James d. Gwartney

Video:
Risks of Good Intentions
Third, the imposition of price controls will also stifle trade. Governments sometimes set
prices above the market level. For example, some governments require that the producers of
various agricultural products be paid a specified minimum price for their commodities. At the
higher set price, buyers will purchase fewer units than they otherwise would. Some
governments also set prices lower than the market level, as in cases of apartment rent controls
and regulated electric power rates. In terms of units produced and sold, it makes little
difference whether price controls push prices up or force them down. Both will reduce the
volume of trade and the gains from production and exchange.
Minimum wage
(?)
rates are perhaps the most commonly imposed price control
throughout the world. A minimum wage rate establishes a price floor
(?)
 that pushes the hourly
wage of some workers (and jobs) above market level. It is currently a hot topic in North
Macedonia, as in many other European countries. Among European Union members, annual
minimum wages in 2017 (adjusted for differences in price levels) ranged from $7,900 in Latvia
to $22,600 in the Netherlands.
The basic postulate of economics indicates that a higher minimum wage will reduce the
employment of low-skill workers. There is some controversy about the size of the employment
reduction, but the weight of the empirical evidence indicates that each 10 percent increase in
the minimum wage will reduce employment by between 1 and 2 percent. Because the wage
increases are substantially larger than the reductions in employment, a higher minimum wage
will nearly always increase the total earnings of low-skill workers. The proponents of higher
minimum wages believe that the higher total earnings are well worth the cost of the relatively

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small reductions in employment.