Minimum wage, maximum folly
by Walter E. Williams

President Clinton and many members of Congress have
proposed raising the minimum wage from its current
$5.15 per hour to $6.15. Most academic economists who've
studied the minimum wage conclude that higher minimum
wages cause unemployment, not so much among the general
labor force, but among low-skilled workers, especially
teenagers. Differences in unemployment rates reflect
this: the unemployment rate for adults over 25 years
is 3.1 percent; for teenagers it's 14.3 percent.

You say, "Williams, the president and Democrats love
America's children. If the minimum wage hurt them, why
would liberals support such a monstrosity?" First, you
have to recognize the reward and punishment structure
in political life. The fact of business is that no
congressman or senator owes his seat to the teenage
vote, but many do owe their seats to the union vote
and other interests that benefit from higher minimum
wages. Thus, in the hurly-burly hardball of political
life, you dump on people who can't dump back on you.

To understand how people can benefit from the minimum
wage, let's examine the general principle of Congress
setting minimum prices using a non-labor example.
Businessmen and labor unions frequently belly-ache
about foreign manufacturers charging too low a price
for a product. They call on Congress or the White House
to bully foreign manufacturers to raise their produce
prices or they lobby Congress to raise tariffs.

Do you think American businessmen and labor unions
want foreign goods to sell at higher prices because
they're concerned about and want to raise the living
standards of foreign producers and their workers? If
you think so, I have a bridge to sell you. Their sole
motivation is to set higher minimum prices on foreign
goods so they can get away with charging higher prices
for American-made goods as a means to higher profits
and higher wages.

The identical principle explains the union's push for
higher minimum wages. If unions can make part of the
labor market less competitive through minimum wages,
they can demand higher wages for their members.
Businesses may also benefit from higher minimum wages.

For example, let's go back several decades and pretend
you produced automatic dishwashing machines. Your
salesmen put on a sales pitch, but restaurant owners
say, "Why should we buy your costly machines when we
can hire people to wash dishes for $2.00 per hour? It
isn't worth it." You would benefit from Congress
raising the minimum wage to say $4.00 per hour. Why?
It raises the cost of restaurant owners using people
to wash dishes. Thus, they'd have greater financial
incentive to buy dishwashing machines from you.

Supporters preach that minimum wages don't cause unemployment
for low-skilled workers. But ask them why they pushed so hard
for Congress to enact the Welfare-to-Work Tax credit and the
Work Opportunity Tax Credit. Both tax credits have the effect
of reducing the employer's wage cost to low-skilled entry
level workers by 35 percent or to $3.33 per hour.

The real problem for low-skilled workers is not that
they're underpaid, but that they're underproductive. The
solution is to improve their skills and education. One of
the ways to do this is to have a climate where youngsters
can have early work experiences. The little bit of money a
youngster can earn after school and weekends is nice but
not nearly as beneficial as the lessons learned, such as
proper work attitudes, promptness, and respect for supervisors.

For youngsters living in dysfunctional homes and attending
rotten schools, a job might be their only chance to learn
something that will make them more valuable workers in the
future. I'm glad today's do-gooders weren't around in the
1940s when I was a teen.
________________________________________________________
NetZero - We believe in a FREE Internet. Shouldn't you?
Get your FREE Internet Access and Email at
http://www.netzero.net/download/index.html