How many bushels of wheat do you make a year? While this is not the most relevant question to be asking about wages today, some of the discussion around the minimum wage is taking inspiration from a very old economic idea according to which questions like this would be right at home. The idea is that of a “wage fund”: a fixed amount of total wages available to an economy for a given period that dictates the average wage. If such a fund exists, then any aim to raise wages within the period for which the fund is fixed will inevitably end up harming workers – most likely those with the lowest wages and the least power. Today’s arguments against increasing the minimum wage at times mirror this flawed logic – and for reasons that, oddly enough, reflect on why the theory was discarded in the first place. (Click here if you want to skip the history and get to the present; otherwise read on.)
