Walter e williams the effects of minimum wage duration. Minimumwage rates collected works of milton friedman. Milton friedman responds to president obamas proposal to raise the minimum wage, the most antiblack law in the land. Minimum wages the logical floor leaders the economist. Pdf the influence of irving fisher on milton friedmans monetary. Unfortunately, the real minimum wage is always zero, regardless of the laws, and that is the wage that many workers receive in the wake of the creation or escalation of a governmentmandated minimum wage, because they lose their jobs or fail to find jobs when they enter the labor force. As a result, old arguments often retain a striking relevance. Friedman was describing his plan for a negative income tax, a plan actually introduced and promoted by nixon, but the skeleton of that case applies to just about any system of universal needsbased support.
His new theory supported an extreme laissezfaire policy agenda that still lives. Milton friedman s awesome idea guaranteed minimum income milton friedman famously said if you put the federal government in charge of the sahara desert, in 5 years thered be a shortage of sand. Friedman points to government and laws as an influence on ethics. Monoponisitic pricing results in a properly set minimum wage increasing employment and wages. An interview with milton friedman and yale brozen, 2627 free society association ed. The great virtue of a free market system is that it does not care what color people are. Friedman cleverly termed his later theory the natural rate of unemployment, thereby enlisting nature on his side. Underneath the welter of arguments offered for and against such legislation there is an underlying consensus on the objective of achieving a living wage. Milton friedman died november 16, 2006, at the age of 94. Of course i wouldnt go that far, but theres an element of truth to it. Milton friedman, 1912side 2 af 8 benefits, minimum wage laws, prounion legislation, tariffs, licensing provisions of crafts or professions, and so on in seemingly endless profusion. The contributions of milton friedman to economics federal. Milton friedman a conversation on minimum wage duration. Aei the oped is a scathing criticism of the minimum wage law.
In fact, insofar as minimum wage laws have any effect at all, their effect is clearly to increase poverty. Leffler, minimum wages, welfare, and wealth transfers to the poor,journal of law and economics 21, no. According to the theory, the minimum wage increases unemployment by driving up wages, and should therefore be done away with. With economic growth, demand for workers increases and wages rise. That is why milton friedman called minimum wages a form of discrimination. A negative income tax, as friedman saw it, would therefore solve two main problems. The minimum wage actually creates unemployment for the unskilled. The basic idea, friedman wrote in a 1968 newsweek column, is to use the mechanism by which we now collect tax revenue from people with incomes above some minimum level to provide financial assistance to people with incomes below that level. Why milton friedman supported a guaranteed income 5 reasons. Minimum wage laws kill jobs downsizing the federal.
Milton friedman s speech about changing congress, circa 1977. The focus on his lecture relates to what he views as problematic areas. Milton friedman a conversation on minimum wage youtube. Friedman s answer was the negative income tax, or nit. Its undeniable, but dont take my word for it, heres the late milton friedman, who won the nobel price in economics in the 1970s. It would give people cash as opposed to inkind benefits and have a much lower tax rate. But to people who call themselves conservatives, and aspire to public office, there is no excuse for not being aware of what a major social disaster the minimum wage. Is there some society you know that doesnt run on greed. Become engaged in a community that shares an interest in the mission of the hoover institution to advance policy ideas that promote economic opportunity and prosperity, while securing and safeguarding peace for america and all mankind. Given that the bulk of the empirical evidence suggests little to no impact on unemployment from minimum wages, an econ 101 price floor model almost certainly doesnt work for labor markets.
It is an early critique of a proposal made by milton friedman that later came to be proposed by richard nixon and a version enshrined into law as the earned income tax credit, which is now the largest cash transfer program for lowincome people. Milton friedman, the minimum wage rate, who really pays. More and more americans are working hard without a raise. From the collected works of milton friedman, compiled and edited by. The main way people have risen in the labor force is by getting unskilled jobs and learning things. The conservative case for a guaranteed basic income. The economic theories of milton friedman have as much merit today as they did in the 1970s. The fact is, the programs labeled as being for the. Supply and demand due to restrictions, this digital item may only be viewed on the collected works of milton friedman site. Increase its profits,1 milton friedman expressed strong views which quickly. Instead of simply paying higher wages, employers will fire people or hire few other people. In 1962, the libertarian economist milton friedman advocated a minimum guaranteed income via a. Fifty years later, this explanation of the case for a basic income laid out by milton friedman is more relevant than ever. For our last readings, we covered chapters 5 and 6.
Minimumwage rates by milton friedman newsweek, 26 september 1966 the newsweekdaily beast company llc congress has just acted to increase unemployment. But the people who are hurt most by higher minimums are the most poverty stricken includes editorial cartoon. Pdf this paper examines the influence of irving fishers writings on milton friedmans work. Milton friedman milton friedman is known as one of the top economists in the world. In february 1973, economist milton friedman gave an interview to playboy magazine.
An obvious and not unimportant example is minimum wage legislation. Do you agree with milton friedmans stance on minimum wage. Fallacies of the negative income tax mises institute. In the 1960s, milton friedman said that the minimum wage is a crime against black americans. He was awarded the nobel prize for economics in 1976. July 31, 1912 november 16, 2006 was an american economist who received the 1976 nobel memorial prize in economic sciences for his research on consumption analysis, monetary history and theory and the complexity of stabilization policy. The minimum wage law is most properly described as a law saying. The high rate of unemployment among teenagers, and especially black teenagers, is both a scandal and a serious source of social unrest.
A minimumwage law is, in reality, a law that makes it illegal for an employer to hire a person with limited skills. Last week my group of students who work their way through readings had our last formal meeting. Far from benefitting them, it is a positive hann to those at the bottom of the labor market. Further, congress voted on amendments in 1966 to broaden the coverage of the minimum wage to public schools, nursing homes, laundries, and the entire construction industry. Milton friedman s economic theories relate to this sort of inflation and its effects on the market and its buyers. The minimum wage destroys the best kind of training programs weve ever had. Milton freidman was one of the first to look at this and say, we ought to scrap the whole system.
Milton friedman, born july 31, 1912, brooklyn, new york, u. The web is awash in welldeserved tributes to milton friedman on what would have been his one hundredth birthday. In economics, a negative income tax nit is a welfare system within an income tax where people earning below a certain amount receive supplemental pay from the government instead of paying taxes to the government. It is the most effective system we have discovered to. Back in the 1960s, economics nobel prizewinner milton friedman warned, the minimum wage law requires employers to discriminate against persons with low skills. Quotes authors m milton friedman a minimumwage law is, in reality. Milton friedman responds to president obamas proposal to. Milton friedman proposed to give everybody free money in his book capitalism and freedom. Milton friedman on the minimum wage american experiment. Milton friedman quotes author of capitalism and freedom. There is some evidence that this is the case in the most recent employment situation summary released. Milton friedman on donahue edited april 2, 2015 by eagle you know, i was influenced by phil donahue to ask questions and it is really sad that my children and the younger generation had only reality shows or fluff talk shows to turn their minds to jelly. Do you agree with milton friedman s stance on minimum wage. Minimum wages actually tend to increase poverty by outlawing wage ranges at certain levels.
A society that puts equality before freedom will get neither. It is clearly not in the interest of employers to do so. Milton friedman on income inequality talents and capacities as negatively as those arising from inherited wealth, though friedman argues that the distinction is in fact untenable. A society that puts freedom before equality will get a high degree of both. To access, please view the item on the collected works of milton friedman site. The economics of minimum wage legislation revisited. Milton friedman responds to president obamas proposal to raise. Milton friedman believes america can still be the cooperative society in which citizens work together for individual benefit. If someone doesnt have enough skills to produce enough for a company to justify the current minimum wage level, they wont be employed, unless that particular business is in the business of losing money. Milton friedmans awesome idea guaranteed minimum income. Friedman s free to choose was one of the first books on public policy i read in. It can hardly require employers to hire at that minimum all who were formerly employed at wages below the minimum. Previous speakers have asked about energy and regulation. Second, so far as possible the program should, while operating through the market, not distort the market or impede its functioning.