Despite the quote often being misattributed to Albert Einstein, the validity of the aphorism, “insanity is doing the same thing over and over and expecting the same result,” is a very valuable one. And it certainly applies to the unconstitutional, immoral, and anti-economic minimum wage mandate that has not only repeatedly shown itself to harm low-skilled people, but also been shown to have originated in very racist soil.
How strange, therefore, that the party historically connected to the taint of American slavery and to the economy-stifling regulatory-tax behemoth should push, once again, for another “minimum wage hike” diktat.
Since entering office last week, that paladin of the “little guy,” Joe Biden, has ramped-up the rhetoric in favor of mandating nation-wide a step-by-step from the current $7.25 to a $15 per hour minimum wage over the next five years. And, not to be outdone, his left-wing axis of allies in Congress also are pushing “the Fight for Fifteen” via federal mandate.
As the Wall Street Journal notes:
A bill introduced by Democrats this week would increase the wage floor to $15 an hour in phases over five years, starting at $9.50 an hour the day a new law becomes effective. Annual increases would follow until reaching $15 an hour, then the rate would be reviewed annually and adjusted based on changes to median hourly earnings of all employees.
It’s beneficence, they tell us. It’s all wrapped up in the rhetoric of Biden’s “American Rescue Plan,” which entails more controls, more edicts, more taxes, and more breaches of the Constitution. And all of it is designed to have government hand out “benefits” on people who, just maybe, might become dependent on the government rather than, oh, engaging in their own private contracts and handling their own lives, expanding the economy through healthy, productive work. Yeah… all that terrible stuff that was happening during the first three years of Trump’s Administration, before the insanity of the COVID-19 lockdowns.
This will wipe out many of the businesses that have struggled through those patently immoral and anti-constitutional lockdowns.
Nearly one in every five restaurants permanently closed their doors in 2020 as 30 large retail and restaurant companies filed for bankruptcy.
Meanwhile, employment in food services (restaurants and bars) fell 19% in 2020 as retail clothing jobs dropped 24% and accommodations (hotels) jobs plummeted 32%.
But the saviors in Washington want to make it more expensive to employers – and by association, their employees and consumers – to engage in commerce.
Welcome to the world of insanity.
For a restaurant with five full-time workers making minimum wage, a doubling of the federal minimum wage would mean an extra $85,800 in wages and employment taxes. With restaurant profit margins of about 5%, that could require an extra $1.7 million in food sales ($4,700 more per day)—a seemingly impossible feat in normal times, let alone in the middle of a global pandemic.
And she also notes the fundamental principle of economic growth. The entire point of economics is to be more productive.
Higher wages are a great thing—especially when the gains accrue to lower-income workers. But the only way to achieve actual wage increases—that is, lasting wage increases that don’t take jobs and incomes from others—is for workers to become more productive.
As much as leftists like to hide the truth behind emotion and screams and signs calling for “living wages”, as much as they try to demonize employers, the laws of economics do not deceive.
Minimum wage mandates prevent low-skilled workers from offering their skills, because they force those workers to only work above a certain pay level. If their skills or products don’t fetch that much on the market, they won’t be able to sell their limited skills or their products.
One way I teach students about the evil of minimum wage mandates is to imagine being an artist who, after calculating for resources, can make one sculpture an hour and recognize a high probability of selling it for $10. What happens when a politician tells said artist to sell the piece for $15, or $20? Will he or she sell more, or fewer?
The answer is obvious, and can be applied to every potential employee in any era in any land and profession. The price increase sees consumers change their behavior, sees them not buy, often turning to alternatives. If they DO spend, consumers have less money left over, which prevents them from spending it on, or investing in, other things – which has its own drag on employment.
There is no way to circumvent the laws of economics. No amount of emotional rhetoric or pop media massaging can change the disastrous results.
And to do this now? Insane. Notes Billy Binion for Reason:
As of September 2020, 100,000 businesses that initially shuttered temporarily were declared dead, a number that has surely expanded through the COVID-19 winter surge. Many other establishments are on their deathbeds.
Morally, as Dr. Mary Ruwart notes in her book, “Healing Our World in An Age of Aggression”, minimum wage mandates are aggressive threats made by politicians who want to tell others how to live, sell, and buy. She, and many others, such as Jack Salmon, writing for the Foundation for Economic Education,have explained how real people have been harmed by these political impositions.
Take Puerto Rico, for example:
Between 1974 and 1983, Puerto Rico was forced to increase its minimum wage in line with the federal figure, where it has remained since 1983. The results of imposing this standardized federal minimum wage have been ‘substantially reduced employment on the island,’ as well as swathes of unemployable low-skilled workers who decided to immigrate to the US mainland to seek work, according to research published by the National Bureau of Economic Research.
And for those who push this insanity out of kind-hearted motivations to “help minorities?” Please keep in mind that minimum wage statutes have their roots firmly planted in racism. As economic historian Chris Calton has written for the Mises Institute:
The earliest of such laws were regulations passed in regards to the railroad industry. At the end of the nineteenth century, as Dr. Walter Williams points out, ‘On some railroads — most notably in the South — blacks were 85–90 percent of the firemen, 27 percent of the brakemen, and 12 percent of the switchmen.’1
The Brotherhood of Locomotive Firemen, unable to block railroad companies from hiring the non-unionized black workers, called for regulations preventing the employment of blacks. In 1909, a compromise was offered: a minimum wage, which was to be imposed equally on all races.
This is important. It’s key information to remember and tell friends:
To the pro-minimum wage advocate, this may superficially seem like an anti-racist policy. During this time, with racism still rampant throughout the United States, blacks were only able to enjoy such high levels of employment by accepting lower wages than their white counterparts. These wage-gaps at the time genuinely were the product of racist sentiment.
And he adds:
But this new wage rule, of course, did not eliminate the racism of nineteenth-century employers. Instead, it displaced their racism at the expense of black workers. One white union member at the time celebrated the new rule for removing ‘the incentive for employing the Negro.’2 This early minimum wage rule was explicitly put in place to prevent African-Americans from finding employment, and it was successful in this goal.
Politically-connected blockers also followed this path in the 1930s with federal statutes such as the Davis-Bacon Act, further harming low-skilled workers.
Yet the polemicists and propagandists tell us that to oppose minimum wage mandates is racist. Amazing
And they never note that the Constitution doesn’t “grant” these “powers” to Congress at all.
But we can, and we can learn this information and spread it to others, especially younger people, so that they don’t engage in the insanity.