New Law: Used Cars must be priced at 15K or more

Don Luskin, a contributing writer at SmartMoney.com and a Chief Investment Officer for an economic consulting firm, has written a great column in which he proposes a new law, one that sets a requirement minimum price of $15,000 for used cars. The idea is that this would help people -- especially poor people -- who have used cars that aren't worth very much because they would be guaranteed of getting at least 15K when they sell them. The obvious problems with this -- problems largely for the very same people (those likely to want to sell or buy low-value used cars) -- are twofold: if your used car isn't worth near 15K, then you'll have a hard time selling it now, and further, people in the market to buy a used car but who can only afford to pay $3,000, or $8,000, or $12,000, won't be able to get a car at all now.

The point is that the exact same logic is involved in the minimum wage laws. In cases where the job in question isn't worth the new legal minimum, the business will not hire people or will let people go who were previously working for the lower amount (an amount that was at or below the value their work provided the business). To make this clear, Luskin discusses the case of France:

"Consider what happened in France, where there is a minimum wage roughly twice that mandated in the United States. Go to a grocery store or a toy store there. There are hardly any clerks to help you. No baggers to pack up your stuff when you check out. Merchants simply can't afford to pay the too-high minimum wage for this kind of work.

So two things happen. First, you waste your own valuable time having to find what you want without help and bagging your own orders. Second, low-skilled workers who would normally be clerking and bagging — if the high minimum wage hadn't eliminated those jobs — are simply unemployed. The minimum wage in France may be double that of the U.S., but so is the French unemployment rate.

And that high unemployment rate is persistent, too. Without low-wage entry-level jobs, unskilled French workers — especially youths and minorities — have no way to acquire the skills necessary to work their way up to higher-paying jobs."