The Immorality of the Minimum Wage

The Immorality of the Minimum Wage

Bandow op ed in The American Spectator
January 29, 2007

The Democratic juggernaut has slowed. The House has approved a minimum wage increase as part of the "100 hours" agenda. But a filibuster has blocked a vote in the Senate.Of course, Republicans there are not going to stop the hike. Instead, they are demanding a minor concession -- some tax breaks for small business. An amended bill will almost certainly pass, though Democrats are still pressing for "clean" legislation.The minimum wage has proved to be a popular bandwagon, with scores of House Republicans joining Democrats in voting to raise the rate from $5.15 to $7.25 an hour. Even the White House has signed on, so long as Congress distributes a few tax goodies to Republican-leaning small businessmen.Alas, the minimum wage has not become better policy because of the new GOP embrace.The usual arguments on behalf of the minimum wage are simply wrong. Rarely do workers support families on the minimum wage. Columnist Mona Charen points to Labor Department data that more than four in five minimum wage recipients have no dependents. Most are second or third earners in a family, not heads of households. Just 1.2 percent hold full-time jobs. Most are below age 25 and almost half of their families earn above $60,000 a year.Instead of helping those most in need, the minimum wage prevents the most disadvantaged from getting a foot on the ladder of economic success. If you raise the cost of hiring workers, fewer will be hired. If you raise the salary that must be paid, employers will reject those with the least skills, education, and training.If there is one issue about which economists agree, it is that the minimum wage destroys jobs. Indeed, whatever legislators might say in public, they obviously understand this point. After all, if you could raise wages without consequence, then Congress should up it to $100 or $1,000 an hour and make all of us rich.The only question about an increase, whether to $7.25 or $1,000, is how many jobs are destroyed. Raising the minimum wage has discouraged employment of minority teens, spurred mechanization, and encouraged substitution of fewer, better- trained workers for unskilled laborers. (This, of course, is why organized labor backs government wage-setting.) In short, the minimum wage, however well intentioned, hurts those it is supposed to help.The best argument for raising the minimum wage today is that doing so will only have a modestly negative effect since the minimum hasn't been increased for some time. Alas, that doesn't help the workers who still will lose their jobs.Of course, economic arguments have had little impact on the minimum wage debate. Instead, the wage hike is being propelled by emotion, the sentiment that people simply "should" be paid more.THAT THE LEFT PREFERS to emote than to analyze comes as no surprise. Alas, it is not only liberals who believe in sentimentality as a basis for legislation. So, apparently, do the moderate Democrats elected in November, who are supposed to make this Democratic majority different from previous ones. These legislators all voted to raise the minimum wage.Indeed, Rep. James Clyburn (D-SC), the new majority whip who leads a "faith working group," defines raising the minimum wage as a "values" issue. Rep. Heath Shuler (D-NC), the pro-life, pro-gun former Redskin quarterback who upended a GOP incumbent, said of hiking the minimum: "To me that's a moral issue. That's where I'm with my party."In what way, however, is voting to make other people pay someone a higher salary a moral action?Forcing others to do what one believes to be a good deed is a form of cheap grace. I receive a benefit, in this case winning votes, while making someone else, namely employers, bear the cost. Such a deal!As Marvin Olasky has pointed out, compassion once meant to suffer with, to actively help those in need. Compassion then turned into writing checks -- a worthy activity, to be sure, but very different in its impact on both giver and recipient.Now compassion means making other people write checks. If you use compulsion to lift someone else's wallet and arrange a wealth transfer, you get to preen in public, proclaiming your moral superiority and commitment to the common good.Raising the minimum wage is a particularly inappropriate tactic to win moral brownie points. Companies that hire unskilled workers are performing a public service by employing people who have the most difficult time finding a job. In doing so these firms are providing an opportunity for future gain -- two-thirds of minimum wage earners win a salary increase within a year.But the unfairness of the minimum wage runs deeper. Congress has declared that there is a social interest in raising the wages of the lowest paid in society. Fine. Then society should pay the cost.Putting the entire burden on employers who disproportionately hire the unskilled is unfair, even, dare one say, immoral. If "we" all want people to earn more, then "we" should do the paying. "We" shouldn't dump the burden on others.ONE ALTERNATIVE TO THE MINIMUM wage is the Earned Income Tax Credit. The EITC is essentially a negative income tax, providing money to low-wage workers. The program has problems of its own, including fraud. But it puts the financial burden on all taxpayers, rather than a few employers, and creates no employment disincentives.Even better would be to fix an educational system that leaves so many people ill-prepared for work in an increasingly technological society. That would empower people to earn more in the marketplace, rather than rely on politicians to increase their wages, subject to the whims of public opinion.In any case, the minimum wage is no answer to the problem of poverty. It is bad in practice, destroying jobs, especially for the disadvantaged. If we care about the working poor, we should expand rather than shrink employment opportunities.Finally, government wage-setting is, to coin a phrase, immoral. The minimum wage is the worst sort of feel good legislation. It purports to help those in need while making others pay the bill. Which, alas, is what Congress seems to do best. It is precisely the sort of legislation that principled Republicans at either end of Pennsylvania Avenue should oppose.