|
It was a common
political move when
Chicago's city
council voted
recently to impose a
$10 an hour minimum
wage on big-box
retailers. There is
nothing that
politicians like
better than handing
out benefits to be
paid for by someone
else.
What was uncommon
was the reaction.
Chicago's Mayor
Richard M. Daley
denounced the bill
as "redlining,"
since it would have
the net effect of
keeping much-needed
stores and jobs out
of black
neighborhoods. Both
Chicago newspapers
also denounced the
bill.
The crowning
touch came when
Andrew Young, former
civil rights leader
and former mayor of
Atlanta, went to
Chicago to criticize
local black leaders
who supported this
bill.
While the $10 an
hour minimum wage
was politics as
usual, the unusual
backlash against it
provides at least a
glimmer of hope that
more people are
beginning to
consider the
economic
consequences of such
feel-good
legislation.
A survey has
shown that 85
percent of the
economists in Canada
and 90 percent of
the economists in
the United States
say that minimum
wage laws reduce
employment. But you
don't need a Ph.D.
in economics to know
that jacking up
prices leads fewer
people to buy. Those
people include
employers, who hire
less labor when
labor is made
artificially more
expensive.
It happens in
France, it happens
in South Africa, it
happens in New
Zealand. How
surprised should we
be when it happens
in Chicago?
The economic
consequence of
political largess --
whether in the form
of minimum wage laws
or medical or other
benefits mandated to
be paid for by
employers -- is to
make labor
artificially more
expensive.
Countries with
generous employee
benefits mandated by
law -- Germany and
France, for example
-- have chronically
higher unemployment
rates than
unemployment rates
in the United
States, where jobs
are created at a far
higher rate than in
Europe.
There is no free
lunch. Higher labor
costs mean fewer
jobs.
Since all workers
do not have the same
skill or experience,
minimum wage laws
have more impact on
some than on others.
Young, inexperienced
and unskilled
workers are
especially likely to
find it harder to
get a job when wage
rates have been set
higher than the
value of their
productivity.
In France, where
the national
unemployment rate is
10 percent, the
unemployment rate
among workers less
than 26 years old is
23 percent. Among
young people from
the Muslim minority,
the unemployment
rate is even higher.
In the United
States, the group
hardest hit by
minimum wage laws
are black male
teenagers. Those who
refuse to admit that
the minimum wage is
the reason for high
unemployment rates
among young blacks
blame racism, lack
of education and
whatever else occurs
to them.
The hard facts
say otherwise. Back
in the 1940s, there
was no less racism
than today and black
teenagers had no
more education than
today, but their
unemployment rate
was a fraction of
what it is now --
and was no different
from that of white
teenagers.
What was
different back then?
Although there was a
minimum wage law on
the books, the
inflation of that
era had raised wage
rates well above the
specified minimum,
which had remained
unchanged for years.
For all practical
purposes, there was
no minimum wage law.
Only after the
minimum wage began
to be raised,
beginning in 1950,
and escalating
repeatedly in the
years thereafter,
did black teenage
unemployment
skyrocket.
Most studies show
unemployment
resulting from
minimum wages. But a
few studies that
reach different
conclusions are
hailed as having
"refuted" the "myth"
that minimum wages
cause unemployment.
Some of these
latter studies
involve surveying
employers before and
after a minimum wage
increase. But you
can only survey
employers who are
still in business.
By surveying people
who played Russian
roulette and are
still around, you
could "refute" the
"myth" that Russian
roulette is
dangerous.
Minimum wage laws
play Russian
roulette with people
who need jobs and
the work experience
that will enable
them to rise to
higher pay levels.
There is now a
glimmer of hope that
more people are
beginning to
understand this,
despite political
demagoguery. |