Plastic bag taxes, gasoline taxes, and the minimum wage

Many US cities and counties have implemented plastic bag taxes at grocery stores, raising the price of the bags. This is rightly interpreted as a measure that will cut down on the use of plastic bags. I don’t think anybody believes a tax of 5¢/bag will eliminate their use entirely, but I can’t think anybody doubts it will lead to fewer bags being used. Shoppers react in predictable ways. If buying a small number of items, they may skip the bag. They may put more items into each bag than they would have before. Some shoppers now bring their own reusable grocery bags to the store.

The US federal government, US states, and more local levels of government apply excise taxes to gasoline, raising the price of the gasoline. These revenues go to fund a variety of other things, mainly road construction and maintenance, but it is also widely (and correctly) believed that increases in gasoline taxes lead to less gasoline being purchased. Drivers react in many ways. They may use other forms of transportation more, carpool, combine errands into one trip, etc., and in the long run buy more fuel efficient automobiles.

Most proponents of these taxes acknowledge that, yes, the product in question is used less than it would be otherwise because of the tax, but think it’s a good thing. One may agree or disagree about the desirability of the consequences, but I don’t find that people dispute that the people who purchase and consume the resources will adjust in certain predictable ways along certain predictable margins.

For my final example, the US federal government, almost all US states, and many more local levels of government have legislated minimum prices for labor, raising the price of some labor…

People may agree or disagree about the desirability of the consequences, but to pretend that there is no tradeoff happening is irresponsible at best. If you recognize the economic logic at work in the first two examples, it takes a lot of explaining to do to say that the same economic logic doesn’t apply in the third. It’s entirely possible that countervailing phenomena at play in the labor market overwhelm this phenomenon; many economists brighter than I am have claimed this to be true. But simply asserting that the minimum wage is a matter of social justice or social responsibility does not help you understand the actual effects, nor does it help the people whose labor has been adjusted away from by purchasers of labor. Of course it’s a desirable goal that the worst off should see their lot in life improve, but what’s at issue is whether this policy actually does that or not. If the goal is important, it’s important to find out if the means chosen to achieve that goal can actually do it.

For more information on this topic, I recommend about 100 posts on Cafe Hayek.

One thought on “Plastic bag taxes, gasoline taxes, and the minimum wage

  1. Pingback: The minimum wage is a technical issue, not a partisan issue | Randall F. McElroy iii

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