Sticking It to Low-Skilled Workers

HUMAN EVENTS ^ | Jan 10, 2007 | John Stossel

[george76]

In the first hundred hours of the just-started session of Congress, the new leadership promises to raise the minimum wage. The Democrats won't be opposed by many Republicans.

Raising the minimum wage is definitely popular. Voters in six states approved higher minimums last Election Day. State politicians in both parties are practically drooling with eagerness to "help" lower-income workers.

We all want the poor to make more money. So if government can raise wages by decree, why are the popular proposals so stingy?

Let's really do something for the poor. Let's raise the minimum wage to $20 an hour. Even better, $50!

Or maybe we should take a deep breath and think like economists for a change.

The law of supply and demand, which operates whether we like it or not, says that when the price of something goes up, people buy less of it. That's why environmentalists like higher gasoline taxes, and anti-smoking activists back higher cigarette taxes.

The law of supply and demand works in the labor market, too. If government mandates a higher minimum wage, some workers will get a raise. Some. But something else will happen. Employers will hire fewer low-skilled workers. Others will let some current workers go. Some will choose not to expand their businesses. A few will close altogether.

Only 2.5 percent of all hourly workers make $5.15 an hour ...says the Department of Labor. "Minimum wage workers tend to be young."

Few of them stay at the minimum wage for long. As they acquire skills, their productivity rises and they command higher wages.

Legal wage minimums kill all kinds of entry-level jobs, particularly those that would teach young people basic work habits and the benefits of effort. That's why there are no kids cleaning your windows at gas stations or ...

[gas0linealley]

True, the union bosses does need money to pay for their mistresses, the fancy cars, and the fancy hotels they stay at whenever they go places.....

Oh no! Don't tell me they've become just like the politicians and capitalists!

[gas0linealley]

Without import restrictions, tariffs, or other some such way to prevent goods made abroad from coming to our shores, that is exactly what we are doing - making the incentive for creating an overseas sweatshop that much greater.

You're right about that. It's ridiculous for us to have laws protecting US workers from exploitation and then allow foreign producers to make an end run around those laws.

[KevinDavis]

Aaah the capitalist are evil to you??

[gas0linealley]

Capitalists, on average, are no more evil, on average, than the average person. Same goes for politicians and union bosses.

[george76]

You have good points.

Raising the minimum wages by government mandate will raise the cost of food, gas, housing...higher.

The people who are least able to pay for higher food, gas...are the biggest victims of this big government mandate.

---

The second point is also valid : either the business must raise their prices or lay off some of the workers or go out of business.

[KevinDavis]

Well to me the politicians and union bosses are crooks.. Todays union is no more than legalize money laundering fraud.. Taking money out of people and giving to the rats.. With all of these laws the need for the union is zilch nowadays.. Most of the union members are government employees..

[Raycpa]

You have such a wonderful understanding of economics. Tell me why in your model, that as an employer I would want to pay them 25 cents if the government doesn't make me. Why can't I pay them 1 cent per day. Heck, if the government is not going to control my compensation packages why should I pay them anything at all?

[Myrddin]

Rather than hiring fewer people, I will pay the higher wage to the same number of people and raise the price that I charge my customers.

Small "mom & pop" businesses that can't generate enough extra business to cover the cost will let employees go and pick up the slack themselves. If your product is very price sensitive, raising prices may divert customers to a competitor.

The local mall vacancy rate has been climbing over the past few years. They keep raising rents. The independently owned businesses left first. Some found new locations in town that they could afford. The chains are going now. Macy's closed. Dollar Tree renovated the vacant Rite Aid store and relocated. There are lots of new buildings going up in the area. Plenty of business. Just not at mall rental rates.

[FastCoyote]

"It's tempting to think of higher minimum wages as an anti-poverty weapon, but such an idea doesn't even pass the smell test. "

In fact, it is a full employment act for illegals who will work off the books for both wages and the benefits and taxes associated with them.

[george76]

Any government mandated program will add lots of costs for legit businesses.

Illegals will work off the books for cash.

Legal businesses may close.

[george76]

If they raise prices to offset this government mandated expense :

Small legit businesses that collect and pay sales taxes will lose some customers...and then some sales taxes may not be collected and paid to the local governments by the illegals.

Same for worker's comp insurance, un-employment insurance, business license fees, donations to local charities...

[TheLion]

Then you are uninformed. Look it up!

[Kenny Bunk]

The Maine Definition of an Environmentalist:

"A Democrat who already owns a home in the woods.
However, the thought of you owning one makes him nervous."

[george76]

These liberals love to have their spot, but then close the door on everyone else.

[Myrddin]

Complementing the reduced collections of unemployment insurance premiums from employers will be increased disbursements of unemployment benefits. One wonders what the secondary effects of indexed union pay will bring. Another factory closing?

[george76]

As we baby boomers retire, close our businesses, quit our jobs, stop paying the high state and federal taxes, stop collecting the sales and payroll taxes for the various governments, stop contributing to these government mandated expenses...

and second : start accessing our accounts from medicare and social security, withdrawing our savings...

There will be a huge shock.

The government mandated costs and the indexed union pay will close many factories. The rust belt of lost union jobs will dramatically increase.

One example of many to come : Toyota will pass GM in total sales soon and GM will close more union shops.

[Myrddin]

I live in the Pocatello area. The area was a heavy union oriented manufacturing and and rail area. The city fathers still have their heads stuck up their blue collar union backsides. They are waiting for a new industrial revolution to return the city back to its former union glory. Their is land, network bandwidth, good roads and an airport. The area could have a vibrant white collar business community, but there is no interest in courting that alternative.

[IrishRainy]

Yeah, they deliberately leave out one part of the equation so we can't figure out the problem for ourselves. Unfortunately, I suck at algebra, but even I came to that conclusion.

They just had a big story in the Arizona Repulsive laying out what a "poor" family had to pay to survive in a suburb of Mexico. The funny thing is, they paid about the same amount for everything there that we do here.

The conclusion of the story was it takes a larger percentage of their wages to buy those things....so we should just let them all move here.

I came to a different conclusion, of course - since the problem lies with THEIR employers in Mexico not paying them enough, then maybe it's Mexico's problem to solve.

I know it's a radical concept, but it just might work....

[RipSawyer]

Look up what? Inflation is an increase in money supply relative to goods and services for sale, higher prices are the symptom of inflation. The current minimum wage is lower in real terms than it has been for a long time. In 1963 one hour at minimum wage would gross enough to buy lunch for three, today it will hardly buy lunch for one. It is absurd to say that the minimum wage is a cause of inflation now. Saying that an increase in the price of anything is a cause of inflation is akin to saying that the rapidly rising river is a cause of rain.

[DungeonMaster]

My son made better money mowing lawns than he does at a grocery store. I kept telling him that he would get a paycut when he got a "real job". Ya can't teach teens.