Why the Minimum Wage Matters

I’ve been ranting today about the minimum wage, and it’s not (I hope) because I’m just some crazy person.  I care about the minimum wage because it’s a law designed to hurt the poorest people in the country.  No, I don’t mean that it’s designed with the intention of hurting these people.  But that’s what the design of it does.

Suppose I open a plant and am looking to hire a person to work in the plant.  Suppose further that I could hire one skilled (maybe unionized) worker for $14 an hour, but that I could also hire two unskilled workers for $5 an hour each, and that these two unskilled workers combined would be just as productive as the skilled worker.  I will hire the unskilled and pay them a collective $10 an hour.  (If I hire the skilled worker, I’m throwing away $4 an hour, and making my product less competitive in the market).

Now, the skilled (perhaps unionized) worker doesn’t like this very much.  So he lobbies the government to force unskilled labor to raise its price.  Maybe he forces unskilled labor to raise its price to $7.50 an hour.  Maybe he pretends it’s because “no one can live on $5.00 an hour,” and that a minimum wage law is going to protect the poor.  What happens when Congress passes the minimum wage law?  Those two unskilled workers now cost me $15 an hour.  I can save a buck by hiring the skilled worker and laying off the two unskilled workers.  (With his new bargaining power, I might pay him $14.95 an hour). And the unskilled workers that we were trying to protect?—well, they are out of a job.

Now maybe some of those unskilled workers will get jobs and make $7.50 an hour.  But that may not happen.  If their skills add less than $7.50 an hour of value to an employer, they won’t be hired.  Who does this hurt?  Mostly inner-city teens.  

Suppose that Congress passed a law saying that people couldn’t sell their cars for less than $10,000.  Now, this might cut supply and drive up prices a little, such that used cars that used to go for $9000 might be able to sell for $10,000.  But if you have a 1984 Ford Escort, you won’t be able to sell your car.  Well, minimum wage laws do the same thing.  The might help out the price of 2004 Camry, but they make the old Ford Escorts pretty much unsalable.  

A Minimum Used Car Price law might be described by legislators as “designed to help people trying to sell used cars,” but I doubt that the public would see it that way.  So why then can’t people see through the minimum wage?

Minimum Wage And State Unemployment

There are a million factors involved, and if you look at the states between the extremes, the divide is less stark, but:

The Five States (Okay, Six, with the tie) With Lowest Unemployment Rates, and Their Minimum Wage Status

SOUTH DAKOTA  (same as Federal) 2.6% unemployed

WYOMING (no minimum) 2.6% unemployed

IDAHO (same as federal) 3.1% unemployed

NEBRASKA (same as federal) 3.1% unemployed

NORTH DAKOTA (same as federal) 3.1% unemployed

UTAH (same as federal) 3.1% unemployed

The Five States With The Highest Unemployment Rates, and Their Minimum Wage Status

DISTRICT OF COLUMBIA (higher than Federal-$7.55 an hour) 6.0% unemployed

RHODE ISLAND (higher than Federal—$7.40 an hour) 6.1% unemployed

CALIFORNIA (higher than Federal—$8.00 an hour) 6.2% unemployed

ALASKA (higher than Federal—$7.15 an hour) 6.7% unemployed

MICHIGAN (higher than Federal—$7.40 an hour) 6.9% unemployed

Rates found here.

Chart found here.

Tom Brokaw is a Joke

Look at the wimpy way he questioned Al Gore about his mansion on Meet the Press last Sunday:

MR. BROKAW:  Let me ask you about your personal lifestyle, because it’s been the subject of a lot of dialogue on the blogs, as you know.  You and Tipper have bought a big home outside of Nashville, and you had it retrofitted.  But for a time there was a comparison between what the president has in Texas at his home as being more environmentally correct than your home.  The Building Green Council gave you its second highest award.  But Stephen Smith, who is with the Southern Alliance for Clean Energy, is troubled by the scale of your home.  He said, “We all need to evaluate what we …  need in square footage.” Present company included.  We all have to look at scale, don’t we?  Why was it necessary for you to have a 10,000 square foot home?  Because that is going to be more energy intensive than a smaller home for just the two of you.

VICE PRES. GORE:  Well, there—I don’t claim to be perfect, and all of us who care about this issue are, are trying to do our part, but I, I will say this. We buy green energy.  The issue is carbon.  The issue is carbon, and we have, essentially, a carbon-free home.  We buy from wind energy and solar energy. Our roof is covered with solar electric panels, a geothermal system with all these deep wells, and we cut our natural gas bill by 90 percent, and I’m, I’m—we’re, we’re walking the walk and not just talking the talk.  There are always people who are going to try to aim at the messenger if they don’t like the message, and I don’t claim to be perfect, but we are walking the walk.

MR. BROKAW:  How often do you fly on a private jet?

VICE PRES. GORE:  I’ve—much more frequently on public transportation.  I’m flying on Southwest Airlines again today.  But sometimes the schedule requires that, and sometimes I do that.

Brokaw’s question is so long because he feels compelled to equivocate within the question, providing some a defense for Gore within the question (the Building Green Council award), foisting the onus of the question on Stephen Smith, and generally dancing gingerly around the issue, as if he’s worried that Gore will be angry at him for bringing up something that “the blogs” care about.

Also, Brokaw leaves unresolved the documented fact that Bush’s home is considerably more environmentally friendly than Gore’s.  He raises the issue of the comparison, without acknowledging what the comparison shows.

Imagine if Brokaw were interviewing President Bush with the same kid gloves.  He might ask something like this:

MR. BROKAW:  Mr. President, there’s been a lot of discussion on the blogs about the use of enhanced interrogation techniques utilized by some in the lower levels of your administration.  Now the courts have looked at some of these issues and your administration has complied with their orders.  But for a time, some people quested whether these techniques should be used.  William Kristol notes that these techniques have undoubtedly saved lives, and that our country has averted a dozen or more catastrophic terror incidents.  But George Will worries that we’ve damaged our international reputation, and that we need to be more mindful of how we’re perceived in the world.  Why was it necessary to use these techniques.

Or if Brokaw interviewed Barry Bonds:

Mr. BROKAW:  Mr.  Bonds, you’re certainly one of the great players of all time.  You have hit more home-runs than anyone in the history of the game.  You played with speed and power, and earned more MVPs than anyone else.  But for a time, some sportswriters were worried that you might have benefited from using performance enhancing drugs.  Now, a writer at Sports Illustrated notes that the entire league was using steroids, and that if you were using them, you were just keeping up with the game.  But another writer, at ESPN, argues that maybe you shouldn’t have used the steroids.  Still, you should be in the Hall of Fame, shouldn’t you?

One Brave Stand

One more point on Obama.  If he is a statesman, a true, transformative political figure, wouldn’t he be able to take at least one brave stand on an issue that didn’t help him with either interests groups or polls?  Here are three brave stands he could take:

(1) End military discrimination; gays can serve.

(2) Gay marriage.

(3) Decriminalize of pot.

I suspect that Obama is secretly in fa