of minimum wage law It’s a trap and a delusion. It preys on the weakest economic actors in this country. Before this harmful law was passed in the 1930s, unemployment rates for whites and blacks, young and old, were about the same. There were no significant differences in unemployment in any of these categories. Today, the unemployment rate for black teens is four times, yes, four times, the unemployment rate for middle-aged whites.
Why is this?
The law is unemployment It’s a law, not a labor law. It mandates that no one can be employed if their productivity falls below the legally established level of productivity. If the law requires you to make $10 an hour, but your productivity is only $7 an hour, the stupid company that employs you is effectively losing $3 for every 60 minutes. Either they won’t hire you or you’ll go broke if you do it too often. Raising the level from $10 to $15 simply means that a $13 productive person who could work under a law requiring a $10 salary will no longer be able to do so.
Minimum wage laws are therefore not a floor to which workers’ compensation will increase if raised. No, rather, it’s a high jump bar that workers have to cross to get the job in the first place. The higher the raise, the harder it is to jump over and get a job. If it really is a floor wage, why not raise it to $100 an hour, or better yet, $1000 an hour? Then we would all be rich. What if we cut off all foreign aid to poor countries, instead enacted minimum wage laws, and told them to keep raising the bar until their people are no longer poor?
Bernie Sanders wants to raise the minimum wage to $17 an hour. This is more than double the current federal level of $7.25. Does he want to raise the unemployment rate for black teens to four to five times the unemployment rate for middle-aged whites? Six times? On seven levels? (True confession: I had to look up these words). Probably not. So how is his position explained? Economic ignorance.
Research on this issue very often focuses on increasing minimum wage levels. Who cares about mere increases? The whole rotten law should be repealed and salt should be sown where it once was. This is because it is impossible for anyone whose productivity, at any level, is below the legal level. Card and Krueger (1) would disagree. The researchers found that a small increase in that level in New Jersey did not lead to more unemployment among unskilled workers than in neighboring Pennsylvania, which does not require statutory wage increases. However, their statistics have proven to be unreliable and in any case we have to compare them with the law. its absencenot slightly higher or lower levels.
Fire burns people. Same goes for 150 degrees Fahrenheit and 152 degrees. Suppose a chemist can barely tell the difference between these two temperatures and concludes that it is safe for a person to get burned. What should I say to him? We must declare that there is something seriously wrong with his analysis. We should treat Cards and Kruegers around the world in much the same way.
(1) Prominent proponents of minimum wage laws are Card and Kruger, 1994, 2000. For a critique, see Block, 2001. Burkhauser, Couch and Wittenburg, David, 1996. Burkhauser and Finnegan, 1989. Garraway and Addy, 1995. Hammermesh and Welch, 1995. Newmark and Washer, 2000
Walter E. Block is the Harold E. Worth Distinguished Scholar Endowed Chair and professor of economics at Loyola University New Orleans.
