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Walter E. Williams
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Politics and Minimum Wage

Comment

There's little debate among academic economists about the effect of minimum wages. University of California, Irvine economist David Neumark has examined more than 100 major academic studies on the minimum wage. He reports that 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 reported in the American Economic Review (1992) 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 searching for a consensus in a field of study, most of the time you can examine the field's introductory and intermediate college textbooks. Economics textbooks that mention the minimum wage say that it increases unemployment for the least skilled worker. The only significant debate about the minimum wage is the magnitude of its effect. Some studies argue that a 10 percent increase in the minimum wage will cause a 1 percent increase in unemployment, whereas others predict a higher increase.

How about the politics of the minimum wage? In the political arena, one dumps on people who can't dump back on him. Minimum wages have their greatest unemployment impact on the least skilled worker. After all, who's going to pay a worker an hourly wage of $10 if that worker is so unfortunate as to have skills that enable him to produce only $5 worth of value per hour? Who are these workers? For the most part, they are low-skilled teens or young adults, most of whom are poorly educated blacks and Latinos. The unemployment statistics in our urban areas confirm this prediction, with teen unemployment rates as high as 50 percent.

The politics of the minimum wage are simple. No congressman or president owes his office to the poorly educated black and Latino youth vote. Moreover, the victims of the minimum wage do not know why they suffer high unemployment, and neither do most of their "benefactors." Minimum wage beneficiaries are highly organized, and they do have the necessary political clout to get Congress to price their low-skilled competition out of the market so they can demand higher wages.

Concerned about the devastating unemployment effects of the minimum wage, Republican politicians have long resisted increases in the minimum wage, but that makes no political sense. The reason is the beneficiaries of preventing increases in the minimum wage don't vote Republican no matter what; where's the political quid pro quo?

Higher-skilled and union workers are not the only beneficiaries of higher minimum wages. Among other beneficiaries are manufacturers who produce substitutes for workers. A recent example of this is Wawa's experiment with customers using touch screens as substitutes for counter clerks. A customer at the convenience store selects his order from a touch screen. He takes a printed slip to the cashier to pay for it while it's being filled. I imagine that soon the customer's interaction with the cashier will be eliminated with a swipe of a credit card. Raising the minimum wage and other employment costs speeds up the automation process. I'm old enough to remember attendants at gasoline stations and theater ushers, who are virtually absent today. It's not because today's Americans like to smell gasoline fumes and stumble down the aisles in the dark to find their seat. The minimum wage law has eliminated such jobs.

Finally, there's a nastier side to support for minimum wage laws, documented in my book "Race and Economics: How Much Can Be Blamed on Discrimination?" During South Africa's apartheid era, racist labor unions were the country's major supporters of minimum wage laws for blacks. Their stated intention was to protect white workers from having to compete with lower-wage black workers. Our nation's first minimum wage law, the Davis-Bacon Act of 1931, had racist motivation. Among the widespread racist sentiment was that of American Federation of Labor President William Green, who complained, "Colored labor is being sought to demoralize wage rates."

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 www.creators.com.

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Comments

13 Comments | Post Comment
Can't we accomplish the same thing financially with an across the board reduction in payroll taxes? I mean, assuming the goal is to give the minimum wage worker more "buying power" or whatever, which I doubt of course.
Comment: #1
Posted by: Kevin Davis
Mon Jan 6, 2014 10:50 AM
The minimum wage is, as I understand it, 30% less than it was in 1968, corrected for inflation. Does Mr. Williams believe that employment for the least skilled requires all minimum wage workers to "enjoy" ever decreasing standards of living? Then why doesn't he propose slashing the minimum wage? What better way is there transfer even more wealth to the top few percent? Henry Ford understood that paying his workers more created customers. Perhaps the "intelligentsia" such as Mr. Williams could eventually get there too.
Comment: #2
Posted by: Mark
Mon Jan 6, 2014 8:32 PM
Sir;... Only to point out the obvious, sir, but the increase in technology was at a standstil until nature made labor more expensive than employers were willing to bear... You see workers displaced by technology built for that purpose, but that is only half the problem... The other half of the problem is that production needs markets, and underpaid and laid off workers don't make a market for much... We could export our goods to places were workers are more oppressed, and have less money who can produce for their own needs; but then we need that expensive old army to stuff our goods down their throats with the barrel of a gun... We are seeing the end of capitalism, which is slavery...If the working class does not like slavery they can be cut out of the picture entirely... The best man they got can be replaced by a trained monkey working for peanuts...But nothing can replace the problems we have with with the promise of capitalism...The old monster of capitalism that had its birth in plague and found its food in war has reached the end of its life, its threats proved, and its promises for improvement unfilled...
Now you justify slavery... What do you offer as evidence??? That employers will resort to technolgy to replace workers??? Knowedge is power in the capitalist frame of thought and if they cannot replace workers they will kill them outright... Certainly, the working class is endangered and forced to surrender all freedom and power to resist just to stay alive... Does this make sense??? If the rich refuse to tax themselves to support their government, and to export our industry where it will not support this population or the government, are they not putting their whole pile of loot in jeapardy??? They may consider in their cruel calculations how many workers they can replace with robots, but they could be replaced with widgits...Even while they believe they can do without humanity, they will find themselves more and more dependent upon a class of lawyers and specialists they cannot live without... Today this subclass keeps the rich in power, and tomorrow they might haul them off their thrones, if we do not haul them all down first...What do we owe this class of parasites; really???
Thanks...Sweeney
Comment: #3
Posted by: James A, Sweeney
Mon Jan 6, 2014 10:39 PM
Sir;... If I may offer an example otherwise obscured by the glow of history, let me suggest the chimney sweep... While there was early on the mechanical method of sweeping chimneys, in England children were used because they were cheeper so that technology languished in the name of profits... This was no improvement for the society even in an age of great advances... It was certainly no improvement for the sweeps who were generally children, and who died in great numbers from their work... We are blinded by the afterglow of history into believing that sweeps were happy... Like a neutered dog is happy...What killed most of them was testicular cancer, and it was a result of carcinogens and the irritation of the ropes they were raised and lowered by...Chimchimeny!!!
Do you ever ask yourself: If there is a job not worth the profit of doing it, then why is it done??? If a private contractor agrees to sweep the streets, and the job needs doing, but the profit in it does not justify the headaches, then why is that job not done by the city??? The city needs to show no profit, and should be able to do it at market value...But one cannot presume that the life and time of a poor and uneducated person is worth less to him simply because he is considered worthless by all who judge humanity by the abstraction of money...
What raises the wages of the educated is usually the price of their education, and the fact that they simply must have more to make their ends meet...Even there, the educated must see their price reduced as an open market is made in educated people from the third world... What does it take to support a poor person where poverty is general??? The only way our educated can compete is by lowering their wages to an approximation of third world levels, though our expenses are so much higher...What is wrong with this picture is the obvious necessity of a person in their lives to provide for their futures, and for the future of their children... If our profit, the profit of the few is creating a situation where our own children are not educated, where our educational institutions are not supported, but the children of the poor in foreign lands are educated (as if poverty is not education enough), then our decline and demise are obvious before us...
Just as the poor people of this land revolt against high taxes that never buy the necessary support from their government, they do in fact what the poor whites of the North and the citizen farmers of Italy once did in Roman times... They act blindly out of the awarness that to compete with a slave one must become a slave...When we have exported our economy to foreign lands, it was with our rule of law to make certain no germ of freedom would infect them... If we will not demand freedom for foreign people when that would mean freedom from exploitation for them, then certainly our freedom is passed...Our founding fathers embraced the export of revolution and we have seen that turned since the Monroe Doctrine into the exploitation of all foreigners under our sway....If we have democracy we have the power to set our own wages, to set our own taxes, to set our own working conditions... You want only so much democracy as endangers our rights, but does not defend our rights... In fact, Mr. Williams, you want democracy in name only so that your economic principals which at this moment are killing this country can range at will, and defeat us in detail....
Sir;...The rich can move a whole factory overseas with less personal distress than a man may move his family... Why should we be forced to chase jobs around our own country like greyhounds after a rabbit??? Why should we lower our wages when we might without near the effort raise the wages of everyone around the world... We could take the profit out of the export of our jobs and our capital in an afternoon of legislative activity... If we could make a democracy out of this sop of majority rule, we might free ourselves and free the world...When the rich have been left free to chart our course by the rise and fall of profit, and they have been able to turn our labor market into a buyers market flooded with labor as nearly free as fresh air, then we have little chance of success or justice...
Thanks...Sweeney
Comment: #4
Posted by: James A, Sweeney
Tue Jan 7, 2014 11:17 AM
Sir;... If I may offer an example otherwise obscured by the glow of history, let me suggest the chimney sweep... While there was early on the mechanical method of sweeping chimneys, in England children were used because they were cheeper so that technology languished in the name of profits... This was no improvement for the society even in an age of great advances... It was certainly no improvement for the sweeps who were generally children, and who died in great numbers from their work... We are blinded by the afterglow of history into believing that sweeps were happy... Like a neutered dog is happy...What killed most of them was testicular cancer, and it was a result of carcinogens and the irritation of the ropes they were raised and lowered by...Chimchimeny!!!
Do you ever ask yourself: If there is a job not worth the profit of doing it, then why is it done??? If a private contractor agrees to sweep the streets, and the job needs doing, but the profit in it does not justify the headaches, then why is that job not done by the city??? The city needs to show no profit, and should be able to do it at market value...But one cannot presume that the life and time of a poor and uneducated person is worth less to him simply because he is considered worthless by all who judge humanity by the abstraction of money...
What raises the wages of the educated is usually the price of their education, and the fact that they simply must have more to make their ends meet...Even there, the educated must see their price reduced as an open market is made in educated people from the third world... What does it take to support a poor person where poverty is general??? The only way our educated can compete is by lowering their wages to an approximation of third world levels, though our expenses are so much higher...What is wrong with this picture is the obvious necessity of a person in their lives to provide for their futures, and for the future of their children... If our profit, the profit of the few is creating a situation where our own children are not educated, where our educational institutions are not supported, but the children of the poor in foreign lands are educated (as if poverty is not education enough), then our decline and demise are obvious before us...
Just as the poor people of this land revolt against high taxes that never buy the necessary support from their government, they do in fact what the poor whites of the North and the citizen farmers of Italy once did in Roman times... They act blindly out of the awarness that to compete with a slave one must become a slave...When we have exported our economy to foreign lands, it was with our rule of law to make certain no germ of freedom would infect them... If we will not demand freedom for foreign people when that would mean freedom from exploitation for them, then certainly our freedom is passed...Our founding fathers embraced the export of revolution and we have seen that turned since the Monroe Doctrine into the exploitation of all foreigners under our sway....If we have democracy we have the power to set our own wages, to set our own taxes, to set our own working conditions... You want only so much democracy as endangers our rights, but does not defend our rights... In fact, Mr. Williams, you want democracy in name only so that your economic principals which at this moment are killing this country can range at will, and defeat us in detail....
Sir;...The rich can move a whole factory overseas with less personal distress than a man may move his family... Why should we be forced to chase jobs around our own country like greyhounds after a rabbit??? Why should we lower our wages when we might without near the effort raise the wages of everyone around the world... We could take the profit out of the export of our jobs and our capital in an afternoon of legislative activity... If we could make a democracy out of this sop of majority rule, we might free ourselves and free the world...When the rich have been left free to chart our course by the rise and fall of profit, and they have been able to turn our labor market into a buyers market flooded with labor as nearly free as fresh air, then we have little chance of success or justice...
Thanks...Sweeney
Comment: #5
Posted by: James A, Sweeney
Tue Jan 7, 2014 11:28 AM
Here is the easiest way to explain why increasing min wage does not work.

Tacos.

Here in SD we have a regional chain called Taco John's. Back when min wage was $5.15, they had Taco Tuesday, 2 tacos for 99 cents. 49.5 cents per taco. So if you were on min wage, you could work for and hour, and buy 10 tacos.

When they increased the min to 7.25, guess what? Tacos now cost 69 cents each. So now with all that extra cash, you can work for an hour and buy.......10 tacos!!!!

The only benefit is to the politicians who provide the "bread and circuses" to the uninformed masses in return for being re-elected.

Oh, just as an afterthought, I make about twice the minimum right now, $15/hour. If they increase the minimum to $9 or $10, will I get $18 or $20 and hour. Kinda doubt it.
Comment: #6
Posted by: Randy L. Wilcox
Tue Jan 7, 2014 11:39 AM
Randy,
Ignoring payroll and income taxes for the moment, if you hold the minimum wage at $5.15 and the price of tacos goes to $0.69 you now earn 7.4 tacos per hour, not ten. This is a pay cut. The fallacy in you example is thinking that increasing the minimum wage is the primary cause of inflation. The purchasing power of minimum wage has dropped 30% since 1968. The most reasonable approach would be, after a reasonable increase, to index the minimum wage to inflation, allowing these workers to hold on to their taco purchasing power. That would remove grandstanding politicians from the picture for future increases.
.
A very wealthy relative recently explained to me that holding down the minimum wage was an important control on inflation. The odious implication is that an ever decreasing standard of living for the minimum wage worker was the little sacrifice we must make for our own comfortable lifestyle.
Comment: #7
Posted by: Mark
Tue Jan 7, 2014 9:28 PM
Simple solution - raise the minimum wage to $200 per hour, but allow any individual worker to opt out, and allow any employer to optimize costs in any manner, including selective wage-based layoffs. Freedom always works better than allowing government to substitute its political wisdom. Does anyone really believe Congress or the President know what they are doing?
Comment: #8
Posted by: Joel
Wed Jan 8, 2014 3:58 AM
The benefit of minimum wage is two-fold: 1) It's pay for a beginning position and pays the beginner to learn; and 2) It assists the small business get started, while knowing full well they are training minimum wage employees to move on to more lucrative and more permanent employment. However, when minimum wage employees demonstrate willingness and abilities beyond that for which they are paid, employers are certain to want to pay them more for the value they bring and contribute. Thus, the minimum wage is raised within the organization based upon performance.
Comment: #9
Posted by: Rick Martinez
Wed Jan 8, 2014 7:15 AM
Are raising the minimum wage advocates humanitarians with a Guillotine?

Often overlooked is only 1.4% of wage earners receive the minimum wage or less in California and 4.7% nationally, and typically for less than one year, according to the Bureau of Labor Statistics. Union workers included in the 95% above the minimum wage are the primary beneficiaries. The do-gooders on the sidelines are what Isabel Paterson calls the Humanitarians with the Guillotine.
Comment: #10
Posted by: Fred Schnaubelt
Wed Jan 8, 2014 9:30 AM
Re: James A, Sweeney
So the alternative to "capitalism", where we end up as slaves is socialism/communism where we start out as slaves?
Comment: #11
Posted by: David Pontius
Wed Jan 8, 2014 9:48 AM
Re: Joel... The myth bag you want to work your way out is the one where government is some abstraction, and not the people... If this were a democacy, the government would be the people, amd of is not, but is them, the enemy; then it is time for a new constitution and a new government...
Thanks...Sweeney
Comment: #12
Posted by: James A, Sweeney
Wed Jan 8, 2014 9:17 PM
Re: David Pontius, Sir;... You are correct that where communism has been a general success, among all primitive peoples, that is was with slavery... There is no doubt that we are slaves to our freedom, and to our definition of freedom; but the primitives suffered a profound and natural slavery to reality, to the fact that they had no technology with which to rape virgin nature, or they would soon have been little better off than ourselves... And so it shall always be, that humanity's store of knowledge will never serve all the famine of ignorance eats...We desire and see our desires denied... We need and see our needs bleed, and all for the want of technical knowledge... Primitive people salved their constant need with sharing... They met the vicissitudes of life with the organization of democracy, and that simple organization of their societies, political socialism in fact, always kept division from their doors, and death and the slavery to the will of others was prevented...
Primitive peoples were different from us... They were more honest, and generally intelligent... In their small communities they realised that every other person was part of the soul of their societies, and that they could not survive without the support of all their friends and family...What wealth, and especially wealth in the face of poverty has given us is the sense that we do not need the people nearest us, that all, and some in particular, are excess baggage... This may be true... I am not able to disagree given my level of ignornace on the subject... I will say I am not willing to throw anyone off of life boat earth as long as survival is as easy as taking back what has been taken from all people through high technology, and the universal rape of nature...
History, which was not begun as sport when primitivism ended, but when modernization had long before begun- tells us tales of many societies that took over when young and strong who were beaten out when corrupt, wealthy, and divided by wealth... One historian who wrote in the time of Tamerlain, and suffered him cataloged a number of such exchanges of power simply because people lost the democracy and communism that made them strong...In our own age and in this land we have seen divided societies fall before divided societies...Even through the looking glass of history the tragedy of our Native Americans is too terrible to view... Primitive people uderstood better than us, but reality was a deadly teacher... The luxury that wealth gives :to deny reality; will not long last, or end well... I am not telling people what to do, but only that they should do, and that today we could have the socialism of wealth, while tomorrow survivors will only have the socialism of poverty, if they are lucky enough to live...Even today, the poor have the socialism of poverty, the emergancy room, and public transportation... It will not get better just because some people accept slavery. and force everyone to do so...It is a bech that you have to allow equal rights, and equal respect... What is the alternative; because I am not voting for anyone to starve in the street when that would only mean me next...I Vote that we make the commonwealth common again; that we take back what is ours and then all those with our wealth today can argue about having some of it on their personal merrits...And We would not have to listen to them any more than they listen to poor workers today...
Sir; our government was designed as a government of assault and offense... Democracy is not made for any other situation but defense, and with the wealth of the society common as much as the poverty was general, people knew who and what they were fighting for when they fought...Our government has been made to defend what our economy has taken...Primarily that defense has been raised against the common people of this land...And yet the world has felt our irrational wrath...Democracy is not more a social defense than an individual defense...By that standard our majority rule is not that much worse than democracy, but it is not in the smallest detail better than democracy...
Thanks....Sweeney
Comment: #13
Posted by: James A, Sweeney
Thu Jan 9, 2014 3:46 PM
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