'Living wage' will hurt the poor

Although Nader will probably not win the election, his spoiler role in allowing a Bush victory (at least, that's how it plays as of this writing—I may have egg on my face later tonight) will probably cause the Democratic Party to shift to the left in a scramble to co-opt Green Party ideas. While they certainly won't go all the way, one idea they're virtually guaranteed to support is a minimum wage hike into a "living wage." While the number isn't set in stone, generally it's considered that a $8 to $10 an hour wage would meet the criteria. The current Federal minimum wage is $5.15.

Supporters of this initiative say that this would enable poorer families to feed and clothe their children, particularly minorities and single mothers. The fact of the matter, though, is that poor minorities and single mothers are those who suffer under minimum wage increases.

According to the Washington Post, over 90% of economists agree that minimum wage increases destroy entry-level jobs. Blacks, teenagers, and women primarily hold these jobs. A look at the numbers confirms this. After the last minimum wage hike in 1996, the Monthly Labor Review showed that black unemployment went up by 3.8%, teenage unemployment increased 2.4% and among women heading households, unemployment increased 7.1%. This happened despite an overall decline in unemployment. When the most recent minimum wage hike was being discussed, a New York Times editorial praised the increase, stating that it would destroy "only" about 100,000 jobs. That is 100,000 people who suddenly do not have money. The numbers are even more distressing if you consider this—the last raise in the minimum wage was only an increase of $0.40 an hour. Just sticking with the New York Times numbers, if unemployment increases by 100,000 jobs per $0.40 increase, then a "living wage" of $10.00 an hour would mean that 1.2 million people would be out of work. Even a more modest hike to $8.00 would result in over 700,000 jobs lost.

Not only will there be an increase in unemployment caused by inflation, but consider the inflationary effects. There's no such thing as a free lunch, as the saying goes. The money for higher wages will almost certainly be paid for in higher prices. This is because even though only 3.7 million people are currently minimum wage earners, a substantial part of the population probably earns wages between $5.15 and $10.00 an hour. And all of those salaries will have to increase. So there will certainly be an increase in prices. These price increases will also almost certainly occur in areas where the most minimum wage help is employed—namely, agriculture, restaurants, clothing, and in service jobs such as cashiers, janitors, etc. So the things that the poor need most-food and clothing—will be substantially more expensive. Not only that, but because of the unemployment problems, they'll have to wait longer in lines at stores, and deal with the dirtier environments caused by the "letting go" of a janitor or two. None of these things will affect the rich.

Nobel Prize winning economist Milton Friedman calls the minimum wage laws "the most anti-black laws on the books." He's part right—it's also anti-teenager and anti-single mother. The proponents of a "living wage," though well intentioned, would substantially hurt the poor. It would put many out of work, raise the prices of essential goods, and cause an overall decline in the quality of life.