With the minimum wage set to increase beginning next week in the state of Connecticut, we are once again reminded that our political leaders believe themselves to be more competent than the free market and the individual actors who operate within it. Though the narrative is routinely given precedence, here is the fact of the matter: Wage floors only help the politicians who promise them.
Proponents of raising the minimum wage religiously spout about “income inequality,” “exploitation” and “living wages,” but they rarely find themselves forced to confront the reality of their preferred policy: When the government increases the price of labor, the amount of labor available decreases. This is not “voodoo economics” or “corporate greed.” It’s the quantifiable ramification of insulated politicians seeking votes with more fervor than they seek economic prosperity. Unfortunately, the people conned into supporting such interventionist measures are the same people condemned to suffer in the reality which their leaders promised could be so exceeded.
In Seattle circa 2016, legislators thought to demonstrate their “compassion” for the poor by hiking the city’s minimum wage to $13 per hour. As a result, hours worked in low-wage jobs declined by 9% and earnings were lowered by an average of $125 per month. In spite of the lie that wage floors result in increased household income for unskilled workers, the truth is that legally mandating a certain pay for a certain job does not render that labor worth that wage. Not only are most companies not inflating their profit margins to the extent that politicians claim, but they’re unwilling (or unable) to pay more to a worker than their labor is truly worth. Consequently, the unskilled, inexperienced and frequently young workers who vote with such enthusiasm for these laws are often the ones who suffer most because of them. Furthermore, minority workers suffer disproportionately from wage floors, in spite of promises by leaders to protect them specifically.
Many have pulled a statistic or poll from some place during some period of time claiming to have proof which can render false the “myth” that wage floors exacerbate unemployment. While it is possible for unemployment to decrease in spite of minimum wage laws, it is impossible to determine how much further it would have decreased had those laws not been enacted. Further, many cite polls in which employers claim that they would not lay off employees if the minimum wage were to be increased.
As Thomas Sowell notes, “The problem with polls, in dealing with an empirical question like this, is that you can only poll survivors.” While some companies may retain the same number of employees which they had prior to the increase, it is possible still for unemployment to rise if the increased costs of labor forced some companies out of business.
Odd circumstances can be exploited for political gain, but there can be no denial of the consistent economic prosperity in the absence of wage floors. In the Scandinavian countries, which rely heavily on private industry to subsidize massive wealth redistribution, there are no minimum wage laws. The allowance of collective bargaining between employer and employee in the absence of government intervention has consistently produced unemployment rates of around 3%. Not coincidentally, the United States experienced similar economic success prior to the imposition of federal minimum wage laws, with the unemployment rate dropping to 1.8% during the Calvin Coolidge administration. Not since have unemployment rates been so low, with perhaps only the exception of the late 40s during which time inflation had rendered the wage floors obsolete.
Historically, overzealous governments have promised higher wages for unskilled workers only to price them out of jobs, preventing them not only from obtaining a “living” wage, but also from gaining valuable work experience. Politicians do not know better than employers the value of a worker’s toil to the company, nor do they have workers’ best interests at heart. In reality, they only seek to win votes through alluring promises, the consequences of which can be ignored from the safety of the capital building. Nonetheless, our politicians continue to be reelected, promising that bigger government and more market intervention will create the prosperity we so desire. And we keep falling for it.
Kevin Catapano is a weekly columnist for The Daily Campus. He can be reached via email at email@example.com.