Minimum wage sounds like a wonderful idea in practice, right? An employer cannot pay his or her employees less than a fixed dollar figure, so the employee can make at least a decent living. Surely this is an example of how labor can use its power to make demands and have them met.
Sadly, this is not the case. Minimum wage is, and always has been, nothing more than a politi- cal tool electors use to garner votes and further a practice that only inhibits economic growth.
Let’s look at why minimum wage exists. During the 1920s and 30s, the textile industry began to move away from New England to the southern states. The southern states had a much lower cost of living (and still do), and this gave them a competitive edge in the marketplace, allowing businesses to make the same amount of product with a much lower cost. Legislators from Massachusetts were terrified of losing their industrial capability and thus lobbied for a national minimum wage.
Then Governor of Massachusetts Charles Hurley demanded a minimum wage on the grounds that “Massachusetts [would] have equal competition with other sections of the country, thus affording labor and industry of Massachusetts some degree of assurance that our present industries will not move out of the state.”
Not quite the noble process one would like to envision. It should be noted, however, prior to the enactment of minimum wage, textile unions had been fighting terrible working conditions and wages with some success in many states and further, the efforts of private individuals and private unions did more for wage increases than any minimum wage law could have ever done.
History aside, let us look at how effective minimum wage is. What minimum wage does is price the unskilled workers out of the marketplace, and this heavily impacts unemployment among the young.
Where young people used to take low paying jobs to gain valuable experience and a foot into the door of the job market, that experience is lost when minimum wage comes into play.
This is not to say that minimum wage will re- sult in mass unemployment overnight, but the marginal effects it has on the job market cannot be ignored, such as the high number of maids and other unskilled workers laid off following the creation of minimum wage or the 128,000 recorded jobs lost to the Clinton-era minimum wage raise.
Another point to be noted is how outdated mini- mum wage is. During the 1940s and 1950s, mini- mum wage became completely irrelevant as the market entered such a post-war boom that wages rose at the rate the market dictated, and “greedy” corporations did not keep them artificially low. This can still be seen today, as the federal minimum wage is $7.25 per hour but the median hourly wage of the U.S. worker, according to the Bureau of Labor Statistics, is $16.57.
New data from Barry Hirsch, Bruce Kaufman and Tetyana Zelenska indicates that by measuring the wages of chain restaurant workers, the minimum wage level has no effect on the economy, and this is true but not for the reasons that its authors would like you to believe.
The reason that the United States’ minimum wage currently has little effect on the economy is because our economy and wages have grown so much that the minimum wage is largely irrelevant to actual wages, generally speaking.
Thus it can be shown that while youth unemployment is higher than total unemployment in the United States, 14.3 percent compared to 7.8 percent across the board minimum wage has had no real effect on worker earnings since the Reagan administration, largely due to our robust econo- my.
Every election cycle cries of a “living wage” come invariably from the some incumbent or another, demanding that wages go up to $9 or $10 per hour, but is reality this would accomplish nothing but make a few people lose their jobs.
Our economy has grown at such a rate that minimum wage is meaningless for most of the United States, and it has become nothing more than a rallying cry for Congressmen and women to use come election time.
So let us step back and look at minimum wage. What does it do? It seems to merely inhibit the youth from being able to enter the labor market and earn money by deciding for them what their effort is worth, while actually contributing nothing to the actual wages of workers as a whole.
