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Minimum Wage: Time for a Change? No
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23732 |
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Section : |
CURRENT ISSUES
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| Issue
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5 / 1987 |
1,748 Words |
| Author
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Jerome Ellig and Tim McClung
Timothy Ashby is deputy director of the Spitzer Institute for
Hemispheric Development at the Heritage Foundation. His most
recent book is The Bear in the Back Yard: Moscow's Caribbean
Strategy (Lexington Books, 1987). |
A wag once asserted that "if you laid all the economists in the world end to end, you'd never reach a conclusion." A like spirit responded, "If you laid all the economists in the world end to end, it would be a darn good thing."
Though economists' penchant for disagreement is legendary, they are virtually unanimous in their agreement that a government-mandated minimum wage creates unemployment, often among those groups who are already least likely to be employed.
This conclusion is not the result of ideology, nor does it imply that economists are hard-hearted souls who do not care about the plight of the poor. It is a statement about the way the world works, not about the way people might wish it would work. The stated intentions of minimum wage proponents are admirable, but all the good intentions in the world cannot change the fact that the minimum wage unintentionally harms the very groups its proponents seek to help.
If the minimum wage were truly an effective tool for raising living standards, the government could solve the poverty problem tomorrow - indeed, make every American wealthy-by mandating a minimum wage of $100 an hour. Such a proposal would, of course, be a prescription for mass unemployment. The only people who could keep their jobs would be those capable of producing more than $100 worth of goods or services per hour.
The damage caused by a more modest increase in the minimum wage would be less severe but just as real. And it would not be the high-wage, high-productivity workers who would suffer the most. An increase in the minimum wage threatens to throw many low-wage workers into the unemployment line and keep many of the chronically unemployed on the street. Black teenage unemployment already tops 40 percent, and an increase would spell further disaster for this group.
Past experience amply displayed the minimum wage's unintended effects. Before 1938, when Congress first created a wage floor of 25 cents per hour, the unemployment rate for all teenagers was about equal to the national unemployment rate for all workers. Then as now, teenagers had less experience and skill than older workers. In those days, though, they could still find jobs and gain experience by offering their services at lower rates.
Since then, the minimum wage has risen to $3.35 per hour, and the law covers a much larger percentage of the work force. The
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