I've recently gone through some data to try to quantify the damage from mimimum wage increases.
But, I think, there is another flaw with the type of thinking that supports minimum wage, tight immigration restrictions, and drug laws. On these policies, people are convinced that we can legislate the world into our image, and so the imagined outcomes of these policies are perceived as a choice between:
workers with low wages vs. workers with high wages
or a community with widespread drug usage vs. a community without widespread drug usage
or a labor market with Mexican immigrants vs. a labor market without Mexican immigrants.
These policies are intertwined, and the policies are so incapable of being effectively implemented that they are ineffective even as serial obstacles. Many drugs consumed here overcame a closed border and the Drug War to get to the customer. Likewise, many workers slip through the closed border in order to labor here for below the legal minimum wage. Some work has even shown that many drug dealers work below the minimum wage.
So, the true comparison is more realistically:
low wage workers with legal protection vs. low wage black market workers
or drug users with a social support network vs. drug users without a social support network
or immigrants with legal protections vs. immigrants without legal protections
In all these cases, the end result of the well-meaning, but overbearing, hand of government restriction, is to harm those who are the most vulnerable. Why do we insist on these policies in the face of clear evidence of their failures?
One reason, I believe, is the universal human tendency for bigotry - different standards for in-groups versus out-groups. This tendency doesn't have to be steeped in any sort of extremist hate-mongering. It can come simply from what Robin Hanson would describe as near vs. far thinking. We hold two mental models in tension. A "far" model, which is stripped of detail and where our ideals can thrive unmolested by practical concerns; and a "near" model, which governs our personal daily activity, and where moral compromise and practical decision-making are necessary.
An innocent foundation for bigoted thinking is the tendency for us to be more familiar with the details concerning our in-groups. So, we are more willing to withhold judgment with our affiliates. The lack of detail in our understanding of outsiders or groups we don't identify with means that we are more likely to judge them based on our ideals, without accounting for practical realities.
Bryan Caplan recently blogged about the idea that people tend to be more supportive of regulations that are enforced indirectly. From Caplan:
Governments rely on indirect coercion because direct coercion seems brutal, unfair, and wrong. If the typical American saw the police bust down a stranger's door to arrest an undocumented nanny and the parents who hired her, the typical American would morally side with the strangers. If the typical American saw regulators confiscate a stranger's expired milk, he'd side with the strangers. If the typical American found out his neighbor narced on a stranger for failing to pay use tax on an out-of-state Internet purchase, he'd damn his neighbor, not the stranger. Why? Because each of these cases activates the common-sense moral intuition that people have a duty to leave nonviolent people alone.When considering immigration in far mode, we judge the immigrants, not based on their needs and incentives, but based on rules and laws. They shouldn't be here, because it is illegal, and clearly it is important for civilized people to obey laws. Their violation of that ideal is further proof of the need for opposition. Those of us who see immigrants in near mode see the dangers of crossing a tightly guarded desert border and the compromises that immigrant families are willing to take as signs of the practical challenges they are facing, and the need for our support.
Switching to indirect coercion is a shrewd way for government to sedate our moral intuition. When government forces CostCo to collect Social Security taxes, the typical American doesn't see some people violating their duty to leave other people alone. Why? Because they picture CostCo as an inhuman "organization," not a very human "bunch of people working together." Government's trick, in short, is to redirect its coercion toward crucial dehumanized actors like business (and foreigners, but don't get me started). Then government can coerce business into denying individuals a vast array of peaceful options, without looking like a bully or a busy-body.
When we consider their employers in far mode, we again frame our judgment in terms of ideals. Employers should follow rules and support native workers. The fact that so many employers are willing to undermine these ideals is further proof of their low moral standing and the need to punish and regulate them. Those of us who see employers in near mode see a labor market that will inevitably be drawn to utilize available labor. Even employers with a strong desire to follow the rules and protect native workers will be faced with a market where their businesses either utilize the best available workers, which happen to be illegal immigrants, or fail.
Similar bifurcated mental constructs play out in the minimum wage and Drug War debates, as well as many others. The problem is that the far-mode approach leads us to punitive solutions that only serve to force the targeted groups into more and more extreme choices, sometimes erupting in violence.
Note that all of these issues involve people engaging in voluntary interactions that meet the community standard, or at least the standards of some subset of the wider community, where emergent norms of conduct serve as the foundation for social protection. Normally, law would reinforce these standards. But, in these cases the imposition of punitive "far-mode" strictures undermines those standards.
So, for instance, an immigrant who might, under a different regime, have a choice between staying in Mexico or arranging some sort of regulated border crossing where they work within some broad set of 1st world legal safeguards, is now faced with the choice of staying in Mexico or embarking on a dangerous trek across a desert in order to get black market job, where all the while even the legal authorities are his enemy.
Similarly, an employer who might have been faced with the choice of either failing or hiring immigrant laborers within a 1st world regulatory and legal context, albeit at wages lower than what most Americans would accept, is now faced with the choice of failing or hiring immigrant laborers in a lawless black market where even the legal authorities are the enemy.
Getting back to the minimum wage, the issue would be very similar. Far view would say that we would prefer all workers to earn at least some minimum level of wages. If we were an employer, we would certainly do everything we could to ensure that. Our ideals would demand it. We then impose punitive strictures that force employers to either fail or meet our standard. This notion that employers are monopsonists is a way to reinforce a far viewpoint in a way that seems scientific. "See, empirically, employers really don't have trade-offs!"
I suspect that many people would view these choice sets differently. They might accept the dilemma of the immigrant, but insist that the employers are intransigent and self-serving - or vice versa. And our logic in making those distinctions will be impeccable. It really will. But, where we are fooling ourselves is not in the logic, but in the mode that we apply the logic. Where we come down on these issues depends on where we apply the logic in a far mode versus where we apply it in a near mode.
Laws live in the here and now - the near. This is where I find the economic way of thinking to be so helpful. The strawman of economic thinking is that it forces everyone into a homo-economicus model which assumes some sort of unrealistic rationality. This is a misreading of what economic thinking really does, if it is used well. It pushes us to interpret all people in the context of their trade-offs - in near mode. It slays bigoted thinking.
The problem with near mode is that this is where messy reality resides. Solutions may be unavailable or unsatisfying. Power may be unbalanced. Scarcity rules. But we feel a duty to our fellow citizens, and when there is not a satisfying solution, the best available solution to address our discomfort may be a far-mode punishment that, while it doesn't improve the situation, at least provides a seemingly uncooperative bogeyman to blame.
This can be so satisfying to us that we are willing to continue to push our far-mode remedies even when they are clearly doing a massive amount of harm. The irony is that a developed sense of duty to attend to other people's problems can lead us to carelessly create even worse problems, all the while blaming some other group of people who happen to fall outside of the reach of our empathy.
This is all understandable. We can't expect the bounds of our empathy to be limitless. But, at least, we should appreciate our limits.
Rule of thumb: If we support some legislation that would solve problems if only THOSE people would cooperate, WE are probably the problem.