This article was published by The McAlvany Intelligence Advisor on Friday, August 5, 2016:
One can surmise from his instructions to believers in the church in Thessalonica: “When we were with you, we gave you this rule: Whoever will not work should not be allowed to eat.” What’s less clear is: what if government mandates keep one from working, or keep employers from hiring those willing to work?
St. Paul assumed that people had the freedom to contract out their labor, to sell the one primary thing they possessed: their time and effort in exchange for money. He also assumed that employers, given the opportunity, were free to hire someone who could add value to their businesses.
Minimum wage laws abrogate that essential freedom, with all manner of negative results. One, it exposes the extraordinary lack of common sense possessed by those promoting it. Senator Edward “Ted” Kennedy called the minimum wage law “one of the best antipoverty programs we have.” Of course the senator was an expert in poverty, having no personal experience in the field whatsoever. Jared Bernstein, an economic “advisor” to Vice President Joe Biden, exposed his own ignorance of how the real world works with this homily: “[The minimum wage] raises the pay of low-wage workers without hurting their job prospects.”
In essence, what minimum wage laws do is mandate that a large number of people will be forced to deal with the ultimate minimum wage: zero.
The Heritage Foundation’s study of the matter concentrated solely on the economic ramifications of such madness: raising the national minimum wage from its present level of $7.25 an hour to $15 an hour would put seven million people who are now working out of work. The study noted that the real cost to employers forced to pay their workers wouldn’t be $15 an hour. It would, thanks to payroll taxes, unemployment insurance premiums and ObamaCare taxes, be $18.61 an hour. Translation: a new employee must be able to generate $37,220 per year in value to his employer before he could even dream of being offered a job. Most employers would likely demand proof he could generate far more than that, or he just wouldn’t bother. He’d ask his existing employees to take on more tasks, hire a part-timer, explore using robotics or other mechanical or technical improvements, move his business out of the country, or close up shop altogether.
That’s what American Apparel is doing. Located in Los Angeles, the company immediately laid off 500 workers when the city council decided to mandate a $15 an hour minimum wage. The company intended initially to move them someplace else in the state where the madness hadn’t penetrated.
But when California decided to double down and mandate a $15 an hour minimum wage throughout the state, American Apparel announced it was investigating moving their entire operation (one of the largest apparel manufacturers in the country) out of the state. How’s that for “improving their job prospects,” eh, Mr. Bernstein?
What’s most annoying is discovering that liberal economic scholars (is that an oxymoron?) know that raising the minimum wage results in increased unemployment, but they are keeping their opinions to themselves. Dylan Matthews, a writer for the liberal news site Vox.com, said: “One really fascinating phenomenon: left-wing economists are saying off the record that $15/hr is super-dangerous, but [are] not saying that publicly.”
Aside from the obvious economic implications, there are others even more devastating that would result from removing low-paid workers from the workforce. There’s the impact on inner city black youths already suffering from 40 percent unemployment (in Chicago it’s 50 percent). If they can’t work, what then? Chicago is the poster child for that answer: inner city crime there makes the headlines almost on a daily basis.
What about increasing pressures on the welfare system, funded by those taxpayers who still have jobs? What about the increasing chances of offshoring jobs to places where people are willing to work without minimum wage mandates getting in the way? What about the impact on morality, on self-esteem, on learning how to provide a service that is needed and useful for which an employer is willing to pay? What about the blatant unconstitutionality of the federal government getting involved in places where it has no business?
St. Paul, so far as we can tell, supports the free market. He would, given the chance, likely tell Senators Sanders and Durbin, co-sponsors of something called the “Pay Workers a Living Wage Act,” which would install $15 an hour as the minimum an employee would be allowed to pay, to take a hike. He would likely tell them to stop meddling in people’s private affairs, to let them alone to find their own ways in the world, unencumbered by do-gooders forcing people to behave in ways those political busybodies know is good for them.
Heritage Foundation report: Raising Minimum Starting Wages to $15 per Hour Would Eliminate Seven Million Jobs