Minimum wage truths
Acolytes for government-mandated minimum wages – and they are legion among public policy makers in Greater Pittsburgh — keep insisting that everyone wins when wage floors are set by government fiat instead of by the marketplace.
Not only are those on the lowest rung of the employment ladder better off and welfare payments are reduced, hey, those paid a higher minimum wage pay more in taxes to the government. It’s a “win-win-win,” they claim.
Reality, however, continues to intrude as the tales of business closings, fewer jobs and fewer hours grow in places where government has chosen to intervene. What was it, again, that they were saying about reducing the welfare rolls?
Take, for example, New York, where government decreed a $15 an hour wage minimum last December. Reports one media outlet: “Big Apple restaurants are feeling the heat from minimum-wage hikes, cutting staff hours and even closing kitchens as they struggle to shoulder the extra payroll costs.”
Continued the account:
“In a survey of 324 full-service restaurants, the New York City Hospitality Alliance found that 76.5 percent of respondents cut staff hours and 36.3 percent eliminated jobs, including whole layers of middle management, in response to mandated wage increases.”
This experience is being reported all over the country (despite a few less than scholarly studies that have attempted to sprinkle magic dust on the ground manure remains of market interventionism).
So, again, what exactly is the “benefit” of arbitrarily raised wage floors?
As legendary Wall Street Journal reporter and economics scholar Henry Hazlitt reminded in his seminal work, “Economics in One Lesson”:
“You cannot make a man worth a given amount by making it illegal for anyone to offer him anything less. You merely deprive him of the right to earn the amount that his abilities and situation would permit him to earn, while you deprive the community even of the moderate services that he is capable of rendering.”
“In brief,” Hazlitt summarized, “for a low wage you substitute unemployment. You do harm all around, with no comparable compensation.”
So, how should low wages rise? It’s fundamental and known as productivity.
Again, from Henry Hazlitt:
“The more the individual worker produces, the more he increases the wealth of the whole community.
“The more he produces, the more his services are worth to customers, and hence to employers.
“And the more he is worth to employers, the more he will be paid.
“Real wages come out of production, not out of government decrees,” Hazlitt states the obvious.
But, sadly and tragically, it is an “obvious” to which too many public policy makers are either oblivious or purposely ignore in the name of government “beneficence” and political expediency.
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (firstname.lastname@example.org).