Big Labor just can’t get its way in Wisconsin.
A Wisconsin union group called Wisconsin Jobs Now has sued Gov. Scott Walker to raise the minimum wage. In response, Gov. Walker called it a “raw, cheap political stunt…If they were serious about this, they would have done it six months or a year ago…The fact it’s being done now is nothing more than to augment the Washington, D.C., money being spent on attack ads to try and drive this issue up.”
Although popular, a minimum wage hike can have unseen secondary effects that devastate a local economy. Iain Murray has an article on the economic harm done by these artificial wage hikes here. The paper highlights, among other things, how higher minimum wages decrease employment opportunities for the poorest of the poor, since higher labor costs make companies more cautious about who they hire. Those without any education or solid work experience are most likely to be passed up for jobs by workers who have more experience when labor costs are increased.
The minimum wage hurts those it is designed to help.
Making matters worse, many left-leaning groups are claiming that government interventions in the form of measures like raising the minimum wage are the only way to compensate for what they see as a decline in wage growth relative to increasing worker productivity.
James Sherk shows that this claim can only be valid if you ignore the growth in employer-provided benefits. Those simply looking at the growth of wages without factoring in benefits are bound to miss the big picture: the expansion of employer-sponsored benefits packages and especially government-guaranteed sources of income like public sector pensions and Social Security has put a downward pressure on wages because direct wages are no longer the only source of income in the workplace. The company does not need to pay as much in wages because they are helping their employee pay for other costs of living.
What is there to learn from this? For one, people must consider the potential unintended consequences of policies designed to force a certain economic outcome.
Also, the majority of empirical studies on the effects of the minimum wage since the early 1990s found negative effects, particularly to youth employment.
Nobel laureate James Buchanan once said, “Just as no physicist would claim that ‘water runs uphill,’ no self-respecting economist would claim that increases in the minimum wage increase employment. Such a claim, if seriously advanced, becomes equivalent to a denial that there is even minimal scientific content in economics, and that, in consequence, economists can do nothing but write as advocates for ideological interests.”
It’s always interesting when unions make a big push for raising the minimum wage because union prosperity and economic prosperity are often mutually exclusive: workers in states with heavy unionization have experienced decreased growth in real per capita income, the most notable case being the 23.1 percent loss in possible RPCI in Michigan since 1964.
Despite imposing these heavy costs on workers, unions often rage against common sense measures like cuts to exorbitant public pensions and right-to-work laws, which allow workers the freedom to join or leave a union at will.
Kudos to Scott Walker for calling the union lawsuit what it is.