Minimum Wage Laws Hurt the Poor and Help the Unions

17 Dec, 2008 by Duane Lester

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“Liberalism always generates the exact opposite of its stated intent.” – Jim Quinn

It was January of 2007 when the House passes the first minimum wage increase in a decade.  Senate Republicans added a ton of tax breaks to small businesses to the minimum wage increase before passing it in February.

They bickered back and forth for a month or three, then finally attached the bill to a war spending bill and Bush signed it into law.

I was against it, saying first of all it was unConstitutional.  I also said it would cost jobs, because businesses could either raise their prices and hire another person, or they could do without the extra body and keep the prices the same.

President-elect Obama is pledging to squeeze even more out of the business owner by raising the minimum wage again, this time from $7.25 to $9.50.  In the middle of what he sells as the worst economic crisis since money began, he wants to add another burden to the small business community. 

A new book called “Minimum Wages” shows how it will do more harm than good. 

According to research conducted by an economist at the University of California at Irvine, minimum-wage hikes clearly reduce the employment of those with the fewest skills.

These negative effects are concentrated among the most vulnerable employees.

The study estimates that for every 10 percent minimum wage hike, employment for young black adults and teenagers falls 8.5 percent.

You don’t have to be an economist to see the fallacy of a mandated wage increase: In a recession, a job at the previous minimum wage is much better than no job at a higher rate.

If you are a business owner, and you have to pay someone a wage that you feel is high, are you going to hire someone with no experience, or a teenager with no work ethic?  No, you aren’t.

Are you going to be able to absorb an increase in expenses and still be able to provide goods and services at the same prices?  Maybe, but then you lose the ability to hire more people because the profits you had are now gone.

There are two things a person needs to understand about why Democrats are concerned about the minimum wage increase.  First, it makes the look like the party that cares about the little guy.  They want to help the poor folks who are living on minimum wage be able to have a better life.  Meanwhile, they sell the idea that the evil republicans are against helping the little guy.  They don’t care about them.  They care about big business.

The fact is this:

In 2005, 1.5 percent of all wage and salaried workers received the federal minimum wage or lower.

That amounts to roughly 2 million people. Of that number,
– about half are under age 25
– less than one-quarter work full time (35 hours or more a week)
– three-fifths work in the food service industry, where, according to government reports, tips and commissions often supplement the hourly wages
– more than 70 percent are at least high school graduates
– two-thirds are women 

The percentage of people who earned the minimum wage or less has dropped from 7.9 percent of all wage and salary workers in 1979 to 1.5 percent of all wage and salary workers in 2005. 

How many of the 1,000,000 minimum wage earners under 25 live at home with their mother and father?  According to the  National Center for Policy Analysis, 40% do.  Here is the Bureau of Labor Statistics Report on miminum wage earners in 2005.  Don’t believe me.  Read it for yourself (but be advised, it is a pdf.)

Also, here’s 50 years of research into the minimum wage.  A few of the things found:

• The minimum wage reduces employment.
• The minimum wage reduces employment more among teenagers than adults.
• The minimum wage reduces employment most among black teenage males.
• The minimum wage hurts blacks generally.
• The minimum wage hurts low wage workers.
• The minimum wage hurts small businesses generally.
• The minimum wage hurts the poor generally.
• The minimum wage does little to reduce poverty.

Also, when the President raised the minimum wage, twenty nine states already had mandated wages be higher than the federal governments.  Some cities and counties had done the same.

But that doesn’t make the headlines.  “Democrats Fight for Minimum Wage Increase” is the headline.  Which is one reason they fight for it.

Another reason is that an increase in the minimum wage is the positive effect it has for unions, who are huge contributors to Democratic candidates.  Unions love minimum wage increases.  They campaign in favor for them.  Why?  Most union members aren’t making minimum wage.

Minimum wage increases help union members get jobs:

This isn’t news.  Milton Friedman taught this years ago:

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