Many Americans are sympathetic to the minimum wage. They think that raising the pay of individuals earning low wages is a way to cure poverty. Even President Obama, In his State of the Union Address February 12, 2013, said he favored raising the federal minimum wage from its current $7.25 per hour to $9.00 per hour. In California, the minimum wage is currently $8.00 per hour. But anyone favoring a higher minimum wage should be aware of its history.
The minimum wage began in the late 1930′s. The wage’s sponsors in Congress had two goals in mind.
The first goal was to keep businesses from leaving the high-priced North — states like Pennsylvania, for example — from going to such low-wage locations as South Carolina. If Pennsylvania’s wages were on par with wages in South Carolina, then businesses inclined to leave the North would stay put.
The second reason was to keep certain ethnic minorities from moving from the South to the North. Northern cities were finding that certain minority groups were leaving the South to look for higher pay in the North. If the pay for these minorities were the same in both the North and the South, then the tendency would be for the minorities to migrate north would lessen.
Giving government the power to set wages can be a dangerous precedent. Why not have government set the minimum wage at $10,000 per hour ($208 million per year)? Then, we might all be rich. But just about all of us would lose our jobs.
For individuals earning low wages, why not have government (or a charity) give them some extra money? Such a practice exists under the Earned Income Tax Credit (EITC). For example, if a family of four is earning $15,000 per year, the government could, through the EITC, give the family some extra money, bringing the family up to a so-called living wage.
Another possibility is to have the government subsidize the wages of low earners. For example, a person earning $7.25 per hour could get a government subsidy of $3.75 per hour, bringing the wage-earner up to $11.00 per hour.
For families lacking any income, some cash grants from government could be helpful.
If the government mandates that an employer must pay $9.00 per hour and the employer is not doing well financially, he may have to reduce staff, relocate, or close the business. Forcing the employer to pay higher wages may, is in fact, a job killer.
Bill Gram-Reefer is Editor & Publisher of Halfway To Concord, founded in 2004. Halfway To Concord is the leading online source for community-driven political news, events, and opinion for Contra Costa County and the San Francisco East Bay.
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This from Carpe Diem (http://bit.ly/NgxciK):
“Excerpt from The Thomas Sowell Reader:
“‘It would be comforting to believe that the government can simply decree higher pay for low-wage workers, without having to worry about unfortunate repercussions, but the preponderance of evidence indicates that labor is not exempt from the basic economic principle that artificially high prices cause surpluses. In the case of the surplus of human beings, that can be a special tragedy when they are already from low-income, unskilled or minority backgrounds and urgently need to get on the job ladder, if they are ever to move up the ladder by acquiring experience and skills.’
“Update: Here’s another challenge to proponents of the minimum wage based on Thomas Sowell’s quote above, and this related quote from Milton Friedman: ‘The effects of the minimum wage have been concentrated on the groups that the do-gooders would most like to help. The people who have been hurt most by the minimum wage laws are the blacks. I have often said that the most anti-black law on the books of this land is the minimum wage law.’
“Q: How do supporters of the minimum wage defend a law that disproportionately and adversely affects low-income minority groups, especially low-skilled black teenagers (current jobless rate is 37.8% for black teens and 43.3% for black male teens)?”
“…If the minimum wage is raised to $9 per hour, we can expect further increases in teenage joblessness, which can have long-term consequences that might adversely affect teenagers throughout their lifetimes. Here’s how the Wall Street Journal explains that possibility:
‘Most readers remember the work habits they learned from their first job. Showing up on time, being courteous to customers, learning how to use technology—such habits are often more valuable than the actual paycheck. Studies have confirmed that when teens work during summer months or after school they have higher lifetime earnings than those who don’t work. So raising the minimum wage may inadvertently reduce lifetime earnings.’”
Read more here: http://bit.ly/XhlfLI
h/t Carpe Diem (http://bit.ly/NgxciK)
This short piece is called “Socrates and the Minimum Wage” and clarifies the point quite nicely: http://bit.ly/VnMlBB
Joel Fox makes the case that a minimum wage hike will hit small business owners particularly hard:
“Adding the minimum wage change to mandates that require health care cost increases for workers, along with tax increases that will hit some small business owners who file their taxes through their personal income taxes, is like adding another stone to an already heavy backpack small business must carry. And, this doesn’t even take into consideration the potential energy cost increases that are predicted for businesses when California’s AB 32 requirements begin.”