Colin McNickle At Large

Minimum wage games

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“(T)he Pennsylvania Legislature hasn’t given (private-sector) workers a raise in nine years,” Gov. Tom Wolf lamented in a tweet last week.

But it should not be the role of any government to set wage floors – a minimum wage — for those working in the private sector.

Wage rates must be set by productivity and supply and demand, not by government fiat.

And, simply put, when government raises the cost of labor, private employers react. As Fraser Institute scholar Yanick Labrie puts it:

“In reaction to the establishment of a minimum wage, or to the raising of a minimum wage, some workers will see their wages rise, it’s true. But some other workers will lose their jobs, as employers reduce the number of people they employ or decide not to create new jobs or create fewer jobs, perhaps automating or eliminating certain posts.”

Continues Labrie:

“Minimum wage increases lead to higher unemployment, especially among the youngest workers, who tend to be least skilled.”

And minority workers typically are the most affected in this subset.

Thus, young workers seeking entry-level jobs – jobs that help to teach new workers how to work – see that step on the employment ladder sawn away.

And here’s a great assessment from another economics scholar, Mark J. Perry, a University of Michigan economics professor:

“If you trust government officials and politicians to set a minimum wage for unskilled workers, you should logically trust those same bureaucrats and politicians to set all prices, wages and interest rates in the economy.

“Inevitable result: Soviet-style central planning, command-and-control, and economic chaos like in Cuba, North Korea and Venezuela.

“If you agree that economy-wide central planning and price controls would be undesirable, then I think you should also agree that the minimum wage law, as an arbitrary, artificial, government-mandated price control, is undesirable.”

Then there’s this, from Ira Stoll, writing at Reason.com:

It’s a sneaky way to increase welfare spending and raise taxes. Raising taxes to spend more on welfare is a political loser. But raising the minimum wage puts money in the pockets of working poor people, at the expense of business owners (and of consumers who would pay in the form of higher prices).

“If politicians want to increase the earned income tax credit or other work-related welfare benefits, they should do the hard work of building political support for such policies, rather than choosing the roundabout approach of a minimum wage increase.”

Then there’s this legal question, as Stoll also detailed:

“It’s not clear that (government-set wage floors are) constitutional. The Supreme Court, in its opinion in the 1923 case Adkins v. Children’s Hospital of District of Columbia, made a strong argument that a minimum wage was a violation of the constitutionally guaranteed freedom of contract embedded in the Fifth Amendment’s language about due process and the deprivation of liberty and property.

“’To the extent that the sum fixed exceeds the fair value of the services rendered, it amounts to a compulsory exaction from the employer for the support of a partially indigent person, for whose condition there rests upon him no peculiar responsibility, and therefore, in effect, arbitrarily shifts to his shoulders a burden which, if it belongs to anybody, belongs to society as a whole.”

The court later, in West Coast Hotel v. Parrish (1937), reversed itself,  5-4.

“But maybe the court was right the first time around,” Stoll posits

For Gov. Wolf, the “seen” is a higher wage for some. Sadly, what he fails to see is the damage such a move causes them – and others.

Colin McNickle is a senior fellow and media specialist at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

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Colin McNickle
Colin McNickle

Colin received his B.G.S. from Ohio University. The 40-year journalism veteran joined the Institute in October 2016. That followed a 22-year career with the Pittsburgh Tribune-Review, 18 as director of editorial pages for Trib Total Media. Prior that, Colin had a long and varied career in media — from radio, newspapers and magazines, to United Press International and The Associated Press.

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