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The Injustice of the Minimum Wage

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Liberals justify their support of America’s massive welfare state by citing their purported love for the poor, needy, and disadvantaged. That purported love, however, is belied by their support of a government-mandated minimum wage, given that the minimum wage hurts those most who are at the bottom of the economic ladder.

Let’s say that liberals get their way and secure an increase in the minimum wage to $15 an hour. That means that everyone whose labor is valued in the marketplace at less than $15 an hour is going to go unemployed. That inevitably means those at the bottom of the economic ladder — i.e., the poor, needy, and disadvantaged who liberals say they love.

This is what liberals just don’t get. They cannot look beyond the simplistic idea of enacting a law to abolish poverty. That has always struck me as amazing. If abolishing poverty could be done by enacting laws, wouldn’t every nation in the world be wealthy? All that every country would have to do is just start passing laws and no one would be poor ever again.

But we know that there are countries where the poor have standards of living far below what exists for the poor here in the United States. Consider, for example, countries like North Korea, Venezuela, and Cuba. In all three countries, people are on are the verge of starvation.

Then, why the poverty in North Korea, Venezuela, and Cuba? Why don’t they just raise their minimum wage to the equivalent of $15 an hour? Or how about $100 an hour? Surely the public officials in those countries have come across what liberals are proposing for the United States?

In fact, all three of those countries are ones where the government wields omnipotent control over economic activity and what people do with their money. That is, as much as the U.S. government regulates and controls the economic activities and economic decision-making of the American people, the governments in those countries do it a lot more.

And that’s something else liberals just don’t get — that the reason why the poor in those three countries are so bad off economically is precisely because their respective government regulates and controls economic activity, oftentimes in the name of helping the poor, needy, and disdvantaged.

Here’s the important principle to note: The more economic control and regulation, the greater the poverty. The less economic control and regulation, the less the poverty.

That’s why the poor here in the United States have a higher standard of living than the poor in North Korea, Venezuela, and Cuba. The U.S. government exercises less control over the economic activity of the American people than the governments in those countries exercise over their citizenry.

The minimum wage provides a perfect example of how economic regulation hurts poor people. The fact is that there are certain people whose labor is valued by employers in the marketplace at less than $15 an hour. Consider inner-city black teenagers, for instance. They lack the work skills, knowledge, education, and experience that would induce an employer to pay them $15 an hour.

Now, liberals can rail all they want against American employers. They can say: “You should hire those black teenagers. You have plenty of money to do so. Why are you bigoted? Don’t be so greedy.” But such rants will do no good. Businessmen are in business to make a profit, not a loss. It’s irrational for a profit-seeking businessman to hire someone at $15 an hour whose labor is worth, say, $8 an hour.

That’s why there has long been a chronic unemployment rate of 30-40 percent among black teenagers. The minimum wage locks them out of the labor market. The law keeps them unemployed.

Imagine this scenario: Suppose a black teenager approaches an employer and says, “I’ll do that job that that rich white kid is doing for $15 but I’ll do it for $7.50 an hour. And I’ll work twice as hard has he works.”

Now, what does the employer do? He could cut his labor cost in half by hiring the black kid. The employer might even be a bigot. But now he has to bear a cost for his bigotry if he lets it control his economic decision-making. The rational thing to do is to hire the black teenager.

Why would the black teenager be willing to work at such a low wage? For the same reason so many rich white kids work for free as interns in Washington, D.C.: to learn work skills, to get experience, and to accumulate knowledge, all of which will make the employee more marketable.

The next time you walk into a restaurant, notice the young people working there. They are learning how to treat customers. They’re learning the importance of getting to work on time. They’re learning how to interrelate with a boss. They’re learning how a business operates.

The government-mandated minimum wage prevents black teenagers, along with everyone else whose labor is valued at less than $15 an hour, from learning any of those things. The minimum wage consigns them to unemployment. It sends them into welfare, where some of them remain dependent the rest of their lives, not only because the dole becomes like heroin (See Social Security recipients) but also because they were denied the opportunity to learn work skills and get experience during the most formative years of their lives. Even worse, many of them are induced to get into the drug trade to make money, which then enables the state, if it catches them, to send them away to the penitentiary for the next 20 or 30 years.

There is another factor to consider here. Imagine how many black entrepreneurs in the inner cities could start up businesses if there was no minimum wage law. They could start up the business by hiring black teenagers in the area at, say, $5 an hour. Everyone would benefit — the teenagers, the business owners, and the consumers. Alas, owing to minimum wage laws, we never see those businesses come into existence. It’s what libertarian economists Frederic Bastiat and Henry Hazlitt termed the unseen consequences of government programs.

America desperately needs one of those great awakenings that we read about in history. Wouldn’t it be wonderful if it began among the poorest people in our society, since they are the ones who are paying the biggest price for the destruction of economic liberty in America? Wouldn’t it be great to see the streets filled with protestors — maybe even led by America’s unemployed black youth — demanding an end to the minimum wage?

This post was written by:

Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.