It seems perennial. Leftists use the force of the government to tell employers -- and, by logical association, consumers -- to pay more to minimum wage workers.
And then the workers suffer, almost as if the skills they’re providing aren’t valued by consumers at that new, government-mandated level.
What a bizarre concept.
And yet, over and over, economists have to go through the repetitive ritual of citing historical evidence of how minimum wage mandates have done just that, even as politicians push for more. So, perhaps it’s valuable to cite an example revealing itself right now, as leftists experiment with more minimum wage mandates and with peoples’ paychecks in that collectivist wonderland of Seattle.
Get ready! Because to everyone’s eternal shock, precisely the same thing is happening.
As Bloomberg’s Megan McArdle reports, a research team at the University of Washington has been following the results of Seattle’s multi-phase minimum wage increase, and -- shocker -- those results aren’t good.
Since the law raised the wage in stages, they studied it in stages. The results of the first jump, from $9.47 to $11 an hour, were released last year, and seemed to show that the effects on earnings were pretty small -- an increase of about $72 every three months -- and that low-wage employment declined slightly. In the long-running battle over the effects of the minimum wage, this paper didn’t offer much ammunition for either side, and thus occasioned relatively little excitement in the wonkosphere.
So, even a small mandated increase in minimum wage saw a decrease in employment, or at least, a correlated decrease. When one deals with statistics, it is only through repeated findings of correlation over time that one can begin to theorize causation.
The next phase of the minimum wage hike, fro $11 to $13 per hour, offers even more indicting data:
The University of Washington released its second study, this one covering the increase from $11 an hour to $13. And this study found huge effects: For every 1 percent increase in their hourly wage, low-wage workers saw a 3 percent reduction in the number of hours worked. As a result, they lost about $125 in earnings a month, clawing back the entire gain from the earlier hike and more.
Is anyone surprised?
Over and over, economists such as Walter Williams have explained that consumers are the final arbiters of value, and that consumers will change behavior if their costs go beyond what they want to pay. This is the most fundamental axiom of economics, and it is one of the reasons why, in my own instruction on the subject, I always start with the Simple Machines, and how even Paleolithic man used them to make work easier. People want more for less toil, not less for more toil. They adopt tools – both physical, like the machines, and non-physical, like the concept or practice of natural rights “your hands off my stuff, my hands off yours” -- to facilitate easier work.
In turn, this allows them to have free time and opportunities to do other things, new things, to improve their lives and the lives of others based on what the others decide helps them. The market is merely the sum total of people deciding what works best to help their lives, each individual assessing his or her preferences.
But politicians don’t respect that, perhaps because they don’t respect the rights of individuals to control their own lives.
Instead, they come up with mandates and orders, like the Seattle minimum wage mandates. And, in turn, these force decisions on consumers.
“Do I want to pay more for something I can get for less elsewhere? Do I want to squander the extra money I would have had left over to spend on a new product that would employ a new employee, or spend more on something I used to get for less?”
The answers are manifest.
And to put a different spin on it, let’s also be sure we explain that a minimum wage mandate is really a threat to workers, telling them that they cannot sell their services for less than what politicians want.
If you were a sculptor, and you knew you could make one statuette per hour, and sell the maximum you could by placing your price at $10, making a $5 profit, what do you think would happen if politicians told you to jack that price to $15 per statuette? Do you think you would sell more, or fewer, statuettes?
This is the practical outcome of minimum wage laws. Low-skill workers sell less of their own abilities. They are forced to price themselves out of the market. Unemployment increases.
Blacks and immigrants tried to get their foot in the economic door by working for a training wage as well. However, many of them weren’t as lucky as I was. As the number of jobs covered by minimum wages increased, black teenage employment, which was comparable to that of whites in 1955, declined in parallel.
Of course, 1955 was half a century ago, so contemporary leftists might not want to do the research about it.
Thankfully, we can see what is happening in Seattle today, and try to avoid those mistakes in our own communities.
The economy depends on us learning about these things and spreading the word.