Thursday, February 14, 2013

HOT New York Times: The Right Minimum Wage Should Be $0.00

Well, at one time, NYT understood basis economics and the harm of minimum wage laws. Below is a January 1987 NYT editorial:
The Right Minimum Wage: $0.00

The Federal minimum wage has been frozen at $3.35 an hour for six years. In some states, it now compares unfavorably even with welfare benefits available without working. It's no wonder then that Edward Kennedy, the new chairman of the Senate Labor Committee, is being pressed by organized labor to battle for an increase.

No wonder, but still a mistake. Anyone working in America surely deserves a better living standard than can be managed on $3.35 an hour. But there's a virtual consensus among economists that the minimum wage is an idea whose time has passed. Raising the minimum wage by a substantial amount would price working poor people out of the job market. A far better way to help them would be to subsidize their wages or - better yet - help them acquire the skills needed to earn more on their own.

An increase in the minimum wage to, say, $4.35 would restore the purchasing power of bottom-tier wages. It would also permit a minimum-wage breadwinner to earn almost enough to keep a family of three above the official poverty line. There are catches, however. It would increase employers' incentives to evade the law, expanding the underground economy. More important, it would increase unemployment: Raise the legal minimum price of labor above the productivity of the least skilled workers and fewer will be hired.

If a higher minimum means fewer jobs, why does it remain on the agenda of some liberals? A higher minimum would undoubtedly raise the living standard of the majority of low-wage workers who could keep their jobs. That gain, it is argued, would justify the sacrifice of the minority who became unemployable. The argument isn't convincing. Those at greatest risk from a higher minimum would be young, poor workers, who already face formidable barriers to getting and keeping jobs. Indeed, President Reagan has proposed a lower minimum wage just to improve their chances of finding work.

Perhaps the mistake here is to accept the limited terms of the debate. The working poor obviously deserve a better shake. But it should not surpass our ingenuity or generosity to help some of them without hurting others. Here are two means toward that end: Wage supplements. Government might subsidize low wages with cash or payments for medical insurance, pensions or Social Security taxes. Alternatively, Washington could enlarge the existing earned income tax credit, a ''negative'' income tax paying up to $800 a year to working poor families. This would permit better targeting, since minimum-wage workers in affluent families would not be eligible. Training and education. The alternative to supplementing income for the least skilled workers is to raise their earning power in a free labor market. In the last two decades, dozens of programs to do that have produced mixed results at a very high cost. But the concept isn't necessarily at fault; nurturing the potential of individuals raised in poverty is very difficult. A humane society would learn from its mistakes and keep trying.

The idea of using a minimum wage to overcome poverty is old, honorable - and fundamentally flawed. It's time to put this hoary debate behind us, and find a better way to improve the lives of people who work very hard for very little.

(ht Mark Perry)

15 comments:

  1. Partly sound, but the negative income tax and wage subsidies sound like Freidman's influence.

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    1. IN the 50's I chopped cotton for 2.50 dollars a day. That's 10 silver quarters. At six dollars each, that would be around 60 dollars in todays money. People working for minimum wage today are still Chopping Cotton back in the 50's. The best wage was when people made a dollar an hour. 32 silver quarters At 6.00 dollars would be almost 200 dollars a day. Man have they screwed with the money.

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  2. You had better read that NYT editorial again. It does not say the minimum wage should be zero. It contemplates a smaller increase in the then existing minimum wage along with additional forms of govt economic support for the poor.

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    1. Sorry, Ed. You didn't read everything. Start with the title and try to put the rest into context with the title. It is a basic English requirement in High School to do that. Sorry if you didn't pass.

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  3. No minimum wage? Oh the horror!! And be just like Austria, China, Denmark, Finland, Iceland and Germany??

    https://en.wikipedia.org/wiki/List_of_minimum_wages_by_country

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    1. Spoken like someone who has never been to those countries. They do not have minimum wages but all of them (except China) have strong unions which decide the wages. Oh the horror!

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    2. Not too strong if you ask me. Only around a fifth of employees in Germany are union members.
      http://www.worker-participation.eu/National-Industrial-Relations/Countries/Germany/Trade-Unions

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    3. And youth unemployment in Germany is extremely low by European standards.

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    4. Not true. Almost all workers in Germany are unionized in one form or another. They have to be in order to receive health and pension benefits. I worked as a truck driver there for the DOD for a decade, I know for a fact, that the above statement to be true. Now, you quoted a Trade Union statistic, sure, I agree. Not everyone is in a trade union. Understand that not all unions in Germany are trade unions. Trade Unions represent skilled workers. Even as a US government employee, I had to join the KFG (Kraftfahrergewerkschaft) as an non contractual member, meaning I couldn't strike when the union struck nationally.

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  4. You had better read that NYT editorial again. It does not say the minimum wage should be zero. It contemplates a smaller increase in the then existing minimum wage along with additional forms of govt economic support for the poor.

    An incredible degree of reading comprehension failure on your part. The Right Minimum Wage: $0.00 is the title of the editorial. Follow the link to the NYT site and you'll see it there as well. Also, your claim is not supported by the text either.

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  5. They were half right , and half utterly wrong . This was the 80's though and Friedmans popularity still had not waned . Ive always had this nagging feeling that the New York times is just put out there to intentionally make capitalism look bad through the use of straw man arguments and other such logical fallacies . Im not one for conspiracies but its one editorial after the other .

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    1. This would imply that the NYT - at least since they sacked Henry Hazlitt - has a grasp of logical reasoning.

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    2. Theyre capable of it at times, when theyre not under the spell of Keynes and Krugman .

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  6. High earning manufacturing owners closed their plants and took those jobs to China ( to fatten their bottom line). Workers making $12-14 and hour were left to work in service jobs that pay less.
    Now some skilled jobs pay lower wages. But much higher prices are the norm. These workers pay the same price for groceries and at the gas pump, and SALES TAXES. Our OHIO governor KASICH wants to cut back sales taxes but apply it to more exempted things. Who will that hurt ? Companies are being forced to pay higher wages to lure back workers to do these jobs.

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  7. The Federal Reserve creates money out of nothing for the Big Five Banks, which exert oligopoly control over credit in the United States. Since it is impossible for a company to survive without credit in an inflationary economy, all major corporations are under the control of the central bankers. The US economy is just as centralized as the Soviet Union's.

    Thus worker wages in the US economy are determined not by free market competition but by dictate of the central financial authority. This was described as long ago as the 1930s, in the novel Grapes of Wrath, in which a California farmer states that bankers tell him how much he can hire workers for. Does that require documentation, or is it intuitively obvious that bankers would do something like that?

    The paper mache government in Washington DC may set 'minimum wages' but that is irrelevant as the central bankers who control the real government on Wall Street determine the 'maximum wage' for the hardest working people of this country.

    A rise in the minimum wage would cause US unemployment to rise only if the US had a free market economy. What the US has instead is a centrally planned socialist economy designed to redistribute wealth on behalf of parasitical financial controllers, and in which people who provide essential services are paid so little that they are forced into the humiliation of public assistance and portrayed by 'libertarian economists' as petulant moochers demanding more than they are worth.

    Thus they starve of us of fair market wages, then give back a small portion of what they stole from us, and call it 'public assistance.'



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