comes from learning basic skills such as time management, personal cleanliness, working on a team or under supervision, communicating with customers, etc. These skills will increase an individual’s qualifications for higher employment.
Then, Mr. Brannon addressed liberal concerns of income inequality bedeviling society. He says these claims are totally false. Brannon likened today’s system of massive CEO compensation to the development of the National Basketball Association over time. Previously, in the 70s and 80s, there was little deviation between NBA player salaries. The NBA’s quality of play and TV production also sucked. Today, you have players like Lebron James, Carmelo Anthony, and Russell Westbrook making enormous paychecks in comparison to their peers, playing at a far higher level than their peers, and the result is a massive demand for the NBA’s entertainment. This huge demand leads to the creation of hundreds of front office jobs for NBA teams, data analysis for marketing departments, and even massive charity projects. Plenty more people benefit from Lebron James’ incentive to earn money by dominating than they would from equality. Everybody is better off in an unequal system.Published in