Socialists, like all of the present candidates for King/Queen of the Socialist Democracy of Amerika, love to talk about a government mandated minimum wage. It is not surprising that in a monarchical election year we should hear a lot about this magical socialist program that is lauded as able to raise people out of poverty, create economic growth and cure cancer. Career politicians, and those who want to become career politicians, know that spouting a bunch of nonsense about the glories of the minimum wage is sure to garner a lot of votes from an envy-filled and socialistic voting public.
Recently a couple of letters have been written to the editor of the Denver Post and a debate, of sorts, has been taking place over the relative merits or demerits of the minimum wage. Normally I would not bother to comment on such an inane topic but some of the things that were written sent me into a rage, thus forcing me to sit down and write this blog post. Let me tell you all about the vast reservoir of ignorance that exists in the minds of socialists who think about the minimum wage.
The salvos began when Gordon Halloran wrote a letter asserting, "the minimum wage law was implemented to keep employers from taking advantage of young and inexperienced employees in entry-level jobs." That single comment tells me all I need to know about Gordon. Gordon is a union man. Gordon hates profit seeking businesses. Gordon believes that profit seeking businesses are evil and will exploit anyone and anything in the world they might come into contact with. Gordon, in a word, is a socialist.
The concept that the Fair Labor Standards Act of 1938, which created the first federally mandated minimum wage, was enacted to "keep employers from taking advantage of young and inexperienced employees" is complete fiction. Gordon, and all socialists, do not understand (or are unwilling to believe) that in the free market labor services are a commodity just like any other commodity. As such they have a market price. Skilled labor services can command a higher price and scarce labor services can command a higher price as well. Commanding the lowest price of all are unskilled labor services when there are many people willing to sell them. Henry Ford introduced the assembly line in 1913. It was not long until manufacturing was revolutionized and assembly lines were being created to produce all sorts of goods. Operating an assembly line is generally a low-skill job and many people who were selling their labor services were qualified to perform it. This economic reality kept a lid on wages and allowed many people of low skill to enter the workplace.
Low skilled workers at companies with assembly lines wanted to earn higher wages but the free market would not bear them. Too many high school kids were willing to drop out of school and enter the labor market to earn money for their families, thus keeping the supply of unskilled labor high and wages low. In most cases this was a very good idea as the parents could use the additional income and the child could get out of a government school that was not teaching him anything of value for his future life. Yes, it is true. In the old days people recognized that not everyone was a scholar and bound for college. Almost nobody believed the patently absurd notion that everyone should go to college. People recognized that many people should be blue-collar workers and tradesmen and those young men were encouraged to enter the workplace as soon as possible. The market would become the "college" for many young men and that was a very good state of affairs, until the unions got involved.
The unions wanted to not only get monopolistic higher than market wages for the labor skills of their members, they also went into protective mode and sought to eliminate all competition for their labor skills. The union leaders were aware of economics, unlike today's career politicians, and they realized that the best way to obtain a monopoly on labor services is to exclude cheap competition from the free market. The best way to do that was to get Congress to enact a law ostensibly designed to "protect children" from having to work for "slave wages" in "sweatshop factories." The propaganda war was well waged and today nary a soul understands that the minimum wage was created by Congress to obtain the votes of union members by pricing cheap teenage labor out of the assembly line. It was famously successful and several terrible things resulted. First, teenage unemployment skyrocketed, harming both the teenagers and the families that were dependent upon teenage income. Second, teenagers went back to government schools to become bored drones, destined to later go to college and run up massive government loan debts.
Bill Goodrich takes exception to Gordon's caricature of the minimum wage. Bill claims that the minimum wage was "implemented to improve the lot of all the working poor -- young, old and in between." I am not quite sure where Bill is getting his information. If that was the intention of the career politicians who first enacted the federal minimum wage it has not worked out that way. The minimum wage has hurt the poor more than any other class, regardless of its original intent.
Bill goes on to deliver a brief lesson in economics. I quote it in its entirety here because it serves as a perfect example of what passes for economic understanding among the citizens of the SDA these days. Bill writes, "According to economics, reducing their workforce is employers' least likely immediate response to an increase in costs due to a higher minimum wage. Staffing levels are driven by current and anticipated demand, rather than by cost. Especially in the kinds of businesses that are likely to pay minimum or near minimum wage. History confirms it." I think we can figure out what Bill is trying to say, despite his incomplete sentences.
Bill claims that an employer will employ people based exclusively upon his anticipated future needs for employees and with total disregard to what those employees will cost his firm. Has anyone who has ever operated a business truly behaved in this fashion? Is it not the case that the very first thing an employer will do is project what his future payroll will cost his firm? Is it not the case that decisions about how many new employees to hire will be based upon the projected profitability of those decisions? What employer or manager in his right mind would say that he is going to double his workforce because he expects great future demand for his product without even considering what that action will cost him and whether he can remain profitable even under the conditions of increased demand? I know one thing for sure about Bill....he has never managed a business.
Although Bill confidently announces that "economics" teaches him that an increased minimum wage will have little to no effect upon company hiring, just the opposite is actually the case. Bill believes that companies that operate on thin margins, he calls them "businesses that are likely to pay the minimum wage," are least likely to care when a government rule raises his cost of doing business. On the contrary, the very companies that are operating on the margin are those that will either go out of business or cut back on employees when minimum wage laws are enforced. I don't know what history Bill speaks of when he alleges that "history confirms" his belief that raising the minimum wage does no harm to marginal business enterprises but it is not the history of any marginal producer in the SDA.
Let's cut to the chase. If raising the minimum wage does not do any economic harm; indeed, if it does only economic good like creating economic growth and curing cancer, let's all agree to raise the minimum wage to $1000/hour effective immediately. What harm could it cause? If you object and say I am being unreasonable, then answer one question for me. Where does the minimum wage go from being good to being harmful? I want to know the exact amount. Is it $15/hour, $30/hour, $100/hour or the $1000/hour I am proposing. And then, after you tell me the exact amount, please explain to me how you know that. I can't wait to read your answer.