Oregon Magazine

The Evil of the Minimum Wage
by Tom Cox

It's political primary season, and the forces of foolishness, wishful thinking, and malicious demagoguery are loose upon the land.

   The latest old, bad idea making the rounds: raising the minimum wage.
   Too often we - who is we? By "we" I mean people with a basic understanding of economics, of cause and effect, those of us who don't think the world is a make-believe place where we can wish real hard and thereby suspend the rules of nature. By "we" I mean grown-ups.
   Too often, we give the benefit of the doubt to folks who support a higher minimum wage. We shouldn't. There are only two reasons someone would support so bad an idea: either they don't realize the economic harm it causes, or they want the harm.
   We know that the minimum wage is a bad idea, like Nixon's wage and price controls were bad, like socialism is bad. A minimum wage destroys jobs, and not just any jobs, but entry level jobs - the kind of jobs that the most vulnerable people most need.

Wanting the Harm

   So what sort of cruel, heartless villain would destroy the very jobs that our most helpless and vulnerable friend, family members and neighbors need?
   He's the kind of villain who wants to trap people into dependence on government - government handouts, government programs, government bureaucracy. The same kind of villain who wants nothing more than to grow the government, at every level, as fast as possible.
   We grown-ups have to confront these villains, we have to unmask them, and we have to denounce their plots publicly. They deserve to be shunned by polite society.

No Credit for Good Intentions

   What of the other folks who support a higher minimum wage? The ones who don't realize or understand the economic harm they cause - what's to be done with them?
   First, we must give them no credit for their supposed good intentions. They seldom have pure good intentions. More often they are in a hurry to bask in self-righteousness, and embrace foolish nostrums like the minimum wage because it's easier than thinking.
   Next, we must challenge them to defend their position in the realm of facts.

We'll sometimes run into a well-meaning self-congratulating type who doesn't actually have any defense for the minimum wage, so they try to make us "prove" them wrong. What follows is often a rhetorical version of Goldilocks and the Three Bears - each argument you advance is not
quite persuasive. This one's too warm, that one's too cool, and they never quite get persuaded. The reality here is that their minds are shut tight.
So, if we issue our challenge and they try to turn the tables and "make" us "prove" we're right, here's the next move: challenge them further to define what proof they would accept.

   "What would you need to see, that would persuade you I was right?" you could ask. "What proof would you accept?"
   That's a perfectly good and reasonable question. Any of us should be willing to answer it if we were the one demanding proof of something, and so should our true believer.
   (It's also a perfectly scientific question. Every scientist performing an experiment answers that question before the experiment even begins.)
   You will get one of three responses: anger, confusion, or an answer.

ANGER: I once asked someone who doubted that third party payer health care schemes lead to price illusion and over-consumption, what proof they would accept that this in fact happened. I was told - I'm not making this up - that I was attacking her. (Translation: their mind was closed and they were using anger to distract themselves so they wouldn't have to admit it.)

CONFUSION: Another time I watched a teacher ask her students the same basic question - how would you know if certain people were motivated by racism, and what would you have to see before you'd believe they were not so motivated. The students were baffled by the question - they'd been trained to assume racist motives and didn't understand the concept of questioning that assumption. Such a person cannot be reached by argument, at least not at that stage of their intellectual evolution.

AN ANSWER: And sometimes you get a real answer. "I'd need to hear it from a Nobel prize winning economist," one might say. "Show me an example or a study," another might say. "I'd need to understand the underlying theory," from a third. Now we have hope of reaching them,
because the facts are indisputably on our side.

Authority

   You'd be hard pressed to find any reputable economist, let alone a Nobel prize winner, who didn't agree that minimum wage laws destroy jobs. (Today there are only a few former Clinton administration hacks who try to publicly argue that the minimum wage doesn't destroy jobs, and they mostly claim that it doesn't destroy very many. Not too convincing.)
   Milton Friedman put it best: "Minimum wage laws cost jobs. Employers cut out, or mechanise, jobs that are not worth the minimum rate to them. Worst affected are the inexperienced young people, those with poor skills, and minorities."
   That's right: the minimum wage is racist.
   Friedman also said: "The high rate of unemployment among teenagers, and especially black teenagers, is both a scandal and a serious source of social unrest. Yet it is largely a result of minimum wage laws. We regard the minimum wage law as one of the most, if not the most,
anti-black laws on the statute books."

Studies

Dr. Burton Folsom of the Mackinac Center for Public Policy Research in 1998 wrote:

The bias of minimum wage laws against disadvantaged minorities has been conspicuous ever since 1956, when the minimum wage shot up from 75 cents to $1.00 an hour. During the next two years, nonwhite teenage unemployment spiralled from 14 to 24 percent. The recent 1996 hike in the minimum wage to $5.15 an hour had a similar effect: unemployment among black male teenagers jumped from 37 to 41 percent almost immediately, at a time when the economy was doing well for almost everyone else. That’s why Milton Friedman, the Nobel Prize winning economist, once called the minimum wage "the most anti-black law on the books."

Data from President Clinton’s own labor department show that at least 20,000 jobs were eliminated by the 1996 hike. The Employment Policies Institute calculates that the real job loss was closer to 128,000.

Theory

Read the arguments of those who are for a higher minimum wage, and you'll find they ignore job-destruction entirely. By turning their backs they hope to escape responsibility for the damage of their policies.
The emotional argument here is that the bottom rung on the ladder of success is too low - people standing on it aren't high enough. But what good is a ladder with no bottom rungs? How do you climb it? The right solution isn't to cut off the bottom rungs, but to help each worker get on and then climb higher, through education, experience, and improved productivity.

Lack of Compassion for the Poor

   And the final admission of guilt and failure comes when boosters of the minimum wage admit that they need a special lower "training wage" for beginning workers - and they want it to be a government program.
   In other words, rather than allowing people to succeed on their own in a dynamic free market, these jackals want to prevent success except through their own big government dependency-producing programs.
    In response, more and more of the marginal work force choose to work off the books, taking money under the table, paying no taxes, and having no worker's compensation protection and few other legal protections against abusive treatment. Far from helping the poorest and most vulnerable, raising the minimum wage - and cutting off the bottom run of the ladder of success - just victimizes them further.
   Anybody who really cares about the poorest and most vulnerable members of society should fight to scrap all minimum wage laws.