LIFE HAS ITS MYSTERIES, but one of them is not whether raising the minimum wage helps the working poor. It doesn't. It hurts them. Common sense says so, basic economics says so, and scads of empirical evidence say so. Even thoughtful liberals say so.
Yet here we are again, once more debating an increase in the federal minimum wage. The numbers are different from the last go-round -- this time the rate would rise to $5.15 an hour from the current $4.25 -- but the arguments offered up by proponents are as stale as month-old doughnuts.
"It's hard to raise a family on $4.25 an hour," says President Clinton. Well, yes, it is. It's not much easier to raise a family on $5.15 an hour. In fact, many families would find it difficult to hold body and soul together on $10 an hour. So why stop at $5.15? If all it takes to provide families with the money they need is a law passed by Congress, why not raise the minimum to $25 an hour?
Answer: because wages don't come from Congress. They come from employers. And if an employer is required to pay every worker at least $5.15 an hour, he's going to make sure not to hire anyone whose labor or productivity is worth less than that. A company willing to give an entry-level job, at $4.25 an hour, to an unskilled high-school dropout who has never worked might be unable to afford to take that chance at $5.15 an hour. It may decide instead not to hire anyone. It may seek out a worker with more skills or education. It may choose to invest in machinery instead of people. It may turn the work over to part-timers who don't draw benefits -- or to workers in Indonesia making $2 an hour.
But in every case, that unskilled employee will be out of work. The higher minimum will have done him harm, not good. It may be hard to raise a family on a job paying $4.25 an hour, but it's a lot harder to raise a family on no job at all.
Raising the minimum wage turns the least employable into the unemployable. All the compassion and good motives in the world cannot repeal the fundamental laws of economics. When the cost of something goes up, the demand for it goes down. That's true for newspapers, for automobiles, for theater tickets. It's no less true for labor.
Which is why jobs disappear (or job-creation slows) whenever the minimum wage is raised. That isn't the Republican or the conservative view. It is the mainstream view.
In 1983, the General Accounting Office found "virtually total agreement that employment is lower than it would have been if no minimum wage existed." The Congressional Budget Office wrote in 1988 (when Congress was under firm Democratic control) that "increases in the minimum wage . . . could cause the loss of approximately 250,000 to 500,000 jobs." In a survey published in 1979, the American Economic Association reported that 90 percent of its members agreed that hiking the minimum wage would increase unemployment among young and unskilled workers. In a follow-up study 13 years later among economists in government, business, and academia, 80 percent agreed.
"The minimum wage," says Gary Becker, the 1992 Nobel laureate in economics, "creates unemployment." Even the Progressive Policy Institute (an arm of President Clinton's former intellectual stamping ground, the Democratic Leadership Council) has written that "the minimum wage can be allowed to fade into history."
The best thing Congress can do with the minimum wage is leave it untouched. It can safely ignore Clinton's lecture about how tough it is to raise a family on $4.25 an hour. Only a tiny fraction of American wage-earners -- less than 5 percent -- are paid $4.25 an hour, and almost none of them are raising families. According to the Bureau of Labor Statistics, most hourly workers earning the minimum wage (60 percent) are in their teens or early twenties. Most (80 percent) live in households that are above the poverty line -- many of them far above. Most (64 percent) are single. Most (58 percent) work fewer than 35 hours per week.
Best of all, most minimum-wage earners get raises -- 63 percent are earning more money within 12 months.
That's because a minimum-wage job, with rare exceptions, is not an end but a beginning. It is the first rung on the ladder to success. The lower that rung, the more people who can climb upon it -- and use it to reach the next rung. But every time Congress raises the minimum wage, it lifts that first step just a bit further out of some people's reach.
Most Americans never notice the difference. But for workers who have to struggle just to get on the lowest rung -- the unskilled, the poorly educated, the mentally impaired -- another mandatory 90 cents an hour can spell the difference between a job and the welfare rolls.
If Congress raises the minimum wage, the workers it will hurt most are the ones it will be claiming to help. That isn't kindness or compassion. It is cruelty.
(Jeff Jacoby is a columnist for The Boston Globe).
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