A study in liberal “good” intentions.
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The private sector is based on voluntary exchange. Employers are not forced to hire a certain number of workers. If a worker adds less value than the minimum wage, an employer would lose money by hiring him. The fundamental problem is that some people have an insufficient value on the labor market. That is the problem we need to focus on if we want everyone to have a “living wage.” Reforming the dysfunctional public school system would be a good place to start. Minimum wage laws attack a symptom instead of its cause, another distinctive characteristic of liberalism.
So long as our economy relies primarily on voluntary exchange, so long as any individual freedom remains, reliance on force and coercion will have limited success. Self-interest, ingenuity, and individual initiative will largely frustrate the grandiose schemes of the control mongers. The fact that everyone does not simply and sheepishly acquiesce when force is applied is the leading explanation for “unintended consequences.” It is also why one law usually begets another.
Liberals have an abiding faith in the effectiveness of force and coercion. They aren’t the least bit hesitant to use force in achieving their goals. Obamacare is one gigantic application of force to our society and economy. Social Security forces every employed person to devote part of his income to a government-run pension plan.
Liberal politicians don’t even mind that minimum wage laws destroy jobs and create more poverty. More poverty simply provides them with more opportunities to do what they love to do, that is, increase the size and scope of government. The jobs destroyed by minimum wage laws just mean that more money needs to be spent on unemployment compensation, food stamps, and redundant job-training programs.
The government can pass a law defining a legal “minimum wage.” It cannot, however, pass a law defining the “equilibrium wage” (or the equilibrium price of anything). An equilibrium price is that price where the quantity supplied equals the quantity demanded, the price where the supply and demand curves intersect. It is the “market clearing” price, the price where there is no shortage or surplus.
A legislated price almost always results in a shortage or a surplus, depending on whether it’s set above or below the equilibrium price. Rent control laws are set below equilibrium rents, so the result is an apartment shortage. Minimum wage laws are usually above the equilibrium wage for low-skill, minimum experience workers. The result is a “surplus” or excess supply of such workers. In labor markets excess supply is called unemployment. Unemployment does far more harm to individuals and society than wages that are defined by someone as unfairly low. Shortages and surpluses represent frustrated voluntary exchange.
There are people who would like to work for $4 an hour, and there are employers who would like to hire them for that wage. However, for them to enter into such a transaction is a criminal act. Some far-away clueless politician has arbitrarily decided that $4 an hour is not fair and not enough to live on.
The clearest evidence for the damage done by the minimum wage laws is the unemployment rates for teenagers, particularly minority teenagers. Today the overall unemployment rate in the U.S. is 7.9 percent. For those 16-19, the rate is more than twice as high (20.8 percent) and for black teenagers the rate is more than four times as high (37.8 percent).
There is perhaps no law more popular and less questioned by liberals than minimum wage laws. Tell a liberal that you are opposed to minimum wage laws, and he or she will look at you as if you are a heartless ignoramus. I’ll bet you could not find a single liberal who has the least degree of doubt about the wisdom and effectiveness of minimum wage laws. Being in favor of minimum wage laws gives you the satisfaction of thinking you’ve done something good even if the actual results are harmful. Liberalism is about feeling good about yourself. It is public policy based on self-indulgence. In liberal never-never land, intentions are all that matter. Intentions are the be-all-and-end-all of public policy choices. Results be damned!
Minimum wage laws are so popular and such an ingrained public policy, even conservative politicians refrain from vigorously challenging them. That’s understandable but unfortunate. It’s not that hard to make the case against minimum wage. Such laws do significant and lasting damage. Running away from the debate is desertion in the heat of a very important battle. Minimum wage laws present a golden opportunity to explain the bankruptcy of liberalism.
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