The immorality of the minimum wage

by Doug Bandow

WASHINGTON — Both houses of the Democratic Congress have approved a minimum wage increase and even many Republicans signed on to the bill. Even the White House has signed on. The hike will soon become law.

Alas, the minimum wage has not become better policy because of the new bipartisan embrace.

The usual arguments on behalf of the minimum wage are simply wrong. Rarely do workers support families on the minimum wage.

Columnist Mona Charen points to Labor Department data that more than four in five minimum-wage recipients have no dependents.

Just 1.2 percent hold full-time jobs.

Instead of helping those most in need, the minimum wage prevents the most disadvantaged from getting a foot on the ladder of economic success. If you raise the cost of hiring workers, fewer will be hired. If you raise the salary that must be paid, employers will reject those with the least skills, education and training.

If there is one issue about which economists agree, it is that the minimum wage destroys jobs. Indeed, legislators obviously understand this point. Otherwise, why not up the minimum to $100 or $1000 an hour and make everyone rich?

The only question about an increase, whether to $7.25 or $1,000, is how many jobs are destroyed. Raising the minimum wage has discouraged employment of minority teens, spurred mechanization and encouraged substitution of fewer, better-trained workers for unskilled laborers. (This, of course, is why organized labor backs government wage-setting.) In short, the minimum wage hurts those it is supposed to help.

The best argument for raising the minimum wage today is that doing so will only have a modestly negative effect since the minimum hasn’t been increased for some time. Alas, that doesn’t help the workers who still lose their jobs.

Of course, the majority of legislators are ignoring economic arguments, instead acting on the simple belief that people “should” be paid more. It is not only liberals who believe in sentimentality as a basis for legislation. So do the moderate Democrats elected in November, who are supposed to make this Democratic majority different from previous ones.

For instance, South Carolina Democratic Rep. James Clyburn, the new majority whip who leads a “faith working group,” defines raising the minimum wage as a “values” issue. North Carolina Democratic Rep. Heath Shuler, the prolife, pro-gun former Redskin quarterback who upended a GOP incumbent, said of hiking the minimum: “To me that’s a moral issue.”

In what way, however, is voting to make other people pay someone a higher salary a moral action?

Forcing others to do what one believes to be a good deed is a form of cheap grace. I receive a benefit, in this case winning votes, while making someone else, namely employers, bear the cost. Such a deal!

Raising the minimum wage is a particularly inappropriate tactic to win moral brownie points. Companies that hire unskilled workers are performing a public service by employing people who have the most difficult time finding a job. In doing so these firms are providing an opportunity for future gain — two-thirds of minimum wage earners win a salary increase within a year.

But the unfairness of the minimum wage runs deeper.

Congress has declared that there is a social interest in raising the wages of the lowest paid in society. Fine. Then society should pay the cost.

Putting the entire burden on employers who disproportionately hire the unskilled is unfair, even, dare one say, immoral. If “we” all want people to earn more, then “we” should do the paying.

One alternative to the minimum wage is the U.S. Earned Income Tax Credit. The EITC is essentially a negative income tax, providing money to low-wage workers. The program has problems of its own, including fraud. But it puts the financial burden on all taxpayers, rather than a few employers, and creates no employment disincentives.

Even better would be to fix an educational system that leaves so many people ill-prepared for work in an increasingly technological society. That would empower people to earn more in the marketplace, rather than forcing them to rely on politicians to increase their wages.

The minimum wage is no answer to the problem of poverty, whether in America or elsewhere. But a rate hike is moving through Congress because legislators are more interested in appearing to help than actually helping those in need.