Robert Reich says that, as a requirement for free trade deals, we should tell developing countries to "set a minimum wage that's half their median wage." The proposal raises two questions in my mind:
1. Does Reich pay his nanny, cleaning person, and gardener more than half the median wage of members of his family?
2. If not, should I refuse to buy his books?
Update: After reading the surprisingly numerous comments on this post, I appreciate that my motivation for asking these questions is not obvious. Let me clarify.
Mr. Reich is in effect saying, "A nation should not trade with other nations that have too much inequality." So, I wondered about the parallel conclusion: "A household should not trade with other households that have too much inequality."
Is there any reason to think that a nation is the right unit of analysis when thinking about trade and inequality? If inequality within a nation is objectionable, why not inequality within a household? One lesson of Ricardian trade theory is that interpersonal trade and international trade are similar phenomena: Both are motivated by comparative advantage and the desire to realize the gains from trade. I was merely extending the analogy to the topic that Mr. Reich raised.
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