Home US & Americas Americas Is the minimum wage economically feasible? – Jacob G. Hornberger

Is the minimum wage economically feasible? – Jacob G. Hornberger


Jacob G. Hornberger |

If economic ignorance among leftists (i.e., liberals and progressives) had no adverse impacts, we could consign it to the ranks of the humorous. Unfortunately, however, such ignorance has very serious adverse consequences, especially on poor people.

The classic example of this phenomenon is the minimum wage. This week a liberal website named In These Times published an article about the minimum wage by a liberal named Marc Daalder. The title of the article is ”Why Every Democrat in Congress Should Support Bernie Sanders’ $15 Minimum Wage Bill.” In his article, Daalder sets forth the standard progressive justification for the minimum wage — to help the poor, needy, and disadvantaged.

Employers subjectively value their labor at less than the minimum wage. So, black teenagers go unemployed, prevented from competing on the basis of a lower wage rate.

There’s one big problem, however, with that justification: It’s false and faulty. In fact, if Daalder and Sanders succeed in getting the minimum wage increased, their success will only make things worse for those at the bottom of the economic ladder.

The question that should be posed to Daalder and Sanders is this: Why settle for $15 an hour? Why not make the minimum wage equal to what Sanders receives for being a member of Congress? When broken down to an hourly basis, Sanders receives about $60 an hour. Isn’t it a bit selfish for a liberal to be receiving $60 an hour and, at the same time, arguing that workers should receive only $15 an hour? What’s up with that?

But just think: If we raised the minimum wage to $100 an hour, every worker in America would suddenly have the chance to become very rich, very quickly. So, why settle for $15 or even $60? Why not go all the way to $100 an hour?

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In fact, think about this: The people in every nation on earth could suddenly become wealthy by just having their respective government establish or raise their nation’s minimum wage to $100 an hour. I think I’m going to rush down to the patent department of the federal government and get my idea patented. I think I should get royalties for coming up with an idea that will finally end poverty around the world.

I think most everyone, including even liberals, can understand why a $100-an-hour minimum wage would be bad for people. The reason is this: The labor of many, if not most, workers are not valued by employers at $100 an hour. The payment of that wage would cause most businesses to start losing money and ultimately force them out of business.

Employers subjectively value their labor at less than the minimum wage. So, black teenagers go unemployed, prevented from competing on the basis of a lower wage rate.

The lesson? Employers are not going to hire anyone whose labor is valued at less than the artificially government-established minimum wage of $100 an hour. If employers value someone’s labor at $90, $80, $50, $15, or $5 an hour, that worker isn’t going to get hired under a system that has a $100-per-hour minimum wage.

Okay, I think most progressives would get that. For some reason, however, their reasoning ability abandons them and turns to mush when they think of a minimum wage that is set at a much lower rate, say $15. They are unable to see that the same principle applies. Every worker whose labor is valued at less than $15 an hour is not going to get hired. The minimum wage consigns those workers to permanent unemployment.

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That’s why there has been a chronic unemployment rate of 30-40 percent among African-American teenagers for years. Employers subjectively value their labor at less than the minimum wage. So, black teenagers go unemployed, prevented from competing on the basis of a lower wage rate. In the process, they never get their foot on the first rung of the economic ladder. They’re told they can go welfare. More likely, they go into the drug trade and end up in a penitentiary.

When it comes to economic principles, good intentions don’t matter. All that matters is the actual consequences of governmental programs. While progressives, leftists, liberals, and socialists (whatever label one chooses to use) think they are helping the poor with their minimum wage, they are actually attacking them.

Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. This article was first published in The Future of Freedom Foundation and is republished here with permission. The views expressed in this article are the author’s own and do not necessarily reflect Global Village Space’s editorial policy.

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