Twenty states and the District of Columbia forced layoffs to ring in the New Year.
The New York Times headline hardly disguised the Old Gray Lady’s glee: “States’ Minimum Wages Rise, Helping Millions of Workers.” The mandates escalating the price of labor certainly will help some of the very few workers currently earning minimum wage. The news that isn’t fit to print is that by further burdening employers with costs, the policies ensure layoffs of some workers currently employed and the continued unemployment of others who might have found work if the states allowed the market, rather than bureaucrats, politicians, or a mathematical formula, to determine wages.
“The true minimum wage is zero—the amount an unemployed person receives from his nonexistent employer,” Milton Friedman explained in his Newsweek column 43 years ago. The truth of Friedman’s quip hasn’t changed one bit even as government’s precise minimum an employer should pay employees has changed a few bits every few years.
The Nobel Prize-winner’s insight into all things economics stems not merely from his work as a scholar at the University of Chicago but from his previous work as a salesman, waiter, and clerk, too. As a kid, Friedman scooped ice cream in his family’s parlor. At Rutgers, he earned his only “C” after earning lunch and tips by waiting tables, a job that made him habitually late for history class. He sold fireworks by roadside, peddled clothing in the school’s colors dorm-door-to-dorm-door, and partnered with Barnes & Noble in a book-buying scheme at semester’s end.
Friedman worked. Friedman’s economics, not coincidentally, worked, too.
The practical, far-from-the-ether quality of his economics found its best expression in his strangely controversial opinion that “the only relevant test of the validity of a hypothesis is comparison of its predictions with experience.” The New York Times headline characterizing the dictated wage hikes as “helping millions of Americans” reads as prediction, and not one buttressed by experience.
The Times cites the Economic Policy Institute as conceding that the increases mean raises anywhere from a few cents an hour to $1.25, and effect, in a nation of 320 million people, just 3.1 million workers. Even that number may be inflated as the Bureau of Labor Statistics reported 3.3 million workers making minimum wage or less—half of whom age 24 or younger—in all the states. The laws seem designed less to uplift the poor than provide catharsis to class-war Hessians eager to alleviate hardships for people they don’t know or know much about.
The thought lost amid the emoting about low-wage workers is that employees at Arby’s, Winn-Dixie, and the local call center work as freemen and not slaves, and if their skills rate higher pay they possess the ability to enter into an agreement with another business willing to give it to them. Workers primarily don’t want protection from employers but payment from them.
Big government acts as bigger bully than the boss. Employees fire their bosses every day. Firing government does not come so easily.
In the free market, a pure democracy of buyers and sellers determines prices—of labor, of apples, of automobiles. In a market manipulated by government, actors far removed from the transactions dictate fair and unfair. Like so much meddling, the results don’t neatly follow intent. Arbitrarily setting a minimum wage above what the market would pay for labor not worth the state-established rate results in poorer workers, not wealthier ones.
The state with the highest minimum wage also suffers from high unemployment relative to other states. Washington State’s minimum wage of $9.47 an hour exceeds the minimum wage set for the states in Washington by $2.22. The Evergreen State currently ranks 33rd in its unemployment rate. Certainly other factors determine the health of a job market to a greater degree than the minimum wage, and the unemployment rates stands as just one metric of a healthy job market. But one can’t help to think of Milton Friedman when realizing that some teen mom in Spokane endures the true minimum wage—$0 an hour for a nonexistent job because no employer deems paying her $9.47 an hour a good deal.