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Walter Williams
Walter E. Williams
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Higher Minimum Wages

In his State of the Union address, President Barack Obama proposed raising the minimum wage from $7.25 an hour to $9 an hour. That would be almost a 25 percent increase. Let's look at the president's proposal, but before doing so, let's ask some other economic questions.

Are people responsive to changes in price? For example, if the price of cars rose by 25 percent, would people purchase as many cars? Supposing housing prices rose by 25 percent, what would happen to sales? Those are big-ticket items, but what about smaller-priced items? If a supermarket raised its prices by 25 percent, would people purchase as much? It's not rocket science to conclude that when prices rise, people adjust their behavior by purchasing less.

It's almost childish to do so, but I'm going to ask questions about 25 percent price changes in the other way. What responses would people have if the price of cars or housing fell by 25 percent? What would happen to supermarket sales if prices fell by 25 percent? Again, it doesn't require deep thinking to guess that people would purchase more.

This behavior in economics is known as the first fundamental law of demand. It holds that the higher the price of something the less people will take and that the lower the price the more people will take. There are no known exceptions to the law of demand. Any economist who could prove a real-world exception would probably be a candidate for the Nobel Memorial Prize in Economic Sciences and other honors.

Dr. Alan Krueger, an economist, is chairman of the president's Council of Economic Advisers. I wonder whether he advised the president that though people surely would be responsive to 25 percent increases in the prices of other goods and services, they would not be responsive to a 25 percent wage increase. I'd bet the rent money that you couldn't get Krueger to answer the following statement by saying either true or false: A 25 percent increase in the price of labor would not affect employment. If anything, his evasive response would be that found in a White House memo, reported in The Wall Street Journal's article titled "The Minority Youth Unemployment Act" (Feb.
15), namely that "a range of economic studies show that modestly raising the minimum wage increases earnings and reduces poverty without measurably reducing employment." The WSJ article questions that statement: "Note the shifty adverbs, 'modestly' and 'measurably,' which can paper over a lot of economic damage." My interpretation of the phrase "without measurably reducing employment" is that only youngsters, mostly black youngsters, would be affected by an increase.

University of California, Irvine economist David Neumark has examined more than 100 major academic studies on the minimum wage. He states that the White House claim "grossly misstates the weight of the evidence." About 85 percent of the studies "find a negative employment effect on low-skilled workers." A 1976 American Economic Association survey found that 90 percent of its members agreed that increasing the minimum wage raises unemployment among young and unskilled workers. A 1990 survey found that 80 percent of economists agreed with the statement that increases in the minimum wage cause unemployment among the youth and low-skilled. If you're looking for a consensus in most fields of study, examine the introductory and intermediate college textbooks in the field. Economics textbooks that mention the minimum wage say that it increases unemployment for the least skilled worker.

As detailed in my recent book "Race and Economics" (2012), during times of gross racial discrimination, black unemployment was lower than white unemployment and blacks were more active in the labor market. For example, in 1948, black teen unemployment was less than white teen unemployment, and black teens were more active in the labor market. Today black teen unemployment is about 40 percent; for whites, it is about 20 percent. The minimum wage law weighs heavily in this devastating picture. Supporters of higher minimum wages want to index it to inflation so as to avoid its periodic examination.

Walter E. Williams is a professor of economics at George Mason University. To find out more about Walter E. Williams and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at


14 Comments | Post Comment
I know that Mr. Williams has observed the comments section on this site before. So I'm going to take a chance and ask him a question, and perhaps he will respond to it in a later column. One big discrepancy between min wage advocates and opponents is the question of "who are these min wage workers"? Advocates of the minimum wage say many people who earn this wage are adults trying to get by and feed their families. Opponents say its mostly teens that earn this wage and thats ok because with time and skills, their pay will increase. So my question is who is right? Who are these low wages workers? Adults with families to feed, or youth just starting out in the work force?
Comment: #1
Posted by: Chris McCoy
Mon Feb 25, 2013 9:13 AM
Re: Chris McCoy;...A better question to ask dear Chris, is the relationship between the price of the wages, and the value of the product... As much as it has been possible, the price of labor has been reduced... Corporations will spend a million dollars on a robot to replace ten workers because the machine never needs a drink, or to take a crap, or misses time because the kids are sick, or he is hung over... In doing so they find they must reduce their price to their cost, and can only make profit on the difference between what they pay for the workers, and the price they charge for the product with all that nonsense like waste and taxes figured in...
If one guy gets a robot, they all get robots, and the price is reduced by cost, and since they have laid off their own market, their consumers, which society then has to pick up the support of, profits already reduced are reduced further by taxes, but taxes going to support the population do at least make consumers out of non producers, so they tend to inflate profits and costs on necessities like food, shelter, clothing, and what all the unimaginative can be led to believe they cannot live without...
The point is, that without the help of government, wages will be reduced to what it takes to keep people alive, and that amount does not allow for freedom.. Such people capable of supporting only themselves do not contribute to the support of their families, or to their societies... They are like those people walmart recommended foodstamps to in order to supplement their short wages... You get it, wages below that necessary to support life or pay taxes that require the support of the whole society, literally take from the poor to ensure profit for a corporation...
That great reactionary William Cristal's (sp) mother, Gertrude Himmelfarb (real name, no fooling) wrote a good book called The Idea of Poverty, England in the Early Industrial Age... Now, the period she referes to began for the most part with the closing of the commons which was a great theft and transformation of heritable property rights that cast millions into poverty... The rich wanted the property of the poor who had their own small tracts and relied upon the commons to herd their cow and other critters... Anyway, my point being that there was a time when the parishes where responsible for what we would consider welfare, and at least for a time, insufficient wages were made up for until it was found out that employers knowing their employees would be supported only reduced their wages further yet...
There were whole generations that left the farms with little choice but to do so, and they never made enough in a life time to marry or reproduce themselves, and like eighty percent of our own people, many never did other than service work, like so many Mary Poppins and Sweeps... And sweeps in particular were kept at work long after machinery was available that could do the job as well... Human beings were cheap, and cheap labor never inspires invention, but only brutality... As in the case of sweeps, when the spanish bowline they used for a boatwains chair rubbed creosolt into the groins of boys and caused them to develop and die of testicular cancer... A sweep is as happy as happy can be....
Chris; whether you think about the individual human cost of poverty, or the decline, and social demoralization through poverty; it is hard to argue a social benefit to America when the same benefit cannot be argued for Americans... If you do not address the problem as national, and in fact international, you never get it...The North at one point tried to limit the spread of slavery to free territories because it drove free people out of those states, as Lincoln said to Speed, Slave states are places for poor white men to remove from, and not remove to...
Seriously, every Northern state today has its limit of Southern white men and blacks all who made their escape from the poverty and miserable working conditions of the South... Problem is, that no one could get the South out of the Southerners... They kept the very bigotry, prejudice, and anti unionism that made life in the South so impossible for them because it inevitably lowered their wages to the survival point, and never more...
OK... If we do not raise the wages of the poor Southerner with our own, we will see our remaining industry all South of the Mason Dixon line... I can see the point of anyone who thinks it wrong to help anyone beyond their desire for help... Some people will bite the hand that feeds them... But some times the individual has got to stand aside for the greater good; even their own...
Consider, that the reason prositution is illegal is not because it is fun, but because it demeans and devalues what people in marriage should hold in great value, their love and intimacy.. Anyone giving away love for trinkets is devalueing every love relationship, the offer tendered and consideration recieved because she has no sense of self worth... A lot of people are like that in the way of labor...The labor and time of a free man should be a consideration of value... Think of what Caesar said to the General who suggest a raise in wages when he was having trouble with recruitment: Double their wages, said Caesar; It takes a lot to capture the imagination of a Roman...
Are we less than they??? If we demand more they would respect us more!!! It is because they get us so cheap that they treat us like trash...These employers are musclemen when it comes to throwing million at elections; but when it come time to raise wages, they toss nickles around like they were man hole covers...
Comment: #2
Posted by: James A, Sweeney
Mon Feb 25, 2013 6:30 PM
Sir;... I think you are looking at it from the wrong point of view... High wages spur technological development... If we were all as cheap as Egyptian peasants they would have us building pyramids with no better advantage than an inclined plane... But what is the ultimate object of technology???...
For the moment technology is used to dispense with labor and labor costs to maximize profits in the period before the competition catches up... And everyone has to be on the edge of new processes and products unless they are simply digging their own grave...In a very real sense, the capitalists do not only want to make us superfluous, but extinct... So long as we can consume we are tolerated, but the moment we begin to live only hand to mouth we are thought in possession of meaningless lives, with too many rights for the quasi modo lives we call our own...
From the point of view of humanity, technology has a reason beyond mere profit and the discarding of humanity with the trash... It is to free us all, and to give us all time to enjoy life, and consider the spiritual value of it... What technology gained by the sacrifice of many lives allows; capitalism denies... We could easily support ourselves with little work shared out equally... Intead, many work too much for too little while they rest stand by in envy because at least the slaves can get through their lives distracted from their misery by their pain...We are so cheap now that people could employ us in our sleep with ease, and only the lowering of price to actual costs makes this impossible in the need for the capitalist to survive his class...But our lives and time have the ultimate value, and we should not be cheap, but as dear as we need be to get our due, and get on with our star gazing, or love making, or learning, or etc... Why in the hell are we slaves to the machine we have created to serve humanity and free us from back breaking toil???
We do not need control of our lives and situations to be finally free... All we need is an understanding of it to own it and to be free for good...And people are kept in absolute want, or at the wheel of life- seeing or knowing nothing for that one purpose of keeping them from taking what is theirs, and turning it to their own purpose...
What is the difference between giving workers chicken feed, of chicken feed plus??? As long as you are giving and they are taking they are not taking for themselves what they need for their lives, for the good lives and happiness they deserve, and making themselves masters of the technology they now serve as slaves...
Who would not agree that their lives are priceless, and yet the boss has your price as we speak, and it might buy as much as a promise, a kind word, or a gob of snot; but it is yours... You lucky American worker...
Comment: #3
Posted by: James A, Sweeney
Tue Feb 26, 2013 5:43 AM
I'm not trying to ask the best question Sweeny. I'm not even trying to understand the whole issue because I know its so complex. Now, Mr. Williams has done a wonderful job explaining this so that someone without an economics degree can understand the basics. But at the same time I know he is just giving us the tip of the iceberg. I'm just asking this one question because there is much conflict surrounding it.
Comment: #4
Posted by: Chris McCoy
Tue Feb 26, 2013 6:26 AM
I can't help but find arguments, like Dr. William's, against increasing the minimum wage remarkably narrow-minded.

“Cause and effect” is certainly a factor but many other variables enter into the equation which suggest that a one-to-one ratio of additional hourly wages to reduced overall employment would not necessarily result.

For example, while some employers would seek cut staff that is not always an option. Employers, as a rule, only maintain the staff they need to support the business. They don't say, “I have X dollars to spend, how many people can I hire?” rather they say, “I need X people to run my business, how little can I pay them?” Therefore, we can reasonably expect the attrition rate to be mollified by this factor.

Secondly, the net increase in disposable income would stimulate the economy. These are people who don't sit on their money. They spend it. [They have little choice.] I have heard it said that almost 15 million Americans fall into this minimum wage category. Even if that number is inflated we are talking a significant increase in demand. Can anyone doubt that increased demand is a proven economic stimulant?

Finally, I would theorize that raising the standing of this group, economically, socially and in terms of pride and self-esteem would generate far-reaching benefits. There is intrinsic value of providing hope to the hopeless, enabling parents to support and invest in their children's future and generally reinforcing the American dream. Potentially this could turn out to be the “rising tide that floats all boats”.

And wouldn't that be worth the investment?
Comment: #5
Posted by: ABarkus
Tue Feb 26, 2013 1:15 PM
Re: Chris McCoy... I don't really care; and God will forgive you... It's his job; and he does it for compliments...Everyone else need enough, and that is sort of a moving target, and different for all of us; but that does not mean that there does not need to be a minimum; or keeping people breathing will set the minimum...Even in the slave labor camps they had to give the people enough to die slowly... Don't worry about anything else but what does it take to keep the person alive with a roof over head, and the hunger of their children out of their ears... It is not the same all over, but almost anywhere a reasonable cost of living should be determinable...
Comment: #6
Posted by: James A, Sweeney
Tue Feb 26, 2013 2:15 PM
The minimum wage increased in three $0.70 increments--to $5.85 in July, 2007, $6.55 in July, 2008, and to $7.25 in July 2009. Did those raises create the rising tide that floats all boats? Did they provide hope to the hopeless? Did they reinforce the American Dream?

But this one will.

Comment: #7
Posted by: Tom
Tue Feb 26, 2013 8:58 PM
Re: Tom

You got me, Tom.

I will freely admit to some hyperbole on that last remark. None-the-less I believe that workers making less than $5.85 per hour in 2007 are better off with today's $7.25 rate [and would be even better served with $9.00] and that the negative impact that Dr. Williams focuses on in his piece would be more than counterbalanced by the benefits.
Comment: #8
Posted by: ABarkus
Wed Feb 27, 2013 5:45 AM
Re: Tom;... It is a shame that people involved in what should be an economic relationship, and at best, a personal relationship with the employers must have the help of government to move them toward fair wages...
I accept it as a given, that whether the business takes all profit out of a business to see it die, or re-invests profits in expectation of growth, that it will never see enough profit to satisfy it... It does seem that as human beings not entirely aloof from their sense of humanity, that they would check with their employees, communicate with them, and ask how they are doing financially...
To customers, businesses are forever working to show their human side, and this may mean they only show their employees their other, not so human side... None the less, if the employees find themselves at an extreme disadvantage in vis a' vis the employer, they are entitled with all rights to have government work on their behalf...
You know that people could make the same argument for murder that they make for low wages that the individual is hurt by limits on his freedom, and that for the most part, those who die get only what they deserve, and who having lived, does not deserve death...The people as a whole are the better judge of who deserves what they deserve- than any individual... The people as a whole can see if it is being injured by any particular freedom, and it must often stand in defense of the individual in order to protect society... Any murderer might claim that society is improved by less demand upon resources, more room, and etc... It would be hard to make that argument to the one killed; that society is improved by his injury...
This piddly increase is nothing, and it cannot be expected to save us from all our economic problems; but we are not only paid too little, but worked too much... When is the las time we had limits placed on hours worked... No employer would ever have limited hours worked for employee, and their wages were set so low as to demand full effort and employment out of each... The congress and people tried year after year to set some limits on business, and all actions coming before the Surpreme Court found they accepted lasaiz faire economic principals, and accepted as a right the employers freedom to contract with his employees... Later Courts looked in vain in the Constitution for this right, but one result of that specious right was the overturning of a New York State Law limiting bakers to sixty hours of work a week...Imagine what sort of life that would allow... We are so cheap to employ that we can be worked long over forty hours, and if considered management, may be over worked with no increase in pay...
Sir; the employing class has consciously as individuals, and has unconsciously as a class killed its own market...
It was inevitable when the income tax was pushed onto the poorest people possible, that they would have to work that much harder, longer, smarter, and faster to support themselves, their employers, and the government as well...At the same time, property relieved of taxation became a bank of wealth for the rich, and an article of speculation, which drove up its price, and forced the poor to work that much harder to afford shelter...Since wages were ineffective at meeting any unusual need, instead of enough to save, people were offered credit so that most are never free from debt their entire lives... This decapitalized the people, and gave bankers great wealth, but the poor domestic profits associated with a distressed market led them to export capital and import cheap products made with slave labor...
There were many point along our line of decline when the government might have stepped in to defend the people and the economy, but they were hooked on the same principals that led to this situation... They were forced to pick up the slack, and support those throw away people capital could not profit on, and make them consumers with a price tag the rest of the poor with their diminishing wages could afford to support... So government borrowed from the very people they should have taxed: that class responsible for the destruction of our market...
It is not too late for the course to be reversed, but it will not be, because the rich and the government have learned nothing...They must continue to defend our capital abroad though it adds only to the expense of government, and nothing to its support...They must continue to some degree to support the poor in poverty if they will have the rich in riches...They are like a tightrope walker juggling...They dare not forget what they are doing...
Comment: #9
Posted by: James A, Sweeney
Wed Feb 27, 2013 6:00 AM
Re: ABarkus;... Mr. Williams argues for the good of society based upon injury to the individual... You have to imagine that in the past, cannibalism held on for a long time after slavery was common for that same reason... If we are a nation, the common demand for justice is never an impertinency... Rights not used are not lost... But that society that denies the rights of its citizens in favor of unproved and unprovable economic principals is lost, and had better be found before swept into the trash...Principals are just principals, and are are not injured because they are never alive, but have only as much use as the good they do, and good for a society must inevitably be good for the individuals in that society, and no mere handful who think to make themselves lords of all...
Captialism has had its day, and look around... Everywhere is a wasteland of deserted, empoverished cities and failing infrastructure with government everywhere too broke to fix it or build new...The people have lost the commonwealth and the capital of many generations to the rich; and the rich may have used our goods to take a mortgage on the world; but we are still on the hook to defend what they bought that does not support us or our government...Now the people ask for some piddling increase in wages, and the rich want to show us their empty pockets... That is not my problem... All the people working only to keep life today with nothing for tomorrow are slaves whether they will admit it or not, and such slaves endanger freedom for all as much as their masters do...
Comment: #10
Posted by: James A, Sweeney
Wed Feb 27, 2013 6:18 AM
The middle class wasn't wiped out by the individual accumulation of wealth, but by the political accumulation of wealth and power. The shift from capitalism to socialism means that the poor live better than they used to, but that they have nowhere to go. And that the middle class is on the road to joining them in a society with a small upper class and a huge lower class that is somehow meant to subsidize its own government benefits. The capitalist ladder over which millions could swarm has been traded in for a socialist elevator that takes you to the top floor if you denounce capitalism often enough, but mostly never goes anywhere.

Rather than a society of aspiring merchants and builders, we instead have a society of beggars and philosopher-kings. The beggars are expected to be angry and the philosopher-kings are expected to be charitable. Eventually the philosopher-kings will expect the beggars to work for very little in exchange for that charity and the beggars will find that social justice protests don't work well against machine gun nests. Some might think that's conspiracy, but it's mostly just history. Credit: Daniel Greenfield
Comment: #11
Posted by: P. Long
Wed Feb 27, 2013 6:42 AM
Without wading through all of the draft Ph.D. theses above, I want to point out something typically overlooked. Minimum wage jobs are usually entry-level jobs and usually held by younger people -- they aren't permanent careers. The turnover is dramatic because these people are trying to work their way up the ladder to better-paying jobs. They escape these jobs as soon as possible and are replaced by the next batch of minimum wage workers and so on, ad infinitum -- it's a revolving door. Obviously, minimum wage workers are by definition at the poverty level, but that's the way the world works, and it's incentive to improve oneself and qualify for better jobs. In high school and college, I worked for less than minimum wage selling shoes and men's clothing, but I was good and got raises that topped the minimum wage. Nowadays, kids have no incentive to apply themselves to the job market or to improve themselves because they know the government will provide for their well-being. Indeed, the various welfare programs can provide a better living that a minimum wage job, even if the wage is raised to $9/hour, and it will ever be thus under a Democrat administration.
Comment: #12
Posted by: Derel Schrock
Wed Feb 27, 2013 8:54 AM
Re: Derel Schrock... That is the point, I believe, of one of the questions... Who holds these jobs; and who pays these wages... It may be that paying more will force some lay offs; but if an adult has to work two minimum wage jobs to support a child, they are not going to end up with much of a child, or help the unemployment situation... If a job is worth having done, and worth a profit, it is also worth a living wage... If; in addition to short wages a person needs food stamps to survive, are the people not subsidizing poverty when they could be demanding just wages, and national dignity???
Sir;.. No American should be forced to give up a significant portion of their life working only to live in poverty.... First of all, collectively we hold the whole country and stand behind the titles of the rich; but if that relationship only works for them, and delivers us into bondage; then it is time to change the rules... Poverty is slavery, as is all wage slavery in fact when it is so unnecessary, and feeds so much waste... Santayana estimated at the turn of the century that people needed then only 2 hours a day of labor to support themselves... That may have been before the income tax; but certainly, since then we have often doubled our ability to produce... If labor feeds enormous profits but cannot feed us; then the relationship is shot, and it is time to have the commonwealth back...
We have now, a massive service society based upon very little of actual production which involves only about 20% of the population...And that accounts for 10% of our profits, and the last I heard, 90% of our exports... Now these figures may have been old when I heard them four years ago, but none the less, the meat and bones of our society does not require much actual labor... It is the financial sector taking almost no labor, and living off of everyone's labor that accounts for 90% of our profits... We are being bled, bigtime, for which the least able are paying with short wages all around... This situation is not far different than that faced by our chattel slaves... They may have had owners and masters; but it was banks in New York that were reaping the profit...
Short enough for you???
Comment: #13
Posted by: James A, Sweeney
Wed Feb 27, 2013 9:56 AM
Re: P. Long;.. How many merchants and builders do you think we need??? How many farmers??? How many cops, or criminals???
Part of the problem of low wages is simply supply and demand, and very little that is labor intensive is getting done, and when it is, it costs a lot, but pays little... Machinery, and technology reduce the cost of labor by reducing the labor, but they invite an arms race in technology that reduces profit margins as well... So what will anyone do when the supply of labor is high, and the demand is low??? The normal result is lower wages, but society generally has a stake in both justice, and quality of life... If the society does not support a minimum wage, the minimum will be set by dire necessity... Every employers wants his labor prices low and those of all other employers high, so that domestic society offers a pool of consumers, and if they are smart as a whole, they want consumers with money to give the whole economy some strength to weather any depression...
What we have had is years of high profit fueled not by good wages, but by credit making up for poor wages; and as one economist noted: glut (meaning depression) is synymous with high profits... When you see high profits you are seeing society drained of its cash and other resources...Eventually there is no money for consumption even when products are sold at the lowest possible price, the price of producing them...Every single time keynesian economics has been used to stimulate the economy, it has pumped liquidity in that in the end results in more and more of the capital of many generations in the hands of the rich...
You can damn socialism all you want... Socialism is the original economy of all societies and the most durable because it is everywhere founded on necessity... People do not choose socialism and never will... Socialism is the result of no choice, or rather, the choice only to survive...When their wealth, and the commonwealth is taken from people they have no choice but to accept some socialism... They begin riding the bus or subway though they might rather drive... They go to a free clinic if one is available, and wait for their number to come up...They go to a soup kitchen or if they are doing well, to a buffet, and make one meal last them all day... And from the government point of view, it is better if people are negotiating their survival rather than plotting revolution...The rich do not mind if everyone becomes used to their pain, and want... They do not care if people take drugs to numb their frustration... The rich are untouchable so long as the government stands between the poor and the rich...
What any one with any sense fears is a fall so sharp and fast, that it throws what is left of the middle class into the street so their future with the poor becomes obvious to them in shocking fashion... Demoralization is common... Consider the death camps of WWII, and what people can get used to... It is when people who can still dream see their dreams of a better tomorrow snatched from them and crushed under foot that they can rebel...
Eric Hoffer in his book about mass movements pointed out that it is not when people's conditions are bad that they revolt, but when their expectation of a better life are destroyed... We can survive anything; but the welfare state has hidden behind it a police state, where there is no expectation of privacy, every person is a suspect, and all are under constant observation...
It affects even my behavior... I have often pulled up to a red light in the middle of the night with clear visibility in all directions, and then driven through it safely... Now, with cameras at every intersection, no one dares... And I have been behind people at red lights who can no longer make a left hand turn without an arrow... Some intersections don't have arrows, but people surrender by degrees their ability to think for themselves, and no arrow means no turn...
One man I knew was training to become a police officer, and told me how few eyes were actually on those cameras, and said it led many to have contempt for the concept of traffic remote control... Even a camera without a face behind it can be an intimidation to the freedom of society...I am not paranoid, but I am alarmed, and thank God the right has the sense to get up in arms about our own droning...We cannot afford police to walk the beat, but we can afford cameras everywhere and eyes in the sky, and spy satalites, and bugs on every phone...As I said: Law enforcement is labor intensive, and for that reason is undone; but people buy the technology even when it is expensive, and is profitless in the long run... Why??? Well they think they can get any joe off the street to keep eyes for hours at a time on monitors for minimum when even that cost becomes too great considered after the cost of the technology...The criminals only look harder for soft targets which means more poor feeding on the poor which about suits the rich because it acts as negative motivation to get out of there even if it means joining the enemy, and preying like so many do upon the poor, legally...
The fact is that people can afford crime more than they can afford a police state...I think the right revolution will start out poorly, and end badly; but the right have the right idea... They should fear the state, and the state IS making them poor, yet not for the sake of the poor, but to keep the rich untouched...
Comment: #14
Posted by: James A, Sweeney
Thu Feb 28, 2013 8:24 AM
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