Increase in the minimum wage Another blow to the poor
Here we go again on the minimum wage carousel. It goes round and round. Where it stops, no one knows.
Perhaps the stupidest law ever invented by the US Congress, surpassed by some states including Florida, is headed for a session of soul-searching.
By this count, 26 states have legislated the federal minimum of $5.15 per hour. Seventeen and the District of Columbia have raised the bar, to be surpassed by Washington State’s $7.63. Kansas set a fee of $2.65. Six have no minimum.
Seven of the minimum wage states, not including Florida, exempt businesses with fewer than four employees, a glimmer of common sense.
Congress is preparing to raise the recommended minimum wage to $7.25. After all, this is an election year, and our solons just got a pay raise from $3,300 to $168,500, plus personnel costs.
Howard “Yeehaw” Dean, the Democratic national chairman, last week dismissed as “nonsense” warnings from supply-side economists that raising the minimum wage would cause unemployment.
He was addressing a crowd at the ultra-liberal Christian Church in National City, Washington, DC. Following the march, parishioners poured into the street, chanting to passing cars: “Hey, hey, ho, ho, poverty has got to go.” .”
As my grandfather used to say: “The road to hell is paved with good intentions.” In fact, the bloody shirt of the minimum wage is being waved just as the US Department of Labor releases employment figures.
The unemployment rate has dipped slightly to 4.6 percent (6 percent the average since President Truman invented the statistic). More than 160,000 jobs were created in June as high school and college graduates entered the job market. The economy is expanding at a rate of 5.6 percent, when 3 percent is considered excellent. (Inflation therefore lurks around the corner, a problem the Federal Reserve must wrestle with.)
Dean, liberal members of Congress, and socially biased Bleeding Hearts subscribe to the myth that the “working poor” get an economic boost when the minimum wage is raised. Unions love it. All other labor costs rise rapidly to maintain wage relativity. The only long-term effect is that low-skill jobs are replaced with labor-saving equipment or “outsourced” offshore.
Worst of all, any rising wages, without an equal boost in productivity, is an illusion. It just devalues money. Three months after a minimum wage increase, low-income workers have returned to the level of purchasing power they once had. Every American pays higher costs for everything. A loaf of bread cost 15 cents when Truman was president.
A national minimum wage of 25 cents an hour was adopted in 1938 to deal with the Great Depression. That horrendous economic disaster, caused by excessive import duties around the world, vanished during the World War production targets.
However, the minimum wage took on a new mission: to fight the “War on Poverty.” It actually drove out low-skill jobs like agriculture and low-end manufacturing.
It is no coincidence that the states of Alabama, Arizona, Louisiana, Mississippi, South Carolina, and Tennessee are refusing to adopt a minimum wage as they fight to regain economic stability.
The minimum wage is a disadvantage to the very people it is meant to benefit. Of the one and a half percent of the workforce that earn minimum wage or less (about two million people), more than half are under the age of 25. A quarter of them are between 16 and 19 years old.
In short, low paying jobs are mostly entry level. Competent workers climb the ladder. Certainly a family of four cannot live comfortably on $25 a week, or the proposed $38, even with food stamps and public housing. An able-bodied man can do more than that by washing dishes in a restaurant.
So why hurt a free economy that leads the world in wages and opportunity? Making do-gooders feel better—and re-electing politicians—isn’t enough to offset the handicap.
If purchasing power can be increased at the stroke of a pen, we should legislate a minimum wage of $100 an hour. Then we could all get rich mowing each other’s lawns.
July 9, 2006
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