Back in February of 2013 I spoofed minimum-wage legislation by writing a satirical report on minimum-grade legislation.  My vanity prevents me from denying that I’m rather proud of that post.

Here, though, is a slightly different take, although one done as a straight blog post rather than as satire.

Suppose the state enacts minimum grades for all college-level engineering students. No professor of engineering is allowed to assign to any student in his or her class any grade lower than a B-. Further suppose that professors of engineering are rewarded, with pay and promotion, according to how many of their students pass independently administered engineering exams – that is, exams administered by the likes of the Electrical Engineers’ Association and the Civil Engineering Society.

In order to practice professionally as an engineer, each engineer must pass one of these independently administered exams. And these exams – unlike the exams administered in the engineers’ college classrooms – are not governed by minimum-grade legislation. The organizations that administer these exams have strong incentives to pass only those persons who truly display real aptitude for, and deep knowledge of, engineering. Put differently, these organizations have strong incentives to use their exams to discover, and to weed out, those engineering graduates who do not know engineering well enough to be certified to practice professionally as engineers.

Anyone who gets a bachelor’s degree in engineering is eligible to sit for one of the engineering-organization’s exams. The results of the exams are tallied each year and it is easy to determine from these results which professors (and engineering departments) have lots of students who pass the exams and which have unusually large numbers of students who fail the exams. Again, each collegiate engineering professor has strong incentives to have as large as possible a number of his or her students pass, and as small as possible a number of his or her students who fail, the engineering-organization’s exams. (Ditto for each engineering department and college.)

Before the minimum-grade legislation – which, remember, applies only to grades administered by collegiate engineering professors in their collegiate classrooms – the engineering professors had powerful incentives to assign grades accurately, for to assign, say, a grade of B to a student who in the classroom really displayed only grade D level competence would mean that that D student would be eligible to sit for one of the organization’s exams. Yet this poor student would be likely to fail that exam. Any professor who is overly generous in assigning grades would suffer as a result.

So what are the predictable consequences of this minimum-engineering-grade legislation?

Most obviously, no grades lower than B- will be assigned in collegiate engineering classrooms. It is, as they declare with rather careless language, “the law!” And just as obviously, the average grade assigned in these classrooms will rise. Duh.

Another prediction: champions of minimum-grade legislation will self-righteously declare victory. “Yay!” yell the champions of minimum-grade legislation. “Take a good look! Our legislation on behalf of the least-advantaged engineering students has succeeded! Despite predictions of armageddon by the greedy opponents of minimum-grade legislation, the average engineering grade has risen as a result of our legislation!”

But while champions of such legislation stop their analysis at this point, good economists go further. Good economists predict also that Departments of Engineering in colleges and universities throughout the land will become far more selective than otherwise in allowing students into their programs and classrooms.

Departments of Engineering, and engineering schools, will no longer accept into their majors and schools those students whose chances of becoming at least B- grade engineers are not high enough for schools to incur the risk of admitting these students into engineering programs and then being forced by the state to assign to these students grades higher than these students actually earned.

Further, the good economist predicts also that the minimum-engineering-grade legislation will increase the quantity supplied of engineering students. Heck, if you’re guaranteed to be assigned in each engineering class a grade at least as high as B- , that’s attractive if you’re a student. More students will seek acceptance into engineering programs. But – because (as explained above) the good economist also predicts a reduction in the quantity of majors and students ‘demanded’ by engineering departments and schools – the good economist predicts not only that the number of students enrolled in engineering programs will fall, but also that there will be a surplus of students seeking admission into engineering programs and schools. Lots of students who seek acceptance into engineering majors and schools will be denied. And the number of such denials will be higher than was the number of such denials before the minimum-grade legislation took effect.

Here’s yet another prediction: because the faculty and administrators who are in charge of student admission in engineering departments and schools have no way to be certain which student applicants will truly be at least B- caliber engineering students and which will not, these faculty and administrators are quite likely to understandably resort to a greater reliance on discrimination in favor of students who fit a certain ‘type’ that is most likely to excel at engineering. Such discrimination might take the form of the following rule of thumb:

Graduates of private high schools are generally more likely to perform better in college than are graduates of even acclaimed public high schools. And graduates of acclaimed public high schools are generally more likely to perform better in college than are graduates of inner-city public high schools. Therefore, with the minimum-engineering-grade legislation, it is no longer worth our while even to consider applications from graduates of inner-city high schools who wish to major as engineers. We’ll give the benefits of all doubts to graduates of private high-schools. It’s too risky to admit students from inner-city high public high schools.”]
Minimum-engineering-grade legislation will make it far more difficult for those students who are least likely at the start to perform well as engineering students – or who even just appear to be least likely to perform well as engineering students – to be admitted into engineering programs. Engineering students – and, later, the engineering profession itself – will become artificially dominated by members of those groups (for example, graduates of private high schools) who at the start of their collegiate careers ‘look’ the part or better fit the profile. An ambitious inner-city black kid with lots of native intelligence that can, with good collegiate instruction, be turned into excellent engineering skills will become more likely, with minimum-engineering-grade legislation, to be denied admission into engineering programs.

The world will never know what it missed. Perhaps, even this young student will never know what he or she missed.

And here’s a final prediction for now: the good economist will not change any of the above predictions if he or she is told that most engineering professors are quite wealthy. That is, the good economist will continue to predict the above consequences even if some minimum-grade proponent, after correctly noting that most engineering professors are quite wealthy, says “Therefore, there’s no need to worry that the risk of lost future salary raises will dissuade engineering professors from admitting less-advantaged students.

Those professors can afford to not get raises, so they’ll not take any steps to minimize their risks of being denied salary raises.”
Note that in the above hypothetical example the exams administered by the engineering societies are analogous to the tests that competitive markets administer to firms. Firms must consistently earn at least enough revenue to cover their costs if they are to remain in business. Market competition is strict. If a firm continues to employ workers at hourly wages that are in excess of the hourly contributions that these workers make to the firm’s revenues, then this firm will suffer losses and, eventually, be forced out of business. The fact that this firm pays such excessive wages only because government commands it to do so does nothing to alter this reality.

In reality, minimum-wage legislation never prompts employers of low-wage workers simply to raise to the legislated minimum the wages of all of its workers. Instead, employers adjust on other margins – most likely by not only reducing the number of low-wage workers they employ, but also by becoming more selective in choosing which particular low-wage workers they employ. The white teen from the leafy suburb will find his prospects of employment at the minimum wage not much reduced; this white-teen’s good fortune will be paid for by the black teen from the inner city who is made, by the same minimum-wage legislation, less likely to find employment.

This piece originally appeared at Cafe Hayek.