Freedom Flyer 15

By Murray Hopper
Guest Writer

Many of those who advocate or support, minimum-wage laws do so from the noblest of motives, the desire to help others.

They perceive that the capitalist employer wants to hire labor at the lowest possible cost, and they fear that this attitude would bear most harshly on those at the fringes of our society - the poorly educated, the handicapped, single mothers, members of minority groups, and others with few marketable skills.

They sincerely believe that without preventive government action these vulnerable marginal workers would fill victim to exploitation.

Unfortunately for good intentions, this legislation will produce results exactly opposite to those intended or expected.

When an employer is required to pay, say, $4 an hour to a prospective employee whose services are worth only $3, the candidate probably will not be hired. To put it plainly, minimum-wage legislation condemns to unemployment all those whose low skill levels do not justify payment of the mandated figure.

CUTTING A GOOD DEAL: Coercive legislation is no substitute for private contract. What the marginal worker needs is freedom to make his or her own deal with an employer, using the rate differential as a bargaining tool in order to gain entry into the work force and the opportunity for on-the-job training. Surely people are better off at a job which pays only $3.50 an hour if the alternative is unemployment because they are not yet worth $4.50.

What we are discussing here is, after all, the entry-level job. It was never envisioned that this type of employment would be either permanent or sufficient to support a spouse and children. Millions of people have successfully passed through this early stage in their working lives and have gone on to greater glories.

The awareness of the harmful effects of the minimum wage on unemployment levels is by no means of recent vintage. As long ago as 1930, English economist William Beveridge accepted as common knowledge the fact that implementation of minimum-wage rates resulted in increased unemployment, particularly among the poor.

This is an astonishing admission, given that Sir William (as he later became) was a founding father of the British welfare state and, therefore, well to the left in the political spectrum. His aim was "security from the cradle to the grave" for all Britons. Naturally, this was to be accomplished by government action.

The understanding that lower wage rates will result in increased hiring, particularly of the disadvantaged, is of even earlier origin.

Marcus Garvey, the militant black leader of the 1920s, paid a back-handed and somewhat cynical compliment to American employers of the day when he said, "It seems strange, and a paradox, but the only convenient friend the Negro worker or laborer has in America at the present time is the white capitalist. The capitalist being selfish, seeking only the largest profit out of labor, is willing and glad to use Negro labor wherever possible on a scale reasonably below the standard union wage... but if the Negro unionizes himself to the level of the white worker, the choice and preference of employment is given to the white worker."

In more recent years, white racist unions in South Africa's construction industry successfully lobbied for an increase in the minimum wage. Although this action was widely hailed by unthinking liberals as an expression of inter-racial solidarity, it was no such thing.

White union leaders knew that any reduction in the gap between high white wage rates and low black ones would result in an increase in white employment and a decrease in black; and that is exactly what happened.

COUNTER-PRODUCTIVE: The American experience verifies the counter-productivity of such legislation. The U.S. minimum wage (introduced in 1939) had risen by the end of the Second World War to only 40 cents an hour. This amount, relatively small and ravaged by inflation, had little or no impact on the economy.

However, in 1950 the minimum wage was raised sharply to 75 cents, and in 1956 to $1. By 1968 the rate stood at $1.60. The effect on the employment of teenagers, particularly black teenagers, was devastating.

In the period 1950 to 1954 teenage unemployment was undifferentiated racially, standing at an average of 10.3 per cent for whites and 11.1 per cent for blacks. However, by 1971 the rate for whites stood at only 13.5 per cent while that of black teenagers had risen to 33.8 per cent.

The greatest objection to this legislation, however, is not simply that it fails to produce the result desired, but that it offends against liberty. No government has the right to limit the peaceable activities of any citizen; when it does so it abandons its sworn duty - to uphold the rights of all.