On the Minimum Wage

minimum wageCultureWatch 18 November 2014
On another site someone sent me a poster, asking me what I thought of it. It was from the political left, and had to do with the minimum wage. On the left side it said: McDonalds in Australia – Minimum Wage: $16/hour, Price of Big Mac: $4.47. On the right it said McDonalds in the US – Minimum Wage: $7.25/hour, Price of Big Mac: $4.62.

This leftist poster was meant to highlight some supposed glaring and unfair inequality. Since this person asked me what I thought, I said this: “Apples and oranges. The US does have a much lower minimum wage. But many if not most things are also far cheaper in the US, from cars to most foods to (importantly!) books, etc. So this is a quite misleading and mischievous post. And there are solid reasons to argue that raising the minimum wage actually hurts people – especially the poor.”

So let me here offer some of those reasons. Plenty of experts can be appealed to in this regard, so let them speak. And let me begin with four voices you would expect to argue for a higher minimum wage: three Black Americans and one Spanish American. They all argue against this.

First, Black economist Thomas Sowell:
One of the simplest and most fundamental economic principles is that people tend to buy more when the price is lower and less when the price is higher. Yet advocates of minimum wage laws seem to think that the government can raise the price of labor without reducing the amount of labor that will be hired. When you turn from economic principles to hard facts, the case against minimum wage laws is even stronger. Countries with minimum wage laws almost invariably have higher rates of unemployment than countries without minimum wage laws. Most nations today have minimum wage laws, but they have not always had them. Unemployment rates have been very much lower in places and times when there were no minimum wage laws….

In European welfare states where minimum wages, and mandated job benefits to be paid for by employers, are more generous than in the United States, unemployment rates for younger workers are often 20 percent or higher, even when there is no recession. Unemployed young people lose not only the pay they could have earned but, at least equally important, the work experience that would enable them to earn higher rates of pay later on.