"Why Minimum Wage Laws Backfire"

When detectives investigate crimes, they look for motivation.  "Who benefits?" they ask.  When unionists push minimum wage laws, I ask the same question. 
         Answer:  the unionists themselves.
         They won't admit it.
         Since the 1930s, unions have been the chief proponents of minimum wage legislation because it eliminates low-wage competition through federal coercion resulting from laws passed by bought-and-paid-for legislators.  By driving up the competition's wages, unions erase the only advantage their unskilled competitors have -- the willingness to work for a lower price than their union counterparts.  Union advocacy of minimum wage laws has nothing to do with bolstering union wages.  Almost no unionist in America works for minimum wage.  Rather, these laws create unemployment outside the union. 
         This marketplace powerplay creates a labor cartel by expelling non-union workers from the field.  The chief competition for union apprentices are low-wage independents.  When the price of low-wage workers is not artificially elevated, employers prefer to hire and train two or three independents instead of one over-priced and protected unionist.  But as the price of independents rises, the attraction of unionists grows, which is why unions are historically the strongest advocates of minimum wage laws.  By such laws, unions drive up the price of their competition, advancing what amounts to compulsory unionism.  
         In the wake of minimum wage laws, employment in low-wage industries always plummets, which predictably injures the poor.  Judged by their impact, these laws are anti-black, anti-woman, anti-immigrant, anti-elderly and anti-young -- the lowest workers on the pay scale -- which is one more thing the unions won't tell you.  Modern unions are the poor worker's worst enemy.  When unions push for a higher minimum wage, they're not looking out for the poor; they're looking out for number one.
         An analogy will serve:  Imagine that, in an effort to aid portions of our lagging auto industry, we propped up the profits of our weakest carmaker with laws mandating a minimum price of $25,000 per vehicle, dramatically increasing the profits enjoyed from every sale.  But, despite our good intention, indeed because of it, that automaker goes out of business because no matter how much we might want to “buy American,” very few can or will pay that much money for cars comparable to those available elsewhere at half the mandated price.  That automaker dies.  Just like unions do to their competitors, the people at GM would love to pass laws requiring a minimum price for all Fords and Chryslers. 
         With minimum wages laws in force, the choice is often not between the mandated wage or some other, but between the mandated wage and none at all.  Tragically, the latter option becomes increasingly attractive and commonplace.  A minimum wage helps only those with jobs; it cannot provide jobs or preserve them.  It keeps those without jobs from getting them.  
         Unionists often say that if we mandate higher wages for the poorest workers, we increase their income and aid their escape from poverty.  Not so; the lowest paid workers are normally those with the least skill and experience.  They are the least desirable workers.  An artificially elevated wage renders them even more undesirable, making it increasingly unlikely they can get or keep a job.  This happens because a wage is not merely a selling price for workers, it is a purchase price for employers.  Minimum wage laws prevent the least desirable workers from selling their services at prices their prospective employers, and ultimately the consumer, can afford to pay.  All workers work not only for employer's, but for consumers, who wisely try to make the most of their money. 
         If you have little or no skill and experience, but the government requires you to sell your services at inflated rates, you'll find no one to purchase them because, in order to pay for them, your employer must raise his own selling price, which means his business is more likely to fail.  If it does, all current employees, who are more skilled, more experienced, and more worth the money they earn, lose their jobs because companies wise enough not to hire you at the mandated price can produce the same product your company does, but at a lower cost both to themselves and their customers. 
         Furthermore, a rise in the minimum wage also raises the wages of workers higher up, who naturally demand a commensurate increase, which ripples up the organization, dramatically increasing production costs.  When prices get too high, consumers purchase elsewhere.  Your product remains on the shelf and your company goes out of business. 
         In short, because of our desire to be moral and compassionate people, we pass laws requiring employers to pay higher wages to their least desirable workers while, as good stewards of our God-given resources, we don't buy the over-priced products of those who do as the law demands, thus creating more unemployed workers and more poor, whom we foolishly try to help with minimum wage laws.
         Instead, we ought to encourage more entrepreneurship like that of marketplace giants Ray Kroc and Dave Thomas, of McDonald's and Wendy's fame respectively.  Far more than any minimum wage law ever has or could, Kroc and Thomas aided the cause of the unskilled poor by providing them with the all-important entry level jobs by which they learn critical marketplace lessons, like the importance of appearance, punctuality, deference, teamwork, and dependability.  These entry level jobs help them acquire management and public relations skills, as well as obtain the personal references and endorsements necessary to capture better jobs with other employers in the future.  And along the way they earn a modest wage to boot. 
         Kroc and Thomas did more to aid the poor than do legislative and artificial means because Kroc and Thomas understood that you cannot climb the ladder of success without first getting on the ladder, which minimum wage laws prohibit.  Kroc and Thomas invited the poor to step onto the first rung and begin to climb.  Untold thousands of people prospered in precisely this way.  Nearly one-eighth of the entire American work force started in the fast food industry.   When one includes those who start in other retail establishments, like Wal-Mart, J. C. Penney, Sears or Pizza Hut, the percentage grows prodigiously.  This is how American workers typically start.  Minimum wages laws often prevent that from happening.
         Because of people like Kroc and Thomas, great numbers of minority poor became wealthy franchisees, many owning multiple franchises.  Thousands more minority workers gained access to management jobs both inside and outside their corporations, jobs that otherwise remain unattainable.
         Minimum wage laws might ease our consciences, but they do not ease the plight of the poor, which is only worsened.  Not everything that glistens is gold, and not everything with good intention is real compassion.
          A brief digression:  the poor must remember that it is no shame to be poor, only lazy and unproductive.  Generations of Americans knew how to be something some of today's poor do not -- how to be both poor and proud --proud of their modest but hard-won earnings, proud of the natural human dignity that does not depend upon a bank account.  The poor must never shun honest wages for honest work.  Some of today's poor are not proud, they are arrogant.  Too many consider themselves too good to do the menial labor necessary to climb the ladder of success.  Yet they are not too proud to take welfare.  They are too proud only to flip hamburgers or dry fenders. 

date modified:
5 July 2006