In July, fast food workers in cities around the country went on strike to demand an increase in the minimum wage to $15 an hour. I was visiting my daughter and my new grand-baby at the time and she and I agreed that, at $15 an hour, we might consider working in fast food! Now, many people are celebrating California’s decision to raise their minimum wage to $10 an hour over the next two years. Minimum wage workers just cannot make ends meet on the current legally mandated $8.00 an hour.
If all it takes is a new law to make companies pay their workers more, why not raise the minimum wage to $20 or $30 an hour? Won’t that give more people more money to buy more stuff and improve the economy? Just think of how our economy would come roaring back if every minimum wage worker had two or three times as much money to spend! Unfortunately, it just doesn’t work that way.
Labor, as in the supply of workers in a market, has to follow the same laws of supply and demand that merchandise or “goods” do. The more highly skilled or productive a worker is, the more demand there is for his or her services, and the more he or she gets paid. If people with certain skills are in short supply in an economy, businesses compete for them and the wages they can demand go up. If there is an oversupply of people with certain skills in the market, demand for them goes down and their wages go down as well, as companies can easily hire willing workers at lower rates.
Unfortunately, people on the left think that government can just mandate a minimum wage for people and there will be no repercussions. Besides the fact that increasing the cost of labor will increase the cost of doing business, and, thus, prices for goods and services, mandating a minimum wage tends to price some people out of the employment market. Jobs that pay the minimum wage are low skill, entry level jobs that provide opportunities for workers to gain experience and, hopefully, learn skills and work habits that will make them more desirable and more highly paid as employees. If an employee’s productivity or skill does not equal the price the employer is forced to pay, the employer may choose to replace that employee with someone who is more productive or skilled. That reduces the minimum wage for the laid-off employee to zero, which is always the real minimum wage, according to Thomas Sowell.
While liberals would like us to believe that minimum wage laws are compassionate toward the poor, they really are not. Minimum wage laws create incentives for employers to find more highly skilled and more productive employees or find ways to do without low-skill employees altogether. Labor tends to be the highest expense for any business, so a forced increase in the cost of labor motivates employers to find other ways of getting the job done. How do you like those automated checkout lines at Wal-Mart and Costco? They serve to eliminate jobs that could have gone to low skill, entry-level workers while saving money for the company.
Minimum wage laws tend to increase unemployment, particularly among young people and minorities. “In European welfare states where minimum wages, and mandated job benefits to be paid for by employers, are more generous than in the United States, unemployment rates for younger workers are often 20 percent or higher, even when there is no recession.” Not only do these young people miss the income they would have earned had they been employed, they miss out on valuable job experience and the development of good work habits that would increase their value as employees.
When, because of demand, wages rise above the current minimum wage, there is in effect, no minimum wage. Unemployment stays low in that situation, as it was in 1948, when the unemployment rate for young black men (age 16-17) was just under ten percent, slightly lower than the rate for young white men at that time. “The inflation of the 1940s had pushed money wages for even unskilled, entry-level labor above the level specified in the minimum wage law passed 10 years earlier.” Liberals soon fixed that situation, starting in 1950, with a series of increases in the minimum wage over the years, leading to the tripling and quadrupling of black teen unemployment that we have come to consider normal.
Liberals think that because their intentions are good, the laws of economics and human nature do not apply to them. In California, increases in the minimum wage, taxes and regulation continue to make liberals feel good about themselves while they destroy what used to be an economic powerhouse. America, watch California. Learn from her mistakes.