Minimum Wage, Maximum Harm

By Perry E. Gresham
web posted December 1997

I learned a very big lesson in a very small town. I was president of a small college, but that college was the biggest thing in town; in fact it was about the only place of employment. Teachers were the principal earners, and their salaries were modest. Children came to town anyway. The baby boom reached into the Allegheny foothills. Town children had limited opportunities to earn spending money. They played in the streets and sometimes got into minor mischief.

At about that time we built a new college library. Moving more than 100,000 books was a considerable project. Money was scarce and costs were rising. A bid to move the books seemed exorbitant. We decided to train the town young people to carry, haul in small hand wagons and wheelbarrows, and place the books in such a manner that the trained librarians could complete the process. The youngsters loved it. They earned some spending money and had the new self-esteem that comes from joining a work force. They were learning to go to work on time and feel the thrill of doing something significant for the college.

We were hardly started when the comptroller was informed that we were breaking two laws -- child labor and minimum wage. The town young were distressed, and the college was subjected to unnecessary expense. I remembered the wise words of Walter Lippmann. In his book, The Good Society, he made the observation that good intentions in the field of government action for social change often bring about unexpected and unfortunate results. The legislators who perpetrated the laws meant to help the children and the poor. The effect of the laws was damage to both the poor and the eager young.

Van Wyck Brooks called America one of the oldest countries in the world. He used the term "old" in a pejorative sense as neglected, run down, cluttered with trash, dilapidated, and smitten with desuetude. The work of cleaning up the countryside or minor chores around the house is inexpensive, but unlikely to command minimum wage. Old, handicapped, inexperienced, and otherwise limited workers could find occupation in such endeavors -- but few would be willing to pay minimum wage. Only the rich or the government could afford to spend a qualified worker's wage for such marginal activity. The government could do it only by higher taxes.

One's labor is the most valuable property one has to sell. If I wish to work for a small wage, and someone wishes to hire me, why should the law forbid it? The answer is that politicians find this kind of legislation to be popular with special interest groups and, at the same time, small drain on the public purse. They are apparently insensitive to the damage wrought against the young, the old, the handicapped, and the unemployed.

Many people have labor to sell, but some such labor is substandard. Beginners are worth less on the market than experienced workers. People with truly limited skills, who could perform such useful but impecunious tasks as collecting abandoned trash or sweeping sidewalks, cannot sell their labor on the market for as much as those who handle computers or analyze the stock market. Why should Congress feel free to pass laws that would send people to jail for selling their labor for less than the minimum wage?

Unfortunately, people often misread their own best interests on account of group opinion. Many young people who are offered work, which is legally excluded from the minimum wage law, destroy their opportunities to gain experience by demanding minimum wage. How hard it is to see clearly that the choice is not between $10 a day and the minimum wage, but between $10 a day or nothing.

I hear the cry that low-salaried workers are shockingly underpaid -- that they do not make enough to live on. This is true. No one in history has ever been able to guarantee plenty for everybody. The idea that everybody can live at the expense of everybody else is very appealing, but impossible.

There is a way for low-wage people to improve their earnings: Develop the skills that our society needs and a higher wage will be forthcoming. If a person is working for minimum wage at a fast food place and wishes to make more, the way to accomplish this is to do the work so well that the wage is increased, or else find an employer who has sense enough to hire competence and pay for it. The market, and not the government, is the road to higher wages.

Reprinted with the permission of The Freeman.




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