On the Other Hand...

Minimum Wage: Minimum Sense, or Maximum Savagery?

by Jim Davies

In July the Republican-controlled US Senate approved a 21.2% increase in the minimum wage, which the Republican-controlled House had already passed. That well known representative of the poor and downtrodden, millionaire Democrat Edward Kennedy, hailed it as a triumph; a less infamous Republican said he regretted it as an imposition on small businesses. So it is, though that is not its main point; even so, I hope that every small-business owner in the land gives both these Parties their long-awaited come-uppance in November.

I cannot, offhand, think of any legislative subject more thickly larded with hypocrisy. The idea of a minimum wage, which we will clarify in a moment, is very easy to understand. It's quite true that very few of the public currently understand it, but that's because every means they might have to learn about it (schools, TV, newspapers) misrepresents it, on purpose or otherwise. Once its nature is pointed out anyone of very ordinary intelligence can grasp it, and since the 535 people pretenting to represent us on the Hill are cunning as well as smart, we can be quite sure they all understand it perfectly well. The fact that they support it anyway is clear proof that they are NOT representing the interests of all the people, but just those of a select group whose votes they hope to win - or at least, to retain. Well, what else is new?

Truth

So, let's clear away the man-made fog and explain what a minimum wage law actually does: it prohibits employment contracts that specify an hourly pay of less than a government-imposed amount; here, $5.15. That's all it does. Nothing more, nothing less. It is a direct intervention by government into the labor market. It does not (on its own) force the employer to hire anyone, and it does not force the employee to accept an offer; it just forces them both to set a pay rate in any contract they sign at $5.15/hr or more.

So, in any potential hiring situation, the negotiation becomes skewed. It is perfectly possible that, each weighing up all the circumstances of the job including what may be available elsewhere as labor or jobs, the employer is willing to pay $3 (or $1 or 50 cents or $5.14) and that the employee is willing to accept his offer; but here cometh Nanny, and sayeth No!

So, if the hirer has calculated that the value of the hiree to his business is worth $5.14 or less per hour, even though that is perfectly acceptable to the hiree, no agreement can be reached. The hirer goes without his help (so presumably damaging his business and its customers in some measure) and the hiree goes without a job. Perhaps taxpayers are, separately, forced to keep him from starving; whether so or not, his labor goes to waste and everyone loses.

Those are the facts. That is what a minimum-wage law always does, expressly and by definition; it forbids low-price labor contracts and distorts the market.

Consequences

Now that we know the naked truth, we can start to see what the consequences are; and there are some surprises in store.

1. There is no free-market Party in power . Maybe some reader favors a "managed economy", despite the disaster of the Soviet example; such people will be content. But those who imagined the Republicans were free marketeers (thanks to pre-election rhetoric, for example) now know better. Those favoring freedom to make any peaceful agreement we wish are, beyond doubt, now not represented in Congress. And until they elect Libertarians, they always will be.

2. Low-skill Americans are being persecuted . By government, that is, by this explicit piece of legislative harassment. For example if you are a black, urban, recent survivor of the government-school indoctrinators, so that you have virtually no skills of any value to any real employer, your labor is worth, perhaps, $2 an hour. Thanks to the Republicrat Party last month, you are now condemned to stay unemployed. That is precisely what they just did to you, and the 90-day delay on the increase merely adds insult to injury.

Brain-damaged though you may well be, you probably have enough street smarts to know that until you succeed at a $2/hr job and learn what the workplace is like, there's a zero chance that you will ever climb to a higher rung on the ladder, like $4 and $6 and $12 an hour. So the Republicrats have just handed you down a life sentence. Tough, ain't it? Yes, I know you don't want to make a living selling drugs; you know quite well it's a high-risk job and you'd like to stay out of jail and anyway, who knows, one day they might make drugs legal again and then the bottom would drop out of your career. But thanks to the intervenors on the Hill, what alternative do you have? Such is White Mans' Law.

3. Other wages will rise . Because government has just raised the "floor", over the next several months the normal operation of the labor market will cause wage rates well above the minimum to go up; and that has the deceptive appearance of good news to the millions of voters in that category - which is, of course, the principal reason the Law was written. Middle-income people vote, illiterate ghetto kids don't; so, ever alert to whatever advances their $130,000/yr careers, the whited sepluchres in Congress sacrifice the latter to ingratiate themselves with the former.

© Copyright Jim Davies 1999

Jim Davies lives in New Hampshire,
and enjoys contemplating which way is up.

The above is Edition # 167

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