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Monday, January 16, 2006

The NYT Immoral (and Misleading) Case For Minimum Wages

The NYT cover story of its Sunday Magazine is entitled “What Is A Living Wage” by Jon Gertner.

It is about the morality of minimum wage statutes. Or more accurately, the overwhelming case of the immorality of anyone who is against minimum wage statutes. Count me in as an immoral person for being against wage increases mandated by government for untried and/or unskilled workers.

This feature story provides pictures of 18 minimum wage earners and advises us what they will do with the extra pay. Each person appears to be a lovely person deserving of a good life. They all have minimum wage jobs. Guess what they will do with the extra money? They are going to buy things, pay down bills and one young man was going to get his own apartment. None stated they were going to play the slot machines in a nearby casino. These are good people.

The article is replete with quotes from “living wage” proponents (and not one quote from an opponent).

Gertner writes:

“It is a common sentiment that economic fairness-or economic justice, as living-wage advocates phrase it-should, or must, come in a sweeping and righteous gesture from the top. From Washington, that is.”

Minimum wage is commonly considered as “Fairness”? “Or justice” to its advocates? That is different? Talk about loading the dice.

Then besides amply quoting such advocates, he finds the eminent Robert Reich, the Labor Secretary under Bill Clinton, who finds such legislation what “demarcates our concept of decency with regard to work.” So, besides being unfair and unjust if you disagree with minimum wage laws, you are indecent as well.

Gertner then discusses the historical background of minimum wage laws. He writes:

“In the years before the enactment of the federal minimum wage in the late 1930’s, the country’s post-Depression economy was so weak that the notion that government should leave private business to its own devices was effectively marginalized.”

Here I have a few questions:

1. The Depression was over by the late 1930’s? I would say it is considered to have ended in the early 1940’s when the country prepared for war and businesses were needed for the supply and armaments. In the late 1930’s unemployment was 20%. The Great Depression was over?

2. Didn’t the US pull itself out of the Depression when business was released by the government in the face of WWII?

Gertner then uses the empirical study by Card and Kreuger to validate minimum wage’s benefit to the economy. Gertner writes:

“[T]he two academics effectively shredded the conventional wisdom [that a rise of wages would destroy jobs].”

Gertner then contends that this study along with The Economic Policy Institute “which endorses wage regulations, has succeeded recently in getting hundreds of respected economists…to support raising the minimum wage to $7 an hour.”

However, for the sake of fairness, Gertner could have mentioned the critical analysis done by economists Neumark and Wascher who double checked the Card and Kreuger study. Their conclusions differed significantly:

1. The minimum wage increase led to a decrease in employment;
2. Likely finding of Card and Kreuger ignoring the likely deviations in their telephone surveys.

While there may those hundreds in agreement, Gertner names and quotes none. One would think that a NYT cover story would be able to find a Nobel Prize winning economist of two to bolster the argument.

Unfortunately, after the above hard economics discussion, Gertner goes back to providing us anecdotes of low-income workers. He does state that “Most of the minimum-wage campaigns in the U.S. have been modest increases of a dollar or a dollar and a half.”

Modest? In my math that is about a 25% increase! 5% maybe 10% could be called modest. But 25%?

Gertner then considers the effect of minimum-wage increases for restaurant workers in Santa Fe. Patronage decreased after price increases on the menus. He states that this may indicate the higher price drove away customers. “Or it could merely mean that high gas and housing prices are hitting hard”. He really wrote that!

But since his article is bereft of economic argument, Gertner finally admits “ultimately…[it] is less about broad economic outcomes than about values.”

Again, I am dead against minimum wages completely. And I am so on moral grounds. History shows that whenever minimum wages increase, teens and white teenage males have increased unemployment.

Quoting economist Bruce Bartlett:

“Advocates of a minimum wage hike ignore the evidence that it increases unemployment among the least productive workers: unskilled teenagers whose employment opportunities are limited. This is unfortunate, because low wage jobs are the first rung on the economic ladder of success for workers entering the labor force. When we cut off the bottom rung by increasing the minimum wage, we keep youngsters from making the transition to work”.

That the NYT can publish this frivolous and unstudied article as its position paper for increasing the minimum wage shows there are no standards left at the Grey Lady.


At 8:49 AM, Anonymous Anonymous said...

Making this a moral issue actualy turns this into a welfare issue. We are mandating that business create wages based on employee needs not what the employee is actually worth. When you pay people based on need, this creates a lot of needy people. This sounds more like France.

The only way to increase your earnings is to increase your skill level. The government cannot waive a magic wand and make someone worth more money - if this were true why are they only fighting for a couple dollars - they should be pushing for $100,000 minimum wage. By their logic everyone would be better off.

Forcing small businesses (large companies pay well above the minimum) to make welfare payments to entry level employees will only accommodate bottom rung employees not to better themselves. People in low level jobs should never be comfortable in those positions - they should always be hungary for more.

We must battle against those trying to eliminate entry level jobs in this country - These jobs are the most important opportunities for any new person entering to the workforce.

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