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April 28, 1996
``[A minimum wage hike]... is the wrong way to raise the income of low wage earners." — Bill Clinton in 1994 as quoted by the Investor's Business Daily.
``If man were meant to fly he would have wings." ``If you sail too far west, you will fall off the edge of the Earth." ``We can help low wage earners, by raising the minimum wage." No matter how completely and definitively foolish notions are disproved by evidence, there is always someone willing to believe them. Advocates of the minimum wage have three primary arguments, none of them intellectually serious, even to those who advocate them.
Equity
The first argument is one of equity. This argument asserts that it is not "fair" for a full-time employee to be making whatever the current minimum wage is. Low income wage earners should be making more. Minimum wage advocates set them up as moral judges telling others what fair. They know what is fair regardless of what agreements employers and employees reach on their own. Minimum wage advocates not only know what is equitable, but they will use your money and the power of the federal government to parade their idea compassion. Despite the fact that only 3% of minimum wage earners are single parents, that most workers stay at the minimum wage for less than a year and minimum wage increases decrease employment, these advocates know what is fair. By what reason do they assert to have this superior moral authority?
Employment
The second argument, proffered by Robert Reich, the Labor Secretary, on the basis of the slimmest of evidence, is that increasing the minimum wage increases employment. Of course, even Reich will agree that large minimum wage increases will cause a loss of jobs, but smaller, clever ones, he argues, will increase employment. The two studies that he bases his claims on have been roundly repudiated and are demonstrable false upon simple examination.To argue that increasing the minimum wage increases employment is to argue that there are a significant number of people who will return to employers a value equal to or greater than the new minimum wage. It is to argue further that these people are not found by employers until the minimum wage is increased.
If Reich is so sure that this lost group really exists, then he should prove it by starting a business and hiring those people. If in fact if such hordes exit, then he could make a great deal of money by hiring them. Someone with Reich's hubris should be willing to risk his own capital before he forces others to risk theirs.
Robert Samuelson, economist and editor at Newsweek points out that ``most economists believe that every 10% rise in the minimum [wage] could erase between 1% and 2% of affected jobs. By this math, a $5.15 minimum might jeopardize between 100,000 and 200,000 jobs for younger workers." Only someone immune to the evidence could argue that increasing the price of labor will increase employment.
Inflation
The third argument is that the real value of the minimum wage has decreased since its last increase in 1991. Fair enough. Let us make a trade. Agree to peg the minimum wage to the inflation adjusted minimum wage as of 1991. Now let us peg federal spending to the 1991 inflation-adjusted value. Any takers?Reality
Indeed, even Democrats in their hearts — at least for the small fraction of the time when they are not pandering the labors unions — do not believe the minimum wage is the best way to help low income wage earners. The House Democrats themselves assert that ``As an antipoverty tool the minimum wage is inefficient; it is not as well targeted as the Earned Income Tax Credit and very large changes may have adverse effects on the employment opportunities of new entrants to the labor force and lower skilled workers. Translation: We know the minimum wage law is not efficient, but increasing the Earned Income Tax Credit would require increased taxes or decreased expenditures on other programs. A minimum wage law is a way of forcing employers to increase low wage earner income through the hidden tax of increased prices.For two years, the Democrats had control of both houses of Congress and the White House and no increase in the minimum wage was passed or even seriously considered. However, what is more pathetic is the sight of Republicans who know better, for fear of short political losses, acquiescing to minimum wage increases they know will hurt the people they are ostensibly to help.
Frank Monaldo — Please e-mail comments to frank@monaldo.net
