Skip to comments.Minimum Wage, Maximum Foolishness
Posted on 03/08/2013 3:14:20 PM PST by Kaslin
Should the federal government make life more difficult for low-skilled workers?
I hope everyone will emphatically say NO!
Heck, most people understandably will think youre crazy for even asking such a preposterous question.
But some of those people will also think that its a good idea for politicians in Washington to make low-skilled workers less attractive to employers by raising the minimum wage.
I often ask such people whether they are more likely to buy a Big Mac if McDonalds raises the price by 24 percent. They say they are less likely.
I then ask them if they are more likely to buy a car if GM increases the price of a Buick by 24 percent. They say less likely, of course.
But they seem to have a blind spot when I ask them whether employers will be more likely or less likely to hire low-skilled workers when the government increases the cost of those workers by 24 percent.
I explain further in this interview for Yahoo! Finance.Dan Mitchell Explains Why Boosting the Minimum Wage Is Bad for Low-Skilled Workers
The interviewer, by the way, seems to be economically illiterate.
He apparently believes that we can reduce inequality by pricing poor people out of the job market. He also blames companies for sitting on piles of cash, presumably unaware that firms only will invest if there are profitable opportunities.
At one point, I delicately state that one of his questions betrays a certain lack of historical knowledge, which is a polite way of saying youre either lying or you have no idea what youre talking about.
Ultimately, I try to help him understand by comparing fast-growing economies such Hong Kong and Singapore, which have relatively low burdens of government, with slow-growth economies such as France and Italy, where politicians ostensibly seek to help people with various forms of intervention.
Im not sure I made any progress, so feel free to suggest other ways of convincing skeptics that freedom is better than statism.
Anyway, for those who want more information, this video explains the underlying economics of the minimum wage. We also have plenty of evidence (see here and here) that unemployment rose following the most recent hike in the minimum wage.
That’s a great cartoon.
In NJ the minimum wage has become a moot point because so many people working anywhere near the minimum wage are illegal aliens anyway; the Americans who would have been impacted by an increase lost those jobs long ago to immigrants (legal and illegal).
The states have never delegated to Congress via the Constitution the specific power to regulate minimum wage.
No matter how statists try to socially engineer things, reality kicks them in the teeth...
The minimum wage is $0. Always has been, always will be.
If an employer would be willing to pay someone $10/hour if a minimum-wage law required it, the only reason the employer wouldn't be willing to pay that much absent such a law would be if someone was willing to work for less. An employer might prefer someone whose labor would generate $10/hour of value for the employer, but who was willing to work for $5/hour, to someone whose labor would generate $14/hour for the employer but who would charge $10. Imposing a $10/hour minimum wage, however, would mean that the former employee would be put of of work (an employer who paid $10 plus taxes etc. for labor that generated only $10 worth of value would lose money) and would have to be supported by the labor of other workers.
Since the people who are kicked out of the labor force by minimum wage rules end up having to be supported by others' labor, it turns out the only people who benefit from such rules are those who benefit from expanding the size of government.
This is about helping the unions. Union wages are pegged in multiples of the minimum wage. Raise that and all union employees immediately get a raise. The unions collect more dues and the Democrats get more PAC money.
At my first job I was a union bagboy. I was already earning more than twice the minimum wage, which was $1.75, if I recall. I was making $4.35. I dont recall what they raised it to, but everybody was really excited. Thats how I found out about the union/minimum wage link. My pay went to an astronomical $4.85.
I have the answer. On Jan 1 of each year, the minimum wage is raised 10%. The same day all prices are raised 10%! Bingo! Everyone is happy!
“The states have never delegated to Congress via the Constitution the specific power to regulate minimum wage. “
This is true as far as it goes. ...but for the most part, states raise their minimum wage to match the federal one, and it is the state one that companies usually are faced with. The federal ones, explicitly make use of the commerce clause or at least their interpretation of it and technically only affect companies directly involved in interstate commerce or with contracts of some sort with the Federal government.
Thank you for this perspective. Are you saying that there are actually two kinds of minimage wage laws, one set of laws applying only to businesses who only do business within a state, another set of laws for business who engage in interstate commerce?
Also consider the following. Regardless what FDR's activist justices claimed about Congress's Commerce Clause powers, please consider the following. First, using terms like "does not extend" and "exclusively" Thomas Jefferson had officially clarified that Congress has no business sticking its big nose into intrastate commerce.
For the power given to Congress by the Constitution does not extend to the internal regulation of the commerce of a State, (that is to say of the commerce between citizen and citizen,) which remain exclusively (emphases added) with its own legislature; but to its external commerce only, that is to say, its commerce with another State, or with foreign nations, or with the Indian tribes. Thomas Jefferson, Jeffersons Opinion on the Constitutionality of a National Bank : 1791.
But let's argue that Jefferson's expert opinion doesn't count because it's the Supreme Court's job to interpret the Constitution. So let's see what the Supreme Court has said about Congress's limited Commerce Clause powers.
"State inspection laws, health laws, and laws for regulating the internal commerce of a State, and those which respect turnpike roads, ferries, &c. are not within the power granted to Congress (emphases added)." --Gibbons v. Ogden, 1824.
The reason that Congress is now interfering with intrastate commerse is the following imo. FDR's outcome-driven justices blatantly ignored Jefferson's words and Supreme Court case precedent when they decided Wickard v. Filburn in Congress's favor in 1942.
1) yes, there are two major levels of minimum wage laws. The States’ typically follow the Federals’...but they don’t actually have to.
2) I agree that the Federal governments interpretation of the Commerce Clause is absurd. It has extended that jurisdiction to a declination to engage in intestate commerce, and to any commerce within a state which can affect I commerce outside the state, such as by local production reducing the demands for imports.
I wonder if employers aware of this? But more importantly, I wonder if employers are aware that the states have never delegated to Congress the specific power to regulate labor? Employers who don't understand constitutional division of federal and state government powers probably ask "how high" when feds decide to raise miminum wage.