We write often about the Law of Unintended Consequences in the formation of public policy. Elected and appointed government officials have an unflattering habit of not thinking through the policies that they, in their hubris, are convinced will serve the greater good.
Or their pandering political expediency.
Take, for instance, Pittsburgh city government raising the realty transfer tax and using the proceeds to make housing “more affordable” for those of lesser means.
Of course, the more you tax something, the less you get of it. And early analyses have shown a decline in housing sales. No doubt there have been a number of variables in play but there can be no doubt that raising this tax has made home purchases less affordable in Pittsburgh, not just in theory but in fact.
But, sometimes, public policy makers nefariously employ the Law of Intended Consequences. Consider the history of government setting wage floors, better known as the minimum wage.
As Wall Street Journal scribe Jason Riley recently reminded:
“The federal government got involved in setting wage levels in the 1930s and did so at the urging of unions that excluded blacks as members. During debates in Congress, lawmakers complained openly about the ‘superabundance’ and ‘large aggregation of Negro labor’ and cited complaints by whites of black Southerners moving north to take jobs.
“As Congress increased the minimum wage periodically over the decades, these same arguments were put forward as a justification.
“When he was a U.S. senator from Massachusetts, John F. Kennedy backed minimum-wage hikes as a way of protecting New England industry. ‘Having on the market a rather large source of cheap labor depresses wages outside of that group, too—the wages of the white worker who has to compete,’ he lectured an NAACP official at a hearing in 1957.
“‘And when an employer can substitute a colored worker at a lower wage—and there are, as you pointed out, these hundreds of thousands looking for decent work—it affects the whole wage structure of an area, doesn’t it?’”
“It’s no accident that these wage mandates disproportionately harm black job prospects. That was the intent all along,” wrote Riley, who happens to be an award-winning black journalist and scholar.
Riley notes that even if that no longer is the intent, it continues to happen. That’s because the underlying economic fundamentals do not change.
To wit, the Congressional Budget Office (CBO) recently concluded that while raising the minimum wage to $15 an hour would lift 900,000 workers out of poverty, it also would put 1.4 million Americans out of work.
“Employers may decide that they can’t afford to pay someone a $15 hourly wage, so workers could be let go or offered fewer hours as a result,” Riley says. Or not hired at all.
Riley notes that those backing ever higher, government-dictated wage floors play down the fact that most minimum-wage earners aren’t impoverished and most people who qualify as “poor” already earn more than the minimum.
“Poor families need jobs more than they need raises,” he says. “And what teens and young adults most need are opportunities to accumulate job experience that can lead to higher pay and upward social mobility down the road.
“By reducing employment opportunities, minimum-wage laws can make inequality worse.
“Low-income minorities stand to lose the most from lifting the wage floor because they are overrepresented among less-skilled and less-experienced workers,” Riley says.
And citing labor economists William Even and David Macpherson’s study of the impact of state minimum-wage mandates in 2007-09, he says those diktats “cost younger blacks more jobs than the Great Recession did.”
Riley finds it disconcerting that minimum wage laws continue to have support among today’s black politicians and activists – and, we would add, pandering politicians of all hues — “who choose to ignore the facts and evidence.”
That Pittsburgh Mayor Bill Peduto, Pennsylvania Gov. Tom Wolf and others so stridently support the $15 wage floor a 107 percent increase from the current level should take your breath away – as it takes away the job opportunities of those who need them most.
And, frankly, given the minimum wage’s founding and sordid history, reasonable people are forced to ask what supporters’ real intent is.
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).
