fbpx
21
Fri, Jan

“I’m From the Government and I’m Here to Help You”

LEANING RIGHT-Governor Jerry Brown continues to vacillate on whether to allow non-citizens to serve on juries in California courts but he did sign into law a bill that will raise California’s minimum wage to $10 an hour by 2016. 

 

The wage hike will go into effect in two phases. The current minimum of $8 an hour will be lifted to $9 on 1 July 2014, and then to $10 on 1 Jan 2016. 

Brown asserts that “Minimum Wage will have a big impact on California which currently has a large percentage of the nation’s poor.”  Numerous studies and the majority of the nation’s economist have asserted that the impact will result in a larger percentage of the nation’s poor.    

Brown put his signature to the legislation in front of workers at the Ronald Reagan State Building in downtown Los Angeles. He called it his “moral responsibility” to give Californians a chance to learn a living wage. We will see just how prophetic Brown’s choice of buildings actually was. After all it was Ronald Reagan who called the phrase “I’m from the government and I’m here to help” the “nine most terrifying words in the English language” in 1986.  

"Our society over the last 30 years ... has experienced a growing gap between those who do work at the bottom and those who occupy the commanding heights of the economy," Brown said. 

 “This is about the social fabric and harmony of Los Angeles and California,” he said. “And the minimum wage will set the floor as the ceiling keeps getting further and further apart.” 

Brown argued that businesses cannot prosper at the expense of their workers. And for consumers, paying a little more for goods and services was worth the trade-off of giving workers a wage they can actually live on, he said. 

“When you chew on a hamburger or get your car washed, you may pay a few pennies more,” he said. 

“How many hamburgers does it take to raise the minimum wage next year by a buck? Not too many.”

Michael Aguilar, a worker at a Los Angeles car wash, thanked the governor for signing the bill. 

The federal minimum wage was first set up in 1938 at 25 cents an hour.

This equates to $4.14 an hour in 2013 after factoring inflation. 

Economist Thomas Sowell observed “It would be comforting to believe that the government can simply decree higher pay for low-wage workers, without having to worry about unfortunate repercussions, but the preponderance of evidence indicates that labor is not exempt from the basic economic principle that artificially high prices cause surpluses. In the case of the surplus of human beings, that can be a special tragedy when they are already from low-income, unskilled or minority backgrounds and urgently need to get on the job ladder, if they are ever to move up the ladder by acquiring experience and skills.” 

Here’s another challenge to proponents of the minimum wage based on Thomas Sowell’s quote above, and this related quote from Milton Friedman:  "The effects of the minimum wage have been concentrated on the groups that the do-gooders would most like to help. The people who have been hurt most by the minimum wage laws are the blacks. I have often said that the most anti-black law on the books of this land is the minimum wage law.” 

One of the simplest and most fundamental economic principles is that people tend to buy more when the price is lower and less when the price is higher. Yet advocates of minimum wage laws seem to think that the government can raise the price of labor without reducing the amount of labor that will be hired. 

When you turn from economic principles to hard facts, the case against minimum wage laws is even stronger. Countries with minimum wage laws almost invariably are higher rates of unemployment than countries without minimum wage laws. 

Now the realities of Brown’s signature start having an effect. The hard facts are on the way. "Small business owners will now be forced to make tough choices including reducing employee hours, cutting positions entirely, and for many, closing their doors altogether," said John Kabateck, head of the California branch of the National Federation of Independent Business. 

Advocates of minimum wage laws often give themselves credit for being more "compassionate" towards "the poor." But they seldom bother to check the actual consequences of such laws. It sure as heck will not affect Brown’s livelihood. 

One of the simplest and most fundamental economic principles is that people tend to buy more when the price is lower and less when the price is higher. Yet advocates of minimum wage laws seem to think that the government can raise the price of labor without reducing the amount of labor that will be hired. 

Most nations today have minimum wage laws, but they have not always had them. Unemployment rates have been very much lower in places and times when there were no minimum wage laws.

Switzerland is one of the few modern nations without a minimum wage law. In 2003, "The Economist" magazine reported: "Switzerland's unemployment neared a five-year high of 3.9 percent in February." In February of this year, Switzerland's unemployment rate was 3.1 percent. A recent issue of "The Economist" showed Switzerland's unemployment rate as 2.1 percent. 

Most Americans today have never seen unemployment rates that low. However, there was a time when there was no federal minimum wage law in the United States. The last time was during the Coolidge administration, when the annual unemployment rate got as low as 1.8 percent. When Hong Kong was a British colony, it had no minimum wage law. In 1991 its unemployment rate was under 2 percent. 

A survey of American economists found that 90 percent of them regarded minimum wage laws as increasing the rate of unemployment among low-skilled workers. Inexperience is often the problem. Only about 2 percent of Americans over the age of 24 earned the minimum wage. 

What is surprising is that, despite an accumulation of evidence over the years of the devastating effects of minimum wage laws on black teenage unemployment rates, members of the Congressional Black Caucus continue to vote for such laws. 

Once, years ago, during a confidential discussion with a member of the Congressional Black Caucus, Sowell asked how they could possibly vote for minimum wage laws. 

The answer he got was that members of the Black Caucus were part of a political coalition and, as such, they were expected to vote for things that other members of that coalition wanted, such as minimum wage laws, in order that other members of the coalition would vote for things that the Black Caucus wanted. 

When he asked what could the black members of Congress possibly get in return for supporting minimum wage laws that would be worth sacrificing whole generations of young blacks to huge rates of unemployment, the discussion quickly ended. 

The same question could be asked of black public officials in general, including Barack Obama, who have taken the side of the teachers' unions, who oppose vouchers or charter schools that allow black parents (among others) to take their children out of failing public schools. 

Minimum wage laws can even affect the level of racial discrimination. In an earlier era, when racial discrimination was both legally and socially accepted, minimum wage laws were often used openly to price minorities out of the job market. 

In 1925, a minimum wage law was passed in the Canadian province of British Columbia, with the intent and effect of pricing Japanese immigrants out of jobs in the lumbering industry. 

A well regarded Harvard professor of that era referred approvingly to Australia's minimum wage law as a means to "protect the white Australian's standard of living from the invidious competition of the colored races, particularly of the Chinese" who were willing to work for less. 

In South Africa during the era of apartheid, white labor unions urged that a minimum wage law be applied to all races, to keep black workers from taking jobs away from white unionized workers by working for less than the union pay scale. 

These supporters of minimum wage laws understood long ago something that today's supporters of such laws seem not to have bothered to think through. People whose wages are raised by law do not necessarily benefit, because they are often less likely to be hired at the imposed minimum wage rate. 

Labor unions have been supporters of minimum wage laws in countries around the world, since these laws price non-union workers out of jobs, leaving more jobs for union members. 

People who are content to advocate policies that sound good, whether for political reasons or just to feel good, often do not bother to think through the consequences beforehand or to check the results afterwards. 

If they thought things through, how could they have imagined that having large numbers of idle teenage boys hanging out on the streets together would be good for any community — especially in places where most of these youngsters were raised by single mothers, another unintended consequence, in this case, of well-meaning welfare policies? 

It will be interesting to be able to speak with Michael Aguilar again 2017.

 

(Kay Martin is an author and a CityWatch contributor. His new book, Along for the Ride, is now available. He can be reached at [email protected])

-cw

 

 

CityWatch

Vol 11 Issue 78

Pub: Sept 27, 2013