January 4, 2007

George Will Layeth the Smacketh Down on a Minimum Wage Increase

Posted in National Politics, State Politics at 9:14 am by Paul Smith Jr

Most of the working poor earn more than the minimum wage, and most of the 0.6 percent (479,000 in 2005) of America’s wage workers earning the minimum wage are not poor. Only one in five workers earning the federal minimum lives in families with earnings below the poverty line. Sixty percent work part time, and their average household income is well over $40,000. (The average and median household incomes are $63,344 and $46,326, respectively.)

Forty percent of American workers are salaried. Of the 75.6 million paid by the hour, 1.9 million earn the federal minimum or less, and of these, more than half are under 25 and more than a quarter are between ages 16 and 19. Many are students or other part-time workers. Sixty percent of those earning the federal minimum or less work in restaurants and bars and earn tips — often untaxed, perhaps — in addition to wages. Two-thirds of those earning the federal minimum today will, a year from now, have been promoted and be earning 10 percent more. Raising the minimum wage predictably makes work more attractive relative to school for some teenagers and raises the dropout rate. Two scholars report that in states that allow people to leave school before 18, a 10 percent increase in the state minimum wage caused teenage school enrollment to drop 2 percent.

The problem is that demand for almost everything is elastic: When the price of something goes up, demand for it goes down. Obviously were the minimum wage to jump to, say, $15 an hour, that would cause significant unemployment among persons just reaching for the bottom rung of the ladder of upward mobility. But suppose those scholars are correct who say that when the minimum wage is low and is increased slowly — proposed legislation would take it to $7.25 in three steps — the negative impact on employment is negligible. Still, because there are large differences among states’ costs of living and the nature of their economies, Sen. Jim DeMint (R-S.C.) sensibly suggests that each state be allowed to set a lower minimum.

But the minimum wage should be the same everywhere: $0. Labor is a commodity; governments make messes when they decree commodities’ prices. Washington, which has its hands full delivering the mail and defending the shores, should let the market do well what Washington does poorly. But that is a good idea whose time will never come again.

Read the whole article

Not content to let Washington be the only economically illiterate goverment around, it seems that the state’s government is considering raising the minimum wage to higher than the national minimum should the feds raise the minimum wage.

Advertisements

2 Comments »

  1. Here’s a factoid I recently discovered about why union labor often supports minimum wage hikes: their pay often contractually indexes off the minimum wage. So a minimum wage increase doesn’t just effect the poor folks barely scraping by on minimum wage, it effects many to most union paychecks as well.

  2. Brud Lee said,

    Look at the (many) states with higher minimums than the national wage as well. Most of them are indexed as well – at .50 to $1.25 hgiher than the national wage. By raising the national wage, Congress would place an undue burden on the states that have historically tried to do what they would not.

    The argument for raising the minimum wage is a non-intellectual one. If the minimum wage is used for unskilled jobs, then jobs that pay a traditionally higher wage because of the greater skill levels involved will have to raise their wages to compensate. Since these wages will come from employers, they’ll have to increase revenues by raising prices. Suddenly, the $7+ an hour is worth a lot less – because the prices of goods and services rise to cover the labor increase.

    Still, because a family of four can’t buy a home on the minimum wage, anyone who tries to regulate its rise is “heartless”.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: