Another silly thing that happened in my illness-induced absence was more economically illiterate ideas from our Marxist-in-Chief. Obama proposed to raise the “minimum wage” from $7.25 to $9 per hour. Not to be outdone, liberal Democratic senators want to raise it to $10.10.
This of course sounds nice to the low-information voters who vote for liberals. But a modicum of thinking should show the economic idiocy of this, even if it is unfortunately a politically good move in today’s West. The unions just love minimum wage laws because they keep out competition (see the late great Milton Friedman on this.)
Why not $50 minimum?
I’ve changed my mind: Obama and the liberals are too stingy. We should raise the minimum much higher—to say $50. But unfortunately my brilliant idea would run aground on the rocks of logic and economics. Many employers just could not afford to pay $50 unless the employee produces over $50 worth of value with his labor. So, many people would just be out of jobs. They would soon find that the real minimum wage is zero.
Seriously, economists for a long time have documented that minimum wage laws, like any minimum price laws, create a surplus. That’s because things will be unsold if they are priced above market price (= price that free buyers will pay). This applies to labor as well. So if labor is priced high above the employee’s productivity, the employer won’t hire him. A surplus in labor = unemployment.
What applies at $50 applies just as much in principle to $9. An employer is usually unable to provide charity—but this is what he would be doing if he paid $9 for work that was worth $8. So this means that anyone whose skills are insufficient to produce $9 of value to an employer will not be able to find a job. He may well be willing to work for less, but minimum wage laws prevent this.
Indeed, some well- known jobs have fallen by the wayside thanks to these wretched laws. Many older Patriots will remember how gas stations really used to be service stations, because a young person would come and pump gas, check oil, and clean the windshield. Now do you think that gas customers like doing all that themselves? No, the problem was the minimum wage laws that stopped gas station owners from hiring young people to do these jobs. Similarly, do Patriots really love to stumble in theaters in the dark? No, it’s just that these crass laws mean that theater owners can no longer afford to hire young ushers.
How would people earn more?
As the saying goes, the best training for a job is a job! That’s because even the entry-level “flipping burgers” or “McJobs” provide an opportunity to learn vital job skills like simply turning up for work on time, working with others, handling money, and general shedding of immaturity. After acquiring such skills, their productivity can exceed the minimum wage. This is confirmed by the fact that well over 90% of workers in the USA earn more than this. But minimum wage laws prevent young people from climbing on the first rung of the employment ladder. This has been especially pernicious for minorities.
Blacks never needed minimum wages
For analysis of racial issues, it’s hard to beat economist Dr Thomas Sowell (b. 1930). And unlike many race-baiters, he started off as a poor black orphan and worked his way up both economically and intellectually. Many of today’s race-baiters were not even descendants of slaves, but were well-off descendants of “free persons of color.” Sowell pointed out in his classic book The Economics and Politics of Race (1983) that the free market has provided the best advancement for groups that have been discriminated against. Unlike many leftists, Sowell provides specific examples.
1. In the year after the Civil War, Southern Democrat white farmers formed a cartel to limit the wages of black workers, and were supported by the white racist Democratic newspapers. But the power of the market—economic incentives—proved too much for the cartel. Some of the farmers broke the maximum wage agreement, and offered more money to attract the best black workers. Those who offered the worst conditions could not find black workers at all. So the black wages as a whole rose—no thanks to government!
2. America has long been a magnet to legal immigrants, who saw the country as a land of opportunity. This was long before there were government handouts. These immigrants still faced many obstacles, but thought it was worth it. For example, around the turn of the 20th century, Japanese workers immigrated to California. At the time, it was legal to discriminate against them. But they were more productive than the white workers. So it soon became more profitable to lure Japanese workers by offering wages equal to those earned by the white workers. Then it became profitable to offer even higher wages. Now it would be in violation of “equal pay for equal work” as defined by bureaucrats, but in fact the work output of the more productive Japanese was not equal, which made it worth the employers’ while to pay them more. And the next generation of Japanese took advantage of the education available, and as a whole earned more than average.
3. Blacks in America made their greatest improvements in the decades before Civil Rights legislation was passed (and actually opposed more by the Dems than by the GOP).
Also, in spite of the wide support by black Democrats for minimum wage laws, they have historically been used to keep black people out of jobs.
More examples from Sowell:
1. In apartheid-era South Africa, some of the leading pro-Apartheid voices were very leftist economically. One of what they called “abuses of capitalism” was the fact that it allowed blacks to move above their “place” as defined by white racists. These were largely socialists and trade unions. Conversely, many employers tried to get around the Apartheid laws and hire and serve black people. They were not necessarily more racially enlightened; it was just profitable to do so. As Sowell’s close friend, fellow black conservative libertarian economist Dr Walter Williams points out, the free market increases the cost of unfair discrimination, while minimum wages lower these costs.
2. Minimum wage laws were first supported in America by racist white unions explicitly to restrict blacks from getting jobs. Now black leftist “leaders” call for an even greater minimum wage, although the current one still prices many young blacks out of the vital first jobs that provide such valuable training for the workforce. Milton Friedman said that minimum wage laws were the most anti-negro laws on the books (when “negro” was still the accepted self-designation). Conversely, as shown above, blacks have had less unemployment and earned growing wages—even thwarting a de facto “maximum wage” law—in the free market.
The late great Milton Friedman (a Jew with a black secretary) said that minimum wage laws were the most anti-black laws in the books. He also identified how the unions love minimum wage laws to restrict competition.
See this old clip.
So in reality, Obama is repaying his union cronies yet again.