Tuesday, August 01, 2006
If Only Most Americans Understood
"'The Right Minimum Wage: $0.00.' So read an editorial headline in one of the most respected newspapers in America. The editorial stated: 'There's a virtual consensus among economists that the minimum wage is an idea whose time has passed. Raising the minimum wage by a substantial amount would price working poor people out of the job market.' Can you guess the newspaper? The Wall Street Journal, perhaps? Right city; wrong paper. This editorial appeared on Jan. 14, 1987, in the New York Times.
More recently, the Times has called for further increases in the minimum wage. At the federal level, many Democrats and some Republicans are pushing to raise the minimum wage from its current level of $5.15 an hour. Moreover, initiatives on the ballot in 10 states would increase the minimum wage.
Most people see the issue as a no-brainer. Wouldn't it be nice to raise the wages of the lowest-earning people? Even if they understand that this will cause them to pay higher prices on goods and services, they see that as a worthwhile price to pay. But economists of various political stripes tend to oppose the minimum wage. We understand that it will help only a subset of the people it is thought to help, and will help them only a little -- while hurting some of them a lot.
The reason goes back to the second sentence quoted in the above Times editorial. In raising the minimum wage, the government doesn't guarantee jobs. It guarantees only that those who get jobs will be paid at least that minimum. But precisely by requiring this, the government destroys jobs. Someone to whom an employer was willing to pay only the current minimum wage of $5.15 might not produce enough to be worth paying, say, $7.25."
More recently, the Times has called for further increases in the minimum wage. At the federal level, many Democrats and some Republicans are pushing to raise the minimum wage from its current level of $5.15 an hour. Moreover, initiatives on the ballot in 10 states would increase the minimum wage.
Most people see the issue as a no-brainer. Wouldn't it be nice to raise the wages of the lowest-earning people? Even if they understand that this will cause them to pay higher prices on goods and services, they see that as a worthwhile price to pay. But economists of various political stripes tend to oppose the minimum wage. We understand that it will help only a subset of the people it is thought to help, and will help them only a little -- while hurting some of them a lot.
The reason goes back to the second sentence quoted in the above Times editorial. In raising the minimum wage, the government doesn't guarantee jobs. It guarantees only that those who get jobs will be paid at least that minimum. But precisely by requiring this, the government destroys jobs. Someone to whom an employer was willing to pay only the current minimum wage of $5.15 might not produce enough to be worth paying, say, $7.25."
