Raising the minimum wage does not benefit the poor
June 18, 2013
Why are cigarettes taxed so fiercely? Raising the price of cigarettes discourages people from smoking them.
Why are foreign goods (like Chinese-made tires or solar panels) taxed on importation?
Raising their price discourages Americans from importing them. In both cases, the price of the good is artificially raised by the government to decrease demand, which decreases consumption.
What happens when the price of low-skilled labor is artificially increased? Just as with cigarettes, tires, solar panels and any other good, the amount bought decreases. This is what minimum wage laws do for labor.
In Amy Goodman's "Time for a Raise in the Minimum Wage" (Ideas & Opinions, June 6, 2013), Ms. Goodman wishes to help low-skilled labor by raising the minimum wage. Wanting to help the poor is admirable. But increasing the minimum wage will not help the poor.
The minimum wage is a perfect example of a law that appears noble, but is actually harmful to the very people it claims to protect.
As a price floor on labor, it creates unemployment for low-skilled workers who aren't productive enough to be paid the minimum wage rate.
It encourages discrimination by dissuading employers from hiring people with low skill (who are frequently ethnic minorities and teenagers). In fact, increases in the minimum wage correlate very well to increases in low-skilled unemployment.
Left-leaning Nobel prize-winning economist Paul Samuelson once asked years ago, "What good does it do a black youth to know that an employer must pay him $2 an hour if the fact that he must be paid that amount is what keeps him from getting a job?"
The minimum wage's original supporters understood this: it was actually the reason they wanted it. Minimum wage legislation was first supported 75 years ago in the U.S. by white unions as a way to keep lower cost black nonunion workers from competing with them.
Minimum wage-advocating politicians in this era of government sanctioned segregation were blunt in who they knew the minimum wage would hurt.
In a 1957 Senate hearing, for example, then-Senator John F. Kennedy stated: "Of course, having on the market a rather large source of cheap labor depresses wages outside of that group, too — the wages of the white worker who has to compete. And when an employer can substitute a colored worker at a lower wage — and there are, as you pointed out, these hundreds of thousands looking for decent work — it affects the whole wage structure of an area, doesn't it?"
Modern advocates of minimum wage laws also forget something important: unless coerced, no one will ever take a job that isn't beneficial to them. Some people, like summer interns, choose to take jobs that pay $0 per hour because the experience they receive is worth the cost to them. It also makes sense that someone might want a job at, say, half the minimum wage rate, if the combination of the pay, enjoyment and the learning was worth the cost of working. To say that an employee should make $8 or $18 or $28 per hour is something that we, as people who don't know the employee, the employer and the characteristics of the job, cannot intelligently comment on.
Trying to help low-skilled workers is noble. Minimum wage laws do the opposite. They destroy the first rung of the job ladder, making it more difficult to climb out of poverty. The most important job you'll ever get in your life is your first, and yet, the minimum wage directly makes finding that first job more difficult. Born out of racism and continued by faulty reasoning, America's poor would be richer without the minimum wage law.
Russ Hooper is studying economics at Rensselaer Polytechnic Institute in Troy, N.Y. He lives in Grass Valley.
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