A federal minimum wage was introduced in the United States in 1938 during the Great Depression at 25 cents an hour. Accounting for inflation, that would be about $4 today. The federal minimum wage has since seen an increase by 22 times and currently stands at $7.25.
Recently there has been a movement to raise the current federal minimum wage to $15, headed by the organization Fight for 15. A plan to reach this minimum wage has already been passed in various states and cities including California, New York, and the District of Columbia.
According to the University of Maryland Program for Public Consultation, the issue of hiking the minimum wage has support from 74 percent of the population. Well known economists such as Nobel Prize winner Paul Krugman stated in 2015 that “raising the minimum wage needn’t cost jobs after all” and that “the direct takeaway from this intellectual revolution is, of course, that we should raise minimum wages.”
In order to get a basic understanding of the problem with minimum wage, there is no greater introduction than Henry Hazlitt’s book “Economics In One Lesson.” Hazlitt says that one of the main problems facing economics is “overlooking secondary consequences.”
What is seen by a general populace when the minimum wage is raised from $10 to $15? They see employees who are now working for $15. What is not seen is the group of low skill workers who can no longer find a job because their labor is now worth less than what it is legal to pay.
Hazlitt states, “You cannot make a man worth a given amount by making it illegal for anyone to offer him anything less. You merely deprive him of the right to earn the amount that his abilities and situation would permit him to earn.” Even if both the employer and the employee agree on a labor price lower than the arbitrary amount set by the minimum wage, it is still illegal to hire that individual.
A study published by the National Employment Law Project found that many minorities including African Americans, Latinos and women are disproportionately working below $15 an hour. They conclude that raising the minimum wage to $15 will help these workers. I look at that same exact data and am terrified for the people who may well find themselves displaced if the minimum wage is increased past a point where they are legally hirable.
What good is it to be unemployed at $15 an hour as opposed to employed at $10?
One of the harming effects of minimum wage can be quantified by looking at the unemployment data of those members of society who are the least skilled, that of teenagers.
According to the Bureau of Labor Statistics, for white teens ages 16-19, the unemployment rate is 12.1 percent. The same age for African American teenagers shows an unemployment rate of 24.8 percent. It is apparent that the minimum wage is one of the largest obstacles minorities must overcome in order to find a job and that raising it makes the problem that much more pervasive.
Unfortunately, because of the overwhelming support for an increased minimum wage from both sides, it is politically expedient to support the minimum wage and ignore economic laws.
Even within the field there are schools willing to defend the minimum wage. All this indicates a continuation in the trend of increasingly harmful policies and laws.
The best way to alleviate the harms of minimum wage would not be to continue the pattern of increases followed throughout history, but rather to abolish the law completely.
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