George Will: Change The Minimum Wage…To Zero
Mr. Will shows a fine understanding of the labor market:
A federal minimum wage is an idea whose time came in 1938, when public confidence in markets was at a nadir and the federal government’s confidence in itself was at an apogee. This, in spite of the fact that with 19 percent unemployment and the economy contracting by 6.2 percent in 1938, the New Deal’s frenetic attempts had failed to end, and perhaps had prolonged, the Depression.
Today, raising the federal minimum wage is a bad idea whose time has come, for two reasons, the first of which is that some Democrats have an evidently incurable disease — New Deal Nostalgia. Witness Nancy Pelosi’s “100 hours” agenda, a genuflection to FDR’s 100 Days. Perhaps this nostalgia resonates with the 5 percent of Americans who remember the 1930s.
Second, President Bush has endorsed raising the hourly minimum from $5.15 to $7.25 by the spring of 2009. The Democratic Congress will favor that, and he may reason that vetoing this minor episode of moral grandstanding would not be worth the predictable uproar — Washington uproar often is inversely proportional to the importance of the occasion for it. Besides, there would be something disproportionate about the president vetoing this feel-good bit of legislative fluff after not vetoing the absurdly expensive 2002 farm bill, or the 2005 highway bill larded with 6,371 earmarks or the anti-constitutional McCain-Feingold speech-rationing bill.
…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.
The intersection of the supply and demand curve…how hard is it? For politicians, the idea that raising the price lowers the demand might as well be Fermat’s Last Theorem…
I believe that President Bush has endorsed the increase with the stipulation that the bill includes safety nets for small businesses. The Dems likely won’t agree to this, so I’d say expect a veto.
Also, while doing research for a recent debate with the College Democrats, I found that only 2% of Americans make the minimum wage. The actual number of people into which that translates is by no means a trifle, and it is possible many more people would be paid the federal minimum wage if the states had not raised their own, but it also indicates that the markets are at work. If there were no minimum wage, people wouldn’t be paid $0.05/week, because, as no one could live on that much, no one would work for that much. That’s what I find so amusing about the Democrats’ insistence that people be paid a “living wage.” If someone were not really paid a living wage, then they would not be living. Any company that offered a salary below what it would cost to live would go out of business because all of their employees would starve to death (or moreover, quit and find a new job).
That said, it does make more sense for the minimum wage to be determined by states, possibly even counties. The argument for this is even stronger than it is for making gay marriage and abortion under states’ jurisdiction, simply because the cost of living can vary quite widely from one place to another in the US. So it would make sense that a person working at a McDonalds in New York City be paid something along the order of $7-9 while someone doing the same job in rural Indiana could probably get by on $5 or $6.
If the minimum wage worked, that is, achieved the goal of providing a “living wage”, then why does a negative gap between the current minimum and the “living wage” develop? I understand how inflation works, the point is that the minimum wage contributes to inflation and, so, is counter-productive. Additionally, it stagnates wages for certain jobs by giving business a law to hind behind when setting wages for these jobs.
The minimum wage is a political winner: lots of people like it and reward politicians that support it. There is no upside to opposing it (you sound like an economics techno-geek if you do) and no downside, politically, to supporting it. Who is the current, public face of the anti-wage hike argument? George Will, he of the horn-rimmed glasses and bow tie. ‘Nuff said.