The first minimum wage laws went into effect in the late 1930s as a part of FDR’s attempt to rebuild the US from the Great Depression. We all learned about the New Deal in high school or college history classes, but what wasn’t discussed was how hard it was to get the law passed.
A similar law was passed earlier in the decade but was struck down by the Supreme Court. The court had also taken down many state laws designed to put in minimum wages. When the legislation that eventually passed finally introduced many of the claims you might expect today were made. Businesses lobbied against it saying they would be forced to lay people off, or shut down businesses. All in all those against the minimum wage pointed out the economic reasons why it was bad for everyone.
Today when a proposed minimum wage increase gets debated, the same arguments are made. Employers won’t be able to keep as many on staff. They’ll outsource the jobs. Overall, it’s unfair to the poor and unemployed. So who is the winner of an increase in the minimum wage?
Look at the argument in favor no increase. Think about the low income worker that can’t find a job. Would that person rather make $5 an hour and have a job or make nothing? Most would take what they can get. Because they can’t find a job that pays the minimum wage, they have no job. In the absence of a minimum wage a job might exist for them. Conceptually the argument makes sense. And conceivably if there were no minimum wage, or a very low one, our unemployment rate would be much lower.
But think about the perspective of the low income worker that does have a job. They might make $7.50 an hour but it’s not enough to live on. They are perpetually broke and don’t have the time to try to find a better job, even if one existed. Getting to the poverty level would be an upgrade in lifestyle for them. So while a boost in minimum wage might increase their chances of getting laid off, though not necessarily by a large amount, they’re willing to take that chance.
Both arguments are valid. A higher minimum wage likely does mean fewer jobs. But a lower minimum wage means those with jobs aren’t making ends meet. And while raising the minimum wage almost seems like the “humane” thing to do, if one takes into account the subsequent job losses it may not be. In our society today, that means either way the government will be providing support. Either you have 50 million people that need some government assistance to get by, or 25 million that needs lots of assistance. Simplistic as it may seem, that is the basic conversation.
The point then is how do you want your government providing support to the poor and what are your goals? Do you want more people employed or more people getting bearable paychecks? I am not informed enough on the matter to speak in either direction, but here are some thoughts on what the minimum wage should mean.
Can a person on minimum wage make enough money (assuming full-time employment) to get themselves to the poverty line? If the answer is yes, then increasing the minimum wage isn’t likely worth the cost of lost jobs. If the answer is no, then perhaps the minimum wage should be increased until it is. This will help differentiate between those truly in need of government assistance and those that can work the system to their advantage. This is likely how our welfare/minimum wage system was intended. But it was hijacked by interested parties with just enough proof to support one side or another, never a whole picture.
And that doesn’t mean in extenuating circumstances that a temporary decrease in the minimum wage may not be a bad idea. We’re in a years-long glut of unemployment. Many people are losing skills and government assistance gives them little reason to try keep those skills sharp. A temporary wage holiday might put millions back to work that could not be hired otherwise. Such a system could be exploited but that demands a separate post. But opposing or supporting a minimum wage policy based on philosophical, or cherry-picked circumstantial situations, is always irresponsible.
Suggested (somewhat opinionated) reading with lots of links: Minimum-wage laws are costly for the unemployed
 By The Weakonomist |
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