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Wednesday, September 15, 2004

Abolish Minimum Wage Laws

Put yourself in the place of union leaders who have managed to increase wages of union workers to artificially high levels. What is to prevent jobs from going to non-union contractors? Answer: minimum wage and prevailing wage laws.

Perhaps you thought unions just want to give poor people a raise. No, what they really want to do is keep poor people unemployed, reserving more jobs for themselves. Of course unions would never admit to such a thing; political agendas are always advanced for noble reasons.

But once in a while someone blurts the truth. That was the case when Dick Gephardt revealed the true agenda behind his support for minimum wages during his 2004 presidential campaign. He told Teamsters Local 238 in Cedar Rapids, Iowa, that he favors an international minimum wage -- one that he says is high enough so that American workers are not competing with slave, sweat-shop and child labor around the world. Apparently candidate Gephardt would like to un-employ all the world’s poor, not just the poor in his country.

Minimum wage is just one example of how government meddling into the marketplace hurts the very people they claim to be helping. Rent control is another. Both have to do with dictating price, which always upsets the balance of supply and demand. When you dictate a minimum price for labor, it causes the supply of jobs to be reduced. This is just basic economics that no economist would dispute. Isn’t it ironic that the same politicians who support minimum wage are the ones boasting how they are going to create jobs! Go figure.

Now suppose you are working at minimum wage. Would you be in favor of the minimum wage being raised? Maybe so, because you might get a raise. On the other hand, your employer might respond by laying you off. Do you want to risk it? If so, you don’t need a law. You can set your own minimum wage. Go to your employer and demand a higher wage now. Tell him you refuse to work for less. If he thinks you are worth it, he will give you what you demand. If not, he will dismiss you.

But wait a minute! If you have set your own minimum wage and it is refused, you can negotiate a lower wage if you want to. But if you let the government set your minimum wage for you, you are out of a job – period; the government has taken away your freedom to negotiate.

If minimum wage is not the answer to increasing wages, what is? Wages are governed by worker productivity, because employers will hire workers only if their productivity is enough to show a profit after wages are paid. Productivity is improved by innovation and capital investment; government has no part in the process except to get out of the way. Again, no economist would disagree, yet this is an answer politicians can’t live with because it doesn’t make them appear important.

Libertarians oppose minimum wage on moral principles; it is wrong to use force in the marketplace to dictate prices to buyers and sellers. Interesting how good moral principles turn out to be best for everyone in a practical sense as well.

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