10.01.2008 0

The Federal Minimum Wages Doing a Job on Workers

  • On: 10/21/2008 19:24:52
  • In: Government Transparency
  • The government has an enduring problem of professing to know more than the tried-and-true free-market system. And when it comes to the minimum wage, politicians especially tend to bury their heads in the sand and ignore the surrounding reality—at the expense of the very people they pretend to help.

    On Wednesday, the New York Sun published an editorial by Ms. Furchtgott-Roth, former chief economist at the U.S. Department of Labor, taking minimum wage increases to task. This is especially salient considering that the presumed Democratic presidential nominee Barack Obama has also been criticized for his campaign pledge to raise the minimum wage for every year he is in office.

    So what exactly is the controversy surrounding the minimum wage issue? After all, raising the minimum amount of money a worker can be paid sounds like a good thing. What honest, hard-working employee wouldn’t prefer a fatter wallet after a long day’s toil?

    To understand this issue, one needs a degree of economic sensibility—not to mention a high dosage or pragmatism, neither of which are commonplace commodities in the corridors of political power.

    The New York Sun piece cites two Democratic Congressional representatives, Carol Shea-Porter and Phil Hare, who support minimum wage hikes. The two argue that the minimum wage has no effect on employment, and the former specifically states that those who are against a higher minimum wage support “a permanent underclass.”

    Neither contention is true. In fact, the reality is the exact opposite.

    While Democrats in government may feel warm and fuzzy inside about their ill-fated attempts to help the struggling American worker, all their minimum wage boosting has accomplished is more economic suffering.

    The hardest hit from the government grandstanding are teenage and general low-skilled workers. According to Ms. Furchtgott’s editorial:

    “Next July, New York’s minimum wage will rise to $7.25 from its current level of $7.15 to match the new federal rate. This will be the third in a series of increases in the federal minimum wage, following increases to $6.55 last month and $5.85 in July 2007. All this represents a significant increase from the $5.15 rate that had prevailed for a decade.”

    And how has employment faired during this time? Consider the numbers:

    “The overall unemployment rate rose to 5.7% in July from 5.5% in June, but teen unemployment rate rose faster, to 20.3% from 18.1%.

    It’s even worse compared to last year. The overall unemployment rate has increased by one full percentage point, to 5.7% from 4.7%, yet teenage unemployment has risen five full percentage points, to 20.3% from 15.3%. This is an unprecedented historical increase for an economy that is still growing.”

    The fact of the matter is that many businesses, already strapped for money, simply don’t have the resources to pay teenage or low-skilled workers at higher federally mandated levels. Someone who’s productivity is worth less than $7.25 an hour simply won’t get hired—or will subsequently be fired if they were already working a job at previous lower pay. Employers will opt for labor-saving technologies or seek out better skilled workers instead.

    In her editorial, Ms. Furchtgott goes on to explain:

    “Denying work opportunities to those whose skills and output don’t add up to $8.00 per hour is not compassionate, it’s manifestly unfair. The federal government essentially would be mandating that workers below a given level of skill have no right to work.”

    It’s time for those in government who profess their love for the working man and woman to actually stand for what they claim to believe. And despite the fact that positions on this issue often come down to party lines, there is no reason why there shouldn’t be bipartisan outcry regarding the negative impact of a high federally mandated minimum wage. As the Washington Examiner points out, the facts are clear:

    “There’s no end to the economic data that confirm these common-sense observations. Research from the University of Georgia, the University of Connecticut and Cornell University indicates that increasing the minimum wage causes four times more job loss for employees without a high school diploma than it does for the general population.”

    So the question begs asking: what good does it do to raise the minimum wage if no it eliminates the workers who need jobs most?

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