California governor Jerry Brown has approved legislation that hikes the current minimum wage of $8.00 an hour to $10.00 an hour by 2016. Supporters of the legislation say this “moral imperative” will help workers and their families but it’s more likely to harm them.
As Thomas Sowell notes, 90 percent of American economists find that minimum wage laws increase the rate of unemployment among low-skilled workers. Such laws do that by pricing low-skilled inexperienced workers out of a job. That is the likely result of the hike, according to the California Restaurant Association, and the California Chamber of Commerce called the measure a “job killer.” Sowell recalls that killing jobs is sometimes the intention of those promoting minimum wage laws.
For example, the 1931 Davis-Bacon Act, the first federal minimum wage law, targeted companies using non-union black workers who were able to outbid white union members. In South Africa under apartheid, “white labor unions urged that a minimum wage law be applied to all races, to keep black workers from taking jobs away from white unionized workers by working for less than the union pay scale.” In similar style Australia’s early minimum wage law targeted the Chinese.
Politicians now believe that those working in, say, fast-food jobs should stay there for life. As politicians see it, if hiking the minimum wage increases unemployment, that can only be due to malevolent business interests. Whatever the result, hiking the minimum wage allows politicians to indulge the illusion that their actions help workers prosper, not the workers’ own productivity, experience, and efforts toward self-improvement. A business-friendly environment is also important. If minimum wage hikes were the key factor, why not raise the wage to $100 an hour for everyone? And don’t forget free hors d’oeuvres in every bar.
Alas, the world does not work that way and command economies have a record of failure. Politicians should know that too but they prefer their own brand of ignoromics over reality. One notes that their own budgetary efforts are not very businesslike, that they run up fathomless debt, and that they prefer double standards. In their own precincts politicians are fond of paying salaries much higher than in the private sector, and with much better benefits that embattled taxpayers can expect. The ruling class takes care of its own in fine style.