Minimum-Wage Laws Are Costly For The Unemployed

CONGRESS ENACTED the first federal minimum wage in 1938. A provision of the Fair Labor Standards Act, it covered about 6 million workers and set a wage floor of 25 cents per hour.

It also cost a lot of people their jobs. The Labor Department reported that as many as 50,000 employees, mostly poor Southern blacks, were thrown out of work within two weeks of the law's taking effect. In the months that followed, the carnage spread. "African Americans in the tobacco industry were particularly hard hit," wrote David Bernstein in his 2001 history of labor regulations and black employment. "In Wilson, N.C., for example, machines replaced two thousand African American tobacco stemmers in 1939."

The economic pain inflicted by that first minimum wage law hasn't stopped Washington from repeating the same folly over and over. In the 74 years since the lowest hourly wage at which most Americans could lawfully be hired was set at 25 cents -- the equivalent in purchasing power of about $4 today -- Congress has raised the amount 22 times. The federal minimum wage is currently $7.25 an hour, and a push is underway to raise it yet again.

On Capitol Hill, Iowa Senator Tom Harkin has introduced legislation that would hike the minimum wage in three steps to $9.80 per hour, a 35 percent increase. A more radical proposal by Representative Jesse Jackson Jr. of Illinois would increase the wage floor immediately, to $10 per hour.

At the state and local level, too, legislators have been pushing for minimum-wage hikes. The lowest legal wage in Massachusetts, for example, would jump to $10 an hour under a bill sponsored by state Senator Marc Pacheco and unanimously approved by a legislative committee in March. In New York City, a "living wage" measure passed over Mayor Michael Bloomberg's veto would require companies that receive public subsidies to pay their employees at least $11.50 an hour, or $10 plus benefits. (Bloomberg plans to challenge the bill in court.)

Yet no matter how much politicians and activists may battle over minimum-wage laws, the real minimum wage in this country has never budged. It is $0.00. According to the Bureau of Labor Statistics, that is the hourly wage being earned right now by 12.7 million Americans -- the 8.2 percent of the work force that is currently unemployed.

The pain of unemployment isn't evenly distributed among all population groups. It is much more severe among those with the least experience and skills. As of last month, the unemployment rate for black Americans had climbed to 14.4 percent; among teenagers it reached nearly 24 percent. And the unemployment rate for black teens -- the least-skilled, least-experienced subset of the workforce -- was 44 percent.

Minimum-wage laws are typically thought of as a mandate on employers. In reality they constrain employees. As it stands now, the federal wage law tells workers that unless they can find a company willing to pay them at least $7.25 an hour, they can't get a job. That may not seem like much of a barrier to Harkin, one of Congress's wealthiest members, but it might as well be the Berlin Wall to an unskilled teen or young adult with no high-school diploma or employment history whose labor is only worth, say, $5.50 an hour. No matter how much that person might leap at the chance to work for what he's worth, the minimum wage forbids it. Should Harkin's bill become law, life will become even harder for those seeking entry-level employment.

With the best intentions in the world, lawmakers cannot raise the value of anyone's labor to $9.80 an hour (or $7.25 an hour, or even 25 cents an hour) merely by passing a law. Making it more expensive to hire workers who are just starting out doesn't advance beginners' prospects; it worsens them. Decades of economic research and empirical studies confirm what common sense should tell anybody: Boost the minimum wage beyond what low-skilled workers are worth, and more low-skilled workers will be priced out of a job. That is why minimum-wage hikes are historically so devastating to those at the bottom of the economic ladder.

Minimum-wage laws are not cost-free. When legislators raise the price of low- and unskilled labor, it's usually low- and unskilled laborers who end up paying the price. As 50,000 Americans found out in 1938, jacking up the minimum wage turns the least employable into the unemployable. It may not be easy to survive on $7.25 an hour. But life gets a whole lot harder when your hourly wage is nothing.

I have a liberal friend (yeah, I know, shame on me) and made the articles point about minimum wage and how it actually hurts jobs. He actually responded with “that’s a really good point that I never thought of”. I am going to flip him some day or another. Haha.

“As it stands now, the federal wage law tells workers that unless they can find a company willing to pay them at least $7.25 an hour, they can’t get a job.”

The system encourages job hunters to walk away from perfectly OK jobs (very likely a foot-in-the-door) if employers don’t offer the current minimum wage.

THAT is idiotic. Everyone has to start SOMEWHERE... and if you get into a place, there have to be opportunities for industrious and responsible employees no matter at what level they started out.

If nothing else, you can get some contin. ed, night school or whatever, and move to other and better paying jobs down the road. There is no limit to what you can achieve if you just BEGIN working and applying yourself.

Sitting around on your duff waiting for the gov’t. to subsidize your indolence and expecting a big time position out of the blue, is just plain ignorant!

I wish I could find the article from Walter E. Williams (I’m pretty sure it was him) wherein he made the point about how minimum wage also hurts existing workers.

For example, take a 2-year employee who started at minimum wage, learned the job and demonstrated commitment, got raises and is now making $10/hour. If you now start hiring newbies at the same wage, doesn’t the employee with longevity also immediately deserve a raise commensurate with his level of experience and added value?

Most in the congress who have never ran businesses seem to ignore that inconvenient truth. It’s inflation, plain and simple.

Most in the congress who have never ran businesses seem to ignore that inconvenient truth. It’s inflation, plain and simple.

They know exactly what they are doing in Congress. That is the scary part. This isn't 'stupidity', it's a tactical move to gain power. Pure and simple.

This line of reasoning, while 100% correct, is becoming irrelevant. Today’s chronically unemployed make more by not working than by taking minimum wage jobs. There is only one viable solution to this dilemma. Reduce benefits, or put work requirements on them, or put lifetime caps in place, or do all of the above.

You won't believe this, but here where I work, a girl who has always voted Democrat told me yesterday all the things about “O” that have been commonly discussed here on FR!!!

She was shocked and amazed that he ‘may not’ be a citizen; that he has no record available about his 'education; that "Rev." Wright screamed obnsenities and treasonous hate-speech for 20 years in "O's" presence; that Communist anti-Americans mentored him and routinely contribute to his campaign; that he is a Socialist (she whispered this word); that he has associations with criminals and other objectionable organizations like ACORN...etc.

She was also in wide-eyed awe that it was all familiar to me and that I had known about all this from the beginning of “O’s” notoriety in American public life!!!

She said “I am voting against this jerk’...and I know she voted FOR him to begin with!!

Underdiscussed: the dollar is on a mundane-labor standard. Minimal-effort/labor/training/talent work has an exchange rate of 8.28 minutes to $1. The marketplace equates $1 to 0.30 gallons of gas. No matter how the government defines the dollar in terms of value of minutes of work, 8.28 minutes of anyone-can-do-it labor will buy about 0.30 gallons of gas. Raise the minimum wage to $72.50/hr, and gas will soon cost $32.70/gallon.

The only benefit minimum wage has to the poor is the delay between pay increase and cost of goods/services. The economy takes some time to adjust prices to match payment, so there is a brief boost in buying power. Well, at least for those who manage to keep their job instead of having it cut because the work isn’t worth the price and automation is cheaper.

In the long run of increasing minimum wages, the ratio of wages to cost of living remains constant, and jobs are lost because the value of a job is not defined by fiat, motivating job reduction in favor of efficiency improvements, automation, or elimination of features & services.

You mention Walter Williams' writings on this subject. For years, he has been pointing out the harm of the minimum-wage argument, but sadly, special interest unions and Dems have prevailed.

The following message was published many years ago, utilizing Williams' warning about the negative consequences of minimum wage laws on families and those who most need work experience and earnings. His words were true then, and he repeated them on Stossel just recently. Isn't it interesting that truth is the same decade after decade?

Dr. Williams understands and has been teaching, speaking, and writing about the tragic consequences of the so-called "progressive" policies which Democrats have inflicted upon Americans--all in the name of "helping" them.

Slavery to government is no better than slavery to individual masters. Yet, the "regressives" continue to buy power and influence by promoting policies that destroy opportunity, prosperity, and freedom for our own and future generations.

The system encourages job hunters to walk away from perfectly OK jobs (very likely a foot-in-the-door) if employers don’t offer the current minimum wage.

It doesn't encourage them to walk away, it mandates that they walk away.

...doesn’t the employee with longevity also immediately deserve a raise commensurate with his level of experience and added value?

Sure, he'll think he deserves a raise, but how has his value to the company changed?

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.