Would you rather work for $5.15 an hour or be unemployed at $7.50?

Today I was doing some research on economic freedom and uncovered this 1970 gem by Leo Rosten:

Fenwick and a friend of mine from Washington, a sociological Meistersinger named Rupert Shmidlapp, were talking about minimum wages, which Congress had just voted to raise from $1.25 an hour to $1.40—and ultimately to $1.60. Fenwick stunned Shmidlapp, whom I had forgotten to brief in advance, by mournfully remarking that the minimum-wage laws would of course create unemployment, and that these particular laws would wreak havoc precisely among those unskilled workers (Negroes, teenagers, Puerto Ricans) they were supposed to help.
“What?” gulped Shmidlapp.
“To begin with,” said Fenwick, “the American wage-earner today gets twice $1.40 an hour, so the bill is not going to affect him——-”
“The bill is designed to help the unskilled and the undereducated,” retorted Shmidlapp.
“An admirable intention,” beamed Fenwick, “because a tragic proportion of that group is unemployed. But if employers aren’t hiring them at $1.25 an hour, is there any reason on earth why they will hire them at $1.40?”
I poured a stiff drink for Shmidlapp.
Fenwick continued: “Surely the unemployed will have less chance of finding a job under the new, higher minimum-wage laws than they had under the old.”
“What?” cried Shmidlapp. “Can you prove that?”
“Yes,” said Fenwick. “Every time minimum wages have been raised, the ratio of unemployed teenagers has risen— and mostly among Negroes and Puerto Ricans, who are the teenagers it seems absolutely insane, if you look at the crime rate, to force onto the streets with nothing to do! … Don’t you agree that every time you raise the minimum, you must push more unskilled or inexperienced or poorly educated or discriminated-against workers onto the unemployment and relief rolls?”
Instead of repairing his fences, Shmidlapp attacked on the flanks. “What about the greedy employers,” he demanded, “who cruelly exploit their workers by not paying them enough to live on?!”
A twinge of pain crossed Fenwick’s boyish features. “Oh, very, very few employers can hold on to their workmen if they pay them less than the workers can get elsewhere.”
“It isn’t what they can ‘get,’ it’s what they’re worth!” Shmidlapp thundered.
“Only God can decide how much a man is ‘worth,’” sighed Fenwick. “Let us consider the best wage a man can get— for his labor, services or talent——”
“Some men just can’t live on that! Or feed and clothe their children! Or pay their medical bills!” This was Shmidlapp at his best.
“We certainly ought to remedy that,” said Fenwick. “No American who wants to work should go hungry because of the objective (and therefore efficient) forces of supply and demand. Let us by all means give and guarantee the poor a minimum income; that does far less economic and political damage than a minimum wage. A minimum income does not discriminate against the black, the illiterate, the inept——”
“Do you mean to stand there and tell me”—Shmidlapp was too agitated to notice that Fenwick was sitting, not standing— “that no workers are actually helped when Congress raises the minimum wage? !“
“Oh, some workers will have their wages raised from $1.25 to $1.40 an hour,” said Fenwick, “but far more will not get a job they might have gotten at $1.25! And fewer teenagers and Negroes will get on-the-job training, which they desperately need. It is just too costly to train them at $1.40, much less $1.60 an hour—especially for skills that take long training periods. This makes a raise in minimum wages absolutely heartless,” mourned Fenwick. “It prices decent, innocent, willing workingmen right out of the labor market!”
“Then why does Congress pass such laws?” shouted Shmidlapp.
Fenwick blinked. “Are you suggesting that Congress never passes foolish or short-sighted——”
“I am asking why, if minimum wages are so goddam stupid, far-sighted humanitarian leaders like Lyndon Johnson and Hubert Humphrey and Governor Rockefeller support them?!”
“Politics,” chuckled Fenwick. “Or innocence. Or ignorance. Or all three. Politicians and labor leaders get a lot of public credit for raising wages, and considerable private satisfaction in imagining all the good they have done.”
“I happen to know that many business leaders, Republicans and conservatives, favor minimum-wage legislation!” swooped Shmidlapp.
“Of course they do. They can be just as wrong, ignorant, or selfish as anyone else,” said Fenwick. “Many of them are manufacturing products in the North——”
“What does geography have to do with it?” demanded Shmidlapp.
“Well, northern manufacturers are delighted to force up their competitors’ costs in the South; in that way, businessmen in the North won’t have to face the desirable effects of that free-enterprise system conservatives and Republicans love to extol.”
“But opinion polls show that the public——”
“The public,” sighed Fenwick, “is not well-informed about economics, and will pay for its innocence. Increased minimum wages lead to increased costs, which lead to higher ……… Then many honest, low-wage earners in the South (where the cost of living is lower; which is one reason wages there stay lower) will become disemployed. And many more of the young and no-skilled, in Harlem no less than Dixie, will remain more hopelessly unemployed than they already are.” Fenwick regarded Rupert Shmidlapp innocently. “Tell me, honestly: Would you rather work for $1.25 an hour or be unemployed at $1.40?”

Can you guess who Fenwick might be in real life?

A Backlash AGAINST the Minimum Wage?

The only thing we heard prior to Congress’s recent vote on a higher mandated wage was that Republicans were acting before the November elections in order to appear more friendly to low-wage workers.
Of course, we might never hear widespread talk of the backlash against Chicago’s recent minimum wage hike due to the fact that it will keep poor and low-income workers out of the work force where they can earn valuable skills that will allow them to move up the economic ladder. Perhaps minimum wage advocates really just want to keep these people on welfare and expand the size of government?

Minimum Wage Nonsense

Last Thursday afternoon I testified in opposition to Ben Lujan’s minimum wage bill before the house Labor and Human Resources Committee. The hearing was scheduled to begin at 1:30 and was gaveled to order at 1:55 (so much for economizing on labor and human resources — but after all this is government).
The economic nonsense I heard was unbelievable. No one seems to know this (or even care):

Most economists believe that the minimum wage is an unwise policy, not because they are against helping the poor but because the minimum wage is such an ineffective way to achieve this goal.

There seems, instead, to be this belief that there is a big pot of money held by the rich, and those rich ought to be giving it to the poor in the form of higher wages. One lady testified that she had no problem paying her employees $9.50 per hour, so why shouldn’t everyone be willing to pay 7.50 per hour? I wondered what her position would be if the government suddenly “forced” her to pay her employees $11.50 per hour.
An “economist” (and advocate) spoke for Rep. Lujan on behalf of the legislation. His empirical analysis of Santa Fe’s “living” wage was so full of holes I don’t know where to begin. The big problem from a real economists standpoint is that he made no attempt to isolate the effect of the “living” wage ordinance on unskilled workers. If he is an economist he should know this, otherwise it is fraud pure and simple.

How the “Living” Wage Reduces Wages

You may already know that Santa Fe’s “living” wage law will put some unskilled workers out of work. That means, of couse, that their wage suddenly becomes ZERO.
But unemployed, unskilled workers will look for work where they can find it. One place they can find work is with businesses that are exempt from the “living” wage law (less than 25 employees). More potential unskilled workers looking for work at these exempt businesses will tend to drive wages in those businesses down! Read all about it (and more) in today’s fine column by Alan Reynolds.