Book: Minimum wage lowers earnings, produces unemployment

posted at 10:59 am on December 15, 2008 by Ed Morrissey

For decades, lawmakers in the US have tried showing solidarity with the working class by championing the minumum wage and demanding increases in it.  In the 110th Congress, Democrats could point to the minimum-wage hike as their only real accomplishment — and even that came as an amendment to funding the war in Iraq.  Now a new book by a professor of economics at UCI and an associate director of research and statistics at the Federal Reserve Board argue that these efforts do more to hurt the working class by lowering real earnings and eliminating job opportunities:

In this book, David Neumark and William Wascher offer a comprehensive overview of the evidence on the economic effects of minimum wages. Synthesizing nearly two decades of their own research and reviewing other research that touches on the same questions, Neumark and Wascher discuss the effects of minimum wages on employment and hours, the acquisition of skills, the wage and income distributions, longer-term labor market outcomes, prices, and the aggregate economy. Arguing that the usual focus on employment effects is too limiting, they present a broader, empirically based inquiry that will better inform policymakers about the costs and benefits of the minimum wage.

Based on their comprehensive reading of the evidence, Neumark and Wascher argue that minimum wages do not achieve the main goals set forth by their supporters. They reduce employment opportunities for less-skilled workers and tend to reduce their earnings; they are not an effective means of reducing poverty; and they appear to have adverse longer-term effects on wages and earnings, in part by reducing the acquisition of human capital. The authors argue that policymakers should instead look for other tools to raise the wages of low-skill workers and to provide poor families with an acceptable standard of living.

The minimum-wage increases that enjoy such popularity among politicians generate much less enthusiasm among economists, and for good reason.  It artificially inflates the cost of labor, especially in low-skill markets, which pushes employers to either reduce their labor through automation or scale back on staffing.  The higher the cost of labor goes, the less competitive the lowest-skilled workers become.  Those businesses that cannot absorb the costs will pass them along to their customers, raising the cost of living and eventually eliminating whatever transient increase in actual buying power the wage increase produced — which prompts politicians to raise the floor again and start the cycle over.

We’ve repeatedly debated this issue at Hot Air and at Captain’s Quarters for years. The unemployment spike this summer among teenagers should have confirmed this. Most of the working poor make more than minimum wage, and for good reason: minimum wage positions are starter jobs. Even those positions only pay that rate at hire, not permanently, making the “they deserve a raise” argument ludicrous. Raises get determined by employers, not government, and the act of raising the floor rate actually dilutes performance-based increases and makes them less likely to occur. Most of the people making minimum wage aren’t poor anyway — they’re students and part-time workers who have to watch as opportunities to make extra money get narrowed by government-imposed rate increases.

Minimum Wages sounds like a great Christmas gift … for your Representatives and Senators. Offer that instead of the traditional lump of coal those bad boys and girls should get in ten days, as it may be a gift that eventually benefits us all. I’m adding it to my wish list for Christmas.


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Comment pages: 1 2

It’s sad that people are so ignorant of economics that they need this book.

To me it is like someone writing a book called “The Earth is Round.”

Bill C on December 15, 2008 at 11:10 AM

Please stop cluttering the matter with facts. Ideology trumps truth every time. Just ask Larry Summers.

Mark30339 on December 15, 2008 at 11:12 AM

If Congress does something, you can bet it’s exactly the wrong thing to do.

The member of Congress that are not criminals are idiots.

notagool on December 15, 2008 at 11:12 AM

I’ve been harping on this for at least twenty years. It’s good to finally have some backup. Many union contracts specify that the base wage employees get is a factor of the minimum wage. Most unions’ dues are X number of hours worth of wages. So, do we see any other reason a Democrat would love to raise the minimum wage besides, of course, all the good things it does for poor people?

Kafir on December 15, 2008 at 11:13 AM

This has been known for decades. Ask any economist who isn’t employed by the Democrats or unions.

The minimum wage was first implemented as a way to prevent blacks from competing with whites. It was then used as a way to prevent non-union labor from competing with union labor.

MarkTheGreat on December 15, 2008 at 11:15 AM

Ed,

Would you mind telling us what, if anything, Amazon pays you if we by the book from them, using your link? I hope you don’t mind the prying.

factoid on December 15, 2008 at 11:15 AM

Minimum wage lowers earnings, produces unemployment

That’s not what Paul Krugman says. And he’s in the NY Times so it must be true.

BacaDog on December 15, 2008 at 11:15 AM

The only thing low skilled workers need to improve their wages is the gumption to show up to work everyday and actually do what they are paid to do.

There is no govt program that will provide these skills.

MarkTheGreat on December 15, 2008 at 11:17 AM

Why does so much effort go into something that is so obvious…

right2bright on December 15, 2008 at 11:19 AM

Ed,

Would you mind telling us what, if anything, Amazon pays you if we by the book from them, using your link? I hope you don’t mind the prying.

factoid on December 15, 2008 at 11:15 AM

It depends on the volume…

right2bright on December 15, 2008 at 11:19 AM

Most of the people making minimum wage aren’t poor anyway — they’re students and part-time workers who have to watch as opportunities to make extra money get narrowed by government-imposed rate increases.

I’d like to see statistics to back this up. Still, the point of the book is well taken. I’ve never understood why Democrats consistently support minimum wage increases, especially because it is their constituents the (minorities, working poor) who are disproportionately hurt.

crr6 on December 15, 2008 at 11:21 AM

Sadly we need a ‘special’ book to tell us what common sense would have predicted.

And the book won’t UNDO the damage our education system has installed in all those young minds.

Sir Napsalot on December 15, 2008 at 11:21 AM

As someone who can count to 20 without taking off my shoes, my reaction to this is… DUH!!

I have no doubt that politicians are aware of this… they just don’t give a damn. They would rather shore up the votes of the ignorant and uninformed than truly act in their best interests. Filthy corrupt lying bastards.

CantCureStupid on December 15, 2008 at 11:22 AM

Those businesses that cannot absorb the costs will pass them along to their customers,

There is no such thing as a business that can “absorb the costs”.

By attempting to “absorb the costs”, the business reduces it’s profit margin. This loss in profit margin makes it harder for the company to attract investment and makes it more vulnerable to the next downturn in the business cycle.

Trying to “absorb the costs” merely results in the company going out of business.

Some companies try to compensate for higher wage costs among some workers by lowering wages for other categories of workers. The result here is that the best workers will leave for companies that have found some other way to adjust for the higher minimum wage. Once again, death to the company.

Some companies adjust by raising prices. Which lowers demand for the product, which means that workers across the board are going to lose their jobs.

The only long term solution to higher wages is more productivity, which means automation. That is fewer workers doing more work.

Ultimately, higher minimum wage results in the elimination of low skill, entry level jobs.

MarkTheGreat on December 15, 2008 at 11:23 AM

Why does so much effort go into something that is so obvious…

right2bright on December 15, 2008 at 11:19 AM

Because there is a hidden agenda.

MarkTheGreat on December 15, 2008 at 11:24 AM

crr6 on December 15, 2008 at 11:21 AM

Come on, crr6. Don’t pretend you don’t understand such measure ‘hurt their constituents disproportionately’.

This is to ensure the Dems have a permenant power base.

Sir Napsalot on December 15, 2008 at 11:24 AM

That’s not what Paul Krugman says. And he’s in the NY Times so it must be true.

BacaDog on December 15, 2008 at 11:15 AM

Yeah, he did an excellent job as Enron’s financial advisor.

Oh, wait….

Vic on December 15, 2008 at 11:24 AM

The minimum wage was first implemented as a way to prevent blacks from competing with whites. It was then used as a way to prevent non-union labor from competing with union labor.

MarkTheGreat on December 15, 2008 at 11:15 AM

Hey, can you explain to me how that works? I don’t get the black/white thing at all. The union/non-union thing seems plain wrong. If a unionized auto worker makes $29/hour, then how is a $6.55 minimum wage preventing non-union labor from competing with union labor? At $6.55 the non-union guy is not competitive, but if we could legally pay him only $5/hour then he’d be competitive? What am I missing?

factoid on December 15, 2008 at 11:25 AM

crr6 on December 15, 2008 at 11:21 AM

You’d argue with a fence post if it appeared to be leaning to the right.

thomasaur on December 15, 2008 at 11:25 AM

I’d like to see statistics to back this up.

crr6 on December 15, 2008 at 11:21 AM

I’ve seen these statistics. Though I’m not sure where to find them right now.

MarkTheGreat on December 15, 2008 at 11:25 AM

Hey, can you explain to me how that works? I don’t get the black/white thing at all. The union/non-union thing seems plain wrong. If a unionized auto worker makes $29/hour, then how is a $6.55 minimum wage preventing non-union labor from competing with union labor? At $6.55 the non-union guy is not competitive, but if we could legally pay him only $5/hour then he’d be competitive? What am I missing?

factoid on December 15, 2008 at 11:25 AM

Not all union members make $29/hr. Many, especially in construction fields, make a lot less.

MarkTheGreat on December 15, 2008 at 11:28 AM

Ed,

Would you mind telling us what, if anything, Amazon pays you if we by the book from them, using your link? I hope you don’t mind the prying.

factoid on December 15, 2008 at 11:15 AM

Probably not minimum wage.

James on December 15, 2008 at 11:31 AM

Ed, up here in the CCCP of WA, the politically correct, publically appropriate phrase for Minimum Wage is Living Wage.

When our politicians raised the Minimum Wage , one of their stated purposes was because “families needed a Living Wage“.

When did this description change?

SouthernRoots on December 15, 2008 at 11:32 AM

Not all union members make $29/hr. Many, especially in construction fields, make a lot less.

MarkTheGreat on December 15, 2008 at 11:28 AM

OK, so Bob the builder is in the union. He makes a lot less then $29/hr, but still, I suppose he makes more than minimum wage, otherwise there wouldn’t be much point in having a union, would there? Ben, on the other hand, is not in the union. Explain to me how the existence of a minimum wage makes Ben more competitive. Sorry, I just don’t get it.

factoid on December 15, 2008 at 11:33 AM

This illustrates the paradox of the Libs. This crap sounds good, but just beneath the surface is disaster.

marklmail on December 15, 2008 at 11:35 AM

I should have written a book. I knew this after my first high school macro class.

Vashta.Nerada on December 15, 2008 at 11:35 AM

The minimum wage is just another example of visible benefits and hidden costs. You can calculate and see the increased income of a person employed at the minimum wage but you never see the zero wages of the unemployed or never employed.

jerryofva on December 15, 2008 at 11:35 AM

The minimum-wage increases that enjoy such popularity among politicians generate much less enthusiasm among economists, and for good reason.

Of course it does….because they’re greedy b@stards!

The serfs in this country already get taken advantage of enough..to get rid of the minimum wage in this country is to cross the line between humanity and animal greed.

Let me ask you something..

Why do you think that politicians, such as John Mccain and Bush, promote illegal immigration and amnesty for illegal aliens?

Obviously to create a new slave class.

This is the propaganda they use to promote that.

SaintOlaf on December 15, 2008 at 11:36 AM

We have to remember, what is important is electing as many Democrats as possible.

The minimum wage is popular among people who are ignorant when it comes to economics.

And it’s pushed by cynical, corrupt Democrat Party liars, who contribute nothing to this country, while sucking the very life blood out of it.

With the media merely the marionettes for the absolutely worthless Democrat Party, who is left to educate the public?

NoDonkey on December 15, 2008 at 11:39 AM

I can remember when I was going to college how much I appreciated having that minimum wage job to help supplement my education. This was before we had all the problems with illegals competing for the same work.

DL13 on December 15, 2008 at 11:44 AM

factoid,

Your example is also not factoring in the existence of labor protectionist laws like Davis-Bacon (and associated “Little Davis-Bacon” state laws).

Karl on December 15, 2008 at 11:45 AM

Hey, can you explain to me how that works? I don’t get the black/white thing at all. The union/non-union thing seems plain wrong. If a unionized auto worker makes $29/hour, then how is a $6.55 minimum wage preventing non-union labor from competing with union labor? At $6.55 the non-union guy is not competitive, but if we could legally pay him only $5/hour then he’d be competitive? What am I missing?

factoid on December 15, 2008 at 11:25 AM

When the minimum wage was first implemented, blacks were willing to work for less money than whites, and so any employer that could get past his own racism would hire more blacks than whites. With the minimum wage in place, racism became a dominant factor in minimum wage level hiring.

Also, nominal wages do not need to be the same in order for workers to be competing. Capital starts to play a factor. With mechanization, one worker can do a job that might otherwise take four, five, or even more than ten workers. Plus, there are costs imposed by the unions in terms of fighting against unionization.

Count to 10 on December 15, 2008 at 11:45 AM

Sorry, I just don’t get it.

factoid on December 15, 2008 at 11:33 AM

When you don’t want to get it, you never will.

MarkTheGreat on December 15, 2008 at 11:46 AM

I can remember when I was going to college how much I appreciated having that minimum wage job to help supplement my education. This was before we had all the problems with illegals competing for the same work.

DL13 on December 15, 2008 at 11:44 AM

To some extent, the minimum wage is why we have an illegal immigration problem.

Count to 10 on December 15, 2008 at 11:47 AM

This illustrates the paradox of the Libs. This crap sounds good, but just beneath the surface is disaster.

marklmail on December 15, 2008 at 11:35 AM

For a lib, doing good doesn’t matter. What matters is how do they feel.

Raising the minimum wage allows them to feel good about themselves. They did something about poverty, and it didn’t cost them a penny.

MarkTheGreat on December 15, 2008 at 11:48 AM

Anyone that paid attention in Econ 101 already knows this. It is a shame a whole book is needed to explain this basic fact.

Buford on December 15, 2008 at 11:56 AM

When the Defense Industry tanked after the end of the Cold War, one of the jobs I took was at a foundry. I learned a trade in mechanical inspection and was able to move up quickly due to my college education and hunger to do better.

We had a union representation of about 5 people amongst the 120 total in employees.

One of the items I remember well was the move back in 1994 to up the minimum wage. Not exactly sure what the amount was, but it was less than $6/hr.

The GM of the facility used to joke about it. See, we needed people to sweep the sand from the castings off the floor and dump it back into the main system.

THE JOB PAID $10/HR STARTING

We still had problems getting people to sweep at $10/hr. There was overtime, health benefits, 401k matching, AND MONTHLY PROFIT SHARING THAT AMOUNTED UP TO $500/MONTH!

I have never like the minimum wage. Employers here in AZ used to get by hiring illegal aliens. Now look what that has done to this country.

jdubya on December 15, 2008 at 11:56 AM

This is why economics needs to be brought back into the curriculum in High School.
But it needs to be taught truthfully; not through multicultural propaganda.

Badger40 on December 15, 2008 at 12:02 PM

For a lib, doing good doesn’t matter. What matters is how do they feel.

Raising the minimum wage allows them to feel good about themselves. They did something about poverty, and it didn’t cost them a penny.

MarkTheGreat on December 15, 2008 at 11:48 AM

Let’s not get too cocky. I don’t think Reaganomics was any better for impoverished Americans than a minimum wage.

You’d argue with a fence post if it appeared to be leaning to the right.

thomasaur on December 15, 2008 at 11:25 AM

I was agreeing with Ed…

SaintOlaf on December 15, 2008 at 11:36 AM

Wow, that post was only mildly paranoid and schizophrenic. That’s not too bad for you.

crr6 on December 15, 2008 at 12:02 PM

I have never like the minimum wage. Employers here in AZ used to get by hiring illegal aliens. Now look what that has done to this country.

jdubya on December 15, 2008 at 11:56 AM

Yes. Exactly. That is why they come here. It we quit this crap, they will leave, stay in their own country, and have motivation to fix what is wrong with them in the first place.

Badger40 on December 15, 2008 at 12:04 PM

The three editorial reviews are brief, but it may well be worth reading…just to shore up the argument Rush has been making for the past twenty years.
You are right, Mark the Great. It’s all about feeling good, not doing good. That’s easy to do when you’re doing it with someone else’s money.

SKYFOX on December 15, 2008 at 12:05 PM

The unemployment spike this summer among teenagers should have confirmed this.

I’m sorry I must be stupid I thought the recession caused this.

I am still of the opinion that far to many companies use the minimum wage like speed limit. They refuse to pay more than it while corporate boards do their best to keep wages as close to it as possible.

Think of this McDonalds make millions yet pay their employees minimum wage. Their prices depend on the economy thus the wage went up but their prices down recently.

Bosses hate minimum wage because they know it will raise their costs. That is all they care about.

This book is not based on the reality of minimum wage rather the reality of forcing employment cost down at all cost.

Steveangell on December 15, 2008 at 12:06 PM

I’ve long maintained that the minimum wage functions as a D.C. (Direct Current, not Washington) offset on the economy. i.e., for the non-engineer, it is simply a base level upon which the rest of the economy then sets itself. It doesn’t matter if that minimum wage is $2 per hour or $20 per hour, it will function as the set-point for the price of goods and services, all other wages and prices being adjusted in accordance with whatever the arbitrary minimum wage number happens to be. People earning minimum wage benefit slightly when the wage is raised, but the economy adjusts to the new level, with prices going up in accordance with the new costs and those at minimum wage wind up exactly where they were before — just using bigger numbers. During the transient adjustment, people who would have been entering the job market are denied entry because businesses are adjusting their costs and margins and thus not hiring, thus the overall effect on the economy when the wage is raised is negative. The only damper on this issue is that the higher the minimum wage is set,the less competitive our goods become with goods manufactured overseas in countries that are not burdened by this offset function or where the function is set at a much lower level.

AZfederalist on December 15, 2008 at 12:09 PM

For a lib, doing good doesn’t matter. What matters is how do they feel.

Raising the minimum wage allows them to feel good about themselves. They did something about poverty, and it didn’t cost them a penny.

MarkTheGreat on December 15, 2008 at 11:48 AM

I’m not quite sure about this. I have no doubt that they thought they were positively affecting the equation — making those workers’ lives better.

I think our entire economy has adjusted to the minimum wage to the point where the only time jobs are lost is when the wage increases and employers have to wait for inflation to adjust itself. I suspect there’s a strong correlation to minimum wage and rate of inflation. I doubt there is a correlation in the long term between the minimum wage and the number of workers hired, because a worker is only capable of doing so much work, and if an employer needs more work done, they will hire more people at the cost of those people. Remember, the only reason an employer needs more work done is if they are turning a profit. Hence, the effects of a minimum wage is passed on to every buyer of that employer’s products. If the products can only be made locally, fine. But if the products can be made cheaper in some third world country, the work will migrate there, even if there were no minimum wage here, just due to cost of living in an American city.

I think the transition of our jobs overseas due to globalization of the economy is the real reason employment is down here. An employer can hire two or three people in China for the same amount of money as they would expend hiring one here. We have, even with the minimum wage, jobs here that few native born people will do — farm work is a classic example. Everyone wants to live in the city, and living in the city costs money.

Every part of our economy is adjusted to having a minimum wage. I think the most interesting question would be: What would happen if the minimum wage were abolished?

I’m not sure we’d like the answer.

unclesmrgol on December 15, 2008 at 12:09 PM

I’m sorry I must be stupid

I would have to agree.

the minimum wage is a joke. its all about making politicians feel good, and union thugs raising their wages, which are often indexed to the minimum wage rising…

right4life on December 15, 2008 at 12:11 PM

Every part of our economy is adjusted to having a minimum wage. I think the most interesting question would be: What would happen if the minimum wage were abolished?

I’m not sure we’d like the answer.

unclesmrgol on December 15, 2008 at 12:09 PM

I sure would. the illegal immigrants would not.

the government should NOT be involved in wage or price considerations at all.

right4life on December 15, 2008 at 12:12 PM

“Bosses hate minimum wage because they know it will raise their costs. That is all they care about.”

I thought it was profits?

Seems to me, if businesses were permitted to set wages at what labor is worth, rather than some arbitrary figure dreamed up by some worthless lawyer/legislature, who has never done an honest day’s work in his life, than that would lower costs and therefore prices for all of us.

And that would include those at the bottom of the economic ladder. Who would have more employment opportunities than ever before.

But we’re sold this bill of goods, that anyone who employs people is “greedy”, while worthless and corrupt lawyer/politicians, are Robin Hood.

NoDonkey on December 15, 2008 at 12:14 PM

Paul Krugman could not be reached for comment

Bevan on December 15, 2008 at 12:15 PM

“Paul Krugman could not be reached for comment”

Check Obama’s colon, ol’ Paul has a desk set up there alongside Maureen Dowd’s.

NoDonkey on December 15, 2008 at 12:17 PM

It’s sad that people are so ignorant of economics that they need this book.

To me it is like someone writing a book called “The Earth is Round.”

Bill C on December 15, 2008 at 11:10 AM

Unfortunately, Supply and Demand represent roughly two concepts more than the average moonbat is capable of grasping at one time.

Why on earth would anyone imagine that a bunch of squiggly lines on some bound sheets of paper can magically change that?

logis on December 15, 2008 at 12:19 PM

When our politicians raised the Minimum Wage , one of their stated purposes was because “families needed a Living Wage“.

When did this description change?

It changed at the same time that Social Security Insurance changed to Payroll Tax

One of the other consequences of the minimum wage is the underground economy. I have lived in CA and NY. Anyone living in those two states knows that there is a huge underground cash economy. If I were to contract for a new roof, I would be given two prices; the cash price and the official price.

The cash price is generally 15% cheaper than the official price. It also circumvents sales tax, which can be considerable on a big job. The workers employed have no job security, benefits (like SSI and workers comp), or enforced work standards. The higher the minimum wage is raised, the more appealing a cash economy becomes.

Babs on December 15, 2008 at 12:32 PM

I’m sorry I must be stupid I thought the recession caused this.

You’ve got the chicken and egg scenario wrong. The minimum wage hike came first, then came recession. We’ve only been in a recession for one quarter, maybe two.

I am still of the opinion that far to many companies use the minimum wage like speed limit. They refuse to pay more than it while corporate boards do their best to keep wages as close to it as possible.

They do that with brand new employees, yes. But these companies do give out raises if you stay there long enough. In fact, if you stay at McDonald’s long enough and actually do your job, you can easily become a manager.

Their prices depend on the economy thus the wage went up but their prices down recently.

So what do you think these greedy bosses did to lower costs? Likely fired a few people.

Bosses hate minimum wage because they know it will raise their costs. That is all they care about.

What else are they supposed to care about? They’re trying to run a business. If the business is unprofitable, their employees don’t even have a job.

This book is not based on the reality of minimum wage rather the reality of forcing employment cost down at all cost.

Steveangell on December 15, 2008 at 12:06 PM

Says an obvious liberal who never read the book and very clearly doesn’t know what he’s talking about.

Esthier on December 15, 2008 at 12:34 PM

When you don’t want to get it, you never will.

MarkTheGreat on December 15, 2008 at 11:46 AM

There’s no reason to respond like that. I don’t get your point either.

At first I thought you were saying that with higher wages, all employees would join the union (thus making minimum wage not competetive), but you seem to be going in a different direction and I really don’t get the point.

Esthier on December 15, 2008 at 12:36 PM

If you want to stop illegal immigration you can do one of three things.

1) Make illegal immigration legal. That is, continue to allow millions of foreigners to come to this country, but instead of calling it illegal, now declare the conduct legal.

That was essentially the Bush-McCain immigration reform proposal back in 2006. Failed miserably.

2) Do radically more enforcement. Build the equivalent of 300 Berlin walls along the southern border. Hire, train and station tens of thousands of guards along it to make sure no-one climbs over. Round up the 10-12 million illegals in the country and throw them back over the wall.

I have my doubts about the financial feasibility of that approach to begin with, but one thing I am certain of: It’s not going to be anywhere near the top of the agenda for the four years starting on 1/20/2009.

3) Set a high minimum wage and enforce it mercilessly. That way employers will have no incentive to hire illegals — whose main competitive advantage is that they are willing to work for subminimum wages — and the US will stop being the lucrative destination it is now.

Weird as it may sound, if you are a conservative concerned about illegal immigration then, in the current political climate, your best, most pragmatic course of action is to join unions in calling for the enforcement of a high minimum wage.

factoid on December 15, 2008 at 12:40 PM

I sure would. the illegal immigrants would not.

the government should NOT be involved in wage or price considerations at all.

right4life on December 15, 2008 at 12:12 PM

Ah, illegal immigrants are the only folk who are subject to the minimum wage? I suspect that most illegal immigrants are being paid “under the table” a wage which is below the minimum wage. And that’s the fault of their employers, not the wage itself.

I offer an anecdote: About 15 years ago, the fence between my neighbors house and my house needed to be replaced. I made arrangements with my neighbor for a “work party” to build the new fence — I would obtain the materials, and he and I would put up the new fence on the weekend. When Saturday rolled around, I and some of my relatives showed up ready to work. The next door neighbor (a guy obviously unaccustomed to exercise) did not come out in his work clothes — instead he shows up with this Mexican laborer and says that the worker is his contribution to the crew. From his looks, the worker was a 60-something. We start work, and this Mexican is doing the work of two of me — and I’m no slacker. The guy doesn’t even know the concept of lunch — we have to force him to stop for the burgers and soda. None of us know Spanish, but the guy is obviously part of our team. At end of day, 12 hours later, next door boss shows up and pays the guy $25. Translation: about $2/hour. The guy was obviously not happy, but what could he do? He’s an illegal, and if he doesn’t want to be taken advantage of by fat-boss-next-door, there’s a bunch of guys desperate for work out in front of Home Depot who will. So we (my relatives and I) topped the guy’s stash off with “tips” to make his take $120 for the day (we felt that $10 per hour was reasonable for the physical work plus the fence-building tips the guy provided).

I suspect that this guy is living in conditions that neither you nor me would countenance, all so he can save a bit and send it back to his family in the village. But his attitude about work was far more American than that of the guy who hired him and then stiffed him with payment time came.

I have a bit of a soft spot for illegal immigrants — my grandfather in law was (may he rest in peace) Chinese, and he was illegal for most of his life — a “paper son”, but he worked hard his whole life, building up a business which, in the end, was taken by the city to build the offramp to the O’Malley family’s spanking new stadium up in Chavez Rivine, not too many decades after the first store he founded had been taken for building Union Station.

In the words of Abraham Lincoln:

I am not a Know-Nothing. How could I be? How can any one who abhors the oppression of Negroes be in favor of degrading classes of white people? Our progress in degeneracy appears to me pretty rapid. As a nation we began by declaring “all men are created equal.” We now practically read it, “all men are created equal, except Negroes.” When the Know-Nothings get control, it will read “all men are created equal, except Negroes, and foreigners, and Catholics.” When it comes to this I should prefer emigrating to some country where they make no pretense of loving liberty–to Russia, for example, where despotism can be taken pure and without the base alloy of hypocrisy.

Google “know-nothing” and notice how closely their feelings mirror yours.

unclesmrgol on December 15, 2008 at 12:43 PM

Count to 10 on December 15, 2008 at 11:45 AM

Thanks for explaining the black/white thing: how blacks, who had been willing to work for less than whites, lost out when the minimum wage was introduced and they were no longer allowed to sell their labor at a competitively low price.

Now see if you can translate that scenario into the current day, where illegal immigrants are willing to work for less than Americans…

factoid on December 15, 2008 at 12:45 PM

duh

JustTruth101 on December 15, 2008 at 12:46 PM

Weird as it may sound, if you are a conservative concerned about illegal immigration then, in the current political climate, your best, most pragmatic course of action is to join unions in calling for the enforcement of a high minimum wage.

factoid on December 15, 2008 at 12:40 PM

I’m sorry but that makes no sense to me. If we have a high minimum wage, that will only encourage businesses to pay illegals under the table. How in the world is it supposed to convince them to pay legals higher wages?

Esthier on December 15, 2008 at 12:48 PM

Telling an unskilled worker that he must not market his labor for less than $8.00 an hour is like telling a milk producer that he can’t sell a gallon of milk for less than $20. The result is the same: the worker doesn’t get hired, and the milk doesn’t get sold. What’s so complicated about that principle, anyway?

Cicero43 on December 15, 2008 at 12:50 PM

“Weird as it may sound, if you are a conservative concerned about illegal immigration then, in the current political climate, your best, most pragmatic course of action is to join unions in calling for the enforcement of a high minimum wage.

factoid on December 15, 2008 at 12:40 PM’

You can call for “enforcement” all you want, it’s not going to happen.

We are able to successfully enforce very few of our laws and there would be a huge economic incentive to circumvent high minimum wage laws.

What makes sense is to abolish minimum wages entirely and then there is one less useless law to enforce.

We need to get the government and law enforcement to do less, not more and to focus on the things that are really important.

Citizens pile more on the plate of government and then are astonished by the cost of government and the failure of government.

NoDonkey on December 15, 2008 at 12:53 PM

Esthier on December 15, 2008 at 12:48 PM

Notice that I said

join unions in calling for the enforcement of a high minimum wage

The key word being enforcement. Instead of jailing 100 Mexican illegals picking lettuce for $2.50 an hour, jail the one guy who pays them subminimum wage under the table and watch the Mexicans go home because they can’t find a job here anymore.

factoid on December 15, 2008 at 12:54 PM

The key word being enforcement. Instead of jailing 100 Mexican illegals picking lettuce for $2.50 an hour, jail the one guy who pays them subminimum wage under the table and watch the Mexicans go home because they can’t find a job here anymore.

factoid on December 15, 2008 at 12:54 PM

What about enforcing our laws that say people shouldn’t hire illegals in the first place? How’s that working out?

Esthier on December 15, 2008 at 12:56 PM

“The key word being enforcement. Instead of jailing 100 Mexican illegals picking lettuce for $2.50 an hour, jail the one guy who pays them subminimum wage under the table and watch the Mexicans go home because they can’t find a job here anymore.”

Isn’t going to happen, no how and no way.

We have drug dealers running around who have been busted 100 times with drugs, who have committed assaulties, theft, etc.

They’re not jailed.

And you really think they’re going to start jailing employers?

Unworkable, unrealistic, isn’t going to happen.

If you’re not willing to deal with reality, then don’t pretend to be offering a solution.

NoDonkey on December 15, 2008 at 12:57 PM

Unworkable, unrealistic, isn’t going to happen.

If you’re not willing to deal with reality, then don’t pretend to be offering a solution.

NoDonkey on December 15, 2008 at 12:57 PM

Kind of what I think about the “let’s build a wall” crowd…

factoid on December 15, 2008 at 12:59 PM

Most of the people making minimum wage aren’t poor anyway — they’re students and part-time workers who have to watch as opportunities to make extra money get narrowed by government-imposed rate increases.

I’d like to see statistics to back this up. Still, the point of the book is well taken. I’ve never understood why Democrats consistently support minimum wage increases, especially because it is their constituents the (minorities, working poor) who are disproportionately hurt.

crr6 on December 15, 2008 at 11:21 AM

It’s Census data. Current Population Survey too (BLS does annual statistical reports, poke around their site for them). It may be lurking in the Panel Survey of Income Dynamics as well.

EITC is a much, much better antipoverty policy than minimum wages, for the ability to statutorily target primary impact alone.

The bit about racial disparities in impact calls W.H. Hutt’s work to mind but I have to admit I haven’t read him in ages.

DrSteve on December 15, 2008 at 1:00 PM

Kind of what I think about the “let’s build a wall” crowd…

factoid on December 15, 2008 at 12:59 PM

Fair enough. There’s no perfect solution, but there’s no reason to expect we’d start enforcing one law when we clearly aren’t even enforcing immigration laws.

If we could enforce those laws, it wouldn’t be necessary to aggressively enforce minimum wage laws.

Esthier on December 15, 2008 at 1:02 PM

Let’s not get too cocky. I don’t think Reaganomics was any better for impoverished Americans than a minimum wage.

Then you are truely delusional.

Reaganomics brought propserity to this country after decades of liberal policies had eliminated it.

MarkTheGreat on December 15, 2008 at 1:09 PM

unclesmrgol on December 15, 2008 at 12:43 PM

Allow me to offer another view of the effect of Illegal Aliens …

Last year I witnessed a ChiTcago based contractor bringing in Illegal Aliens from ChiTcago, who mostly only understood Spanish, to build houses in a gated community within the state of Michigan.

They would show up in the morning in a van that had 2 seats. At least 5 would pour out, get their instructions from a translator, and begin their tasks. Of the 5 houses I watched them build, every one ended up with major construction flaws. Windows weren’t centered, walls weren’t supported correctly, and they never passed a single first building inspection. I was able to get one section of wall [12'x16'] in one of those houses to flap back and forth wildly by just pushing against it, and that one held the front door. I was told that the baloon wall would settle down after the drywall was installed. NOT!

At another house they had to build the set of stairs leading to the second floor 3 times. For 2 months the wood used to build the first set of stairs clutterd up the first floor, forcing sub-contractors to work around that.

They always left a mess, they never got it right the first time, and they definitely put a lot of good builders out of a job. In order to work they broke many of the laws instituted to keep people safe. The only one more incompetent on those jobs was the ChiTcago based contractor. I look forward to the day that I can report them all without creating a negative effect on my employer.

I hope your house wasn’t build by them. You would end up regretting the purchase.

DannoJyd on December 15, 2008 at 1:09 PM

Now see if you can translate that scenario into the current day, where illegal immigrants are willing to work for less than Americans…

factoid on December 15, 2008 at 12:45 PM

Simple–illegal immigrants are already working illegally, and so working for less than minimum wage is comparatively a small risk. The higher this minimum wage is, the more incentive there is for illegal labor.

Count to 10 on December 15, 2008 at 1:09 PM

“Kind of what I think about the “let’s build a wall” crowd…

factoid on December 15, 2008 at 12:59 PM”

Me too.

The political will is not there.

Although if things get really bad economically, all of that PC nonsense will go out the window, quick.

We haven’t reached that point yet.

NoDonkey on December 15, 2008 at 1:10 PM

Steveangell on December 15, 2008 at 12:06 PM

Business’s exist for one purpose and one purpose only. To make money for those who own the business.
Any business that forgets this fact will go out of business, and deservedly so.

Of course businessmen want to pay as little as they can for labor. Just like they want to pay as little as they can for every other factor that goes into their final product.

If you want to make more, make yourself worth more. Don’t wait for the govt to declare you a better person.

MarkTheGreat on December 15, 2008 at 1:12 PM

unclesmrgol on December 15, 2008 at 12:09 PM

you are ignoring the affect of automation. A higher minimum wage causes companies to buy more automation, which in turn causes manufacturers to make more and better automation. Once inflation has reduced the minimum wage back to where it once was, the automation that was bought is not thrown away. It’s part of the business equation forever.

MarkTheGreat on December 15, 2008 at 1:15 PM

unclesmrgol on December 15, 2008 at 12:09 PM

Rising wages do not cause inflation, just like rising commodity prices do not cause inflation. Only govt printing money faster than the growth in goods and services can do that.

What happens is a dislocation. Those things that got more expensive have their demand go down relative to everything else.

MarkTheGreat on December 15, 2008 at 1:16 PM

The key word being enforcement. Instead of jailing 100 Mexican illegals picking lettuce for $2.50 an hour, jail the one guy who pays them subminimum wage under the table and watch the Mexicans go home because they can’t find a job here anymore.

factoid on December 15, 2008 at 12:54 PM

Then watch the lettuce grower go out of business and watch all of our lettuce come from Mexico where they are being paid $2.50 a day.

Or watch the lettuce grower buy a machine that picks the lettuce and only needs one person to operate.

MarkTheGreat on December 15, 2008 at 1:22 PM

Anyone with any sense knows the effects of raising the minimum wage.

Done That on December 15, 2008 at 1:24 PM

Libtard 101

tarpon on December 15, 2008 at 1:25 PM

“Anyone with any sense knows the effects of raising the minimum wage.”

Mandating a floor on wages has no effect either way on employment.

And if you jump off a two-story building, you won’t get hurt.

Because liberals deal with the way the world should be, not the way it is.

NoDonkey on December 15, 2008 at 1:55 PM

It artificially inflates the cost of labor, especially in low-skill markets, which pushes employers to either reduce their labor through automation or scale back on staffing.

Not quite. Do you know what happened after the invention of the cotton gin?

But apart from that, I’m all for automation of many repetitive tasks, especially in agriculture. If one lettuce-picking machine can replace the work of twenty-five illegals, so be it.

newton on December 15, 2008 at 1:56 PM

It’s sad that people are so ignorant of economics that they need this book.

To me it is like someone writing a book called “The Earth is Round.”

Bill C on December 15, 2008 at 11:10 AM

Yeah, but I thought they wrote one called The World is Flat

thequeball on December 15, 2008 at 2:14 PM

I hope your house wasn’t build by them. You would end up regretting the purchase.

DannoJyd on December 15, 2008 at 1:09 PM

Who was the foreman on the job? That guy and the hiring contractor were the problems. I’m sure the guys you saw were hired from the front of a Home Depot like the guy my next door neighbor hired. Good at manual labor (and, in the case of my guy, knowledgable about fence building — although that was an unexpected plus from the situation). Willing to work. Easily available.

Again, it’s the employer who was willing to pay less to get less. And I’m willing to bet that those guys you saw didn’t even get minimum wage.

You can complain about them all you want, but they are not the problem — its the guys hiring them (and exploiting them) that are the problem — like AgriProcessors and its boss, Shalom Rubashkin.

And no, my house was not built by them. It was built in 1920 by Mr. Knight, whose name is stenciled or written in grease pencil on the back of every trim piece and floorboard in the place. I have no idea who he was, but he built handsomely and had a very big ego.

unclesmrgol on December 15, 2008 at 2:27 PM

Then watch the lettuce grower go out of business and watch all of our lettuce come from Mexico where they are being paid $2.50 a day.

Or watch the lettuce grower buy a machine that picks the lettuce and only needs one person to operate.

MarkTheGreat on December 15, 2008 at 1:22 PM

Notice that you are now making the case for allowing illegal immigrants to pick lettuce in the US of A.

factoid on December 15, 2008 at 2:28 PM

you are ignoring the affect of automation. A higher minimum wage causes companies to buy more automation, which in turn causes manufacturers to make more and better automation. Once inflation has reduced the minimum wage back to where it once was, the automation that was bought is not thrown away. It’s part of the business equation forever.

MarkTheGreat on December 15, 2008 at 1:15 PM

I’m lost here. In this modern era, machines are everywhere, doing repetitive tasks far more accurately and at far less cost than the humans they replace. Your argument is similar to the Luddite one from over two centuries ago. The Luddites (weaving artisans) were replaced by automation (in their case, jaquard looms), which could be operated by less skilled labor than the artisans represented. This happened long before there was a minimum wage.

The movement, like all union ones, was inherently violent, the British Army was called in and “frame breaking” became a felony punishable by death. (not that this has anything to do with illegal aliens, but you get a sense of the nature and severity of this problem through the ages)

No matter how cheap or expensive your job, if it’s manual in nature, it could be replaced by a machine if it’s repetitive enough and quality is an issue.

unclesmrgol on December 15, 2008 at 2:38 PM

Not quite. Do you know what happened after the invention of the cotton gin?
newton on December 15, 2008 at 1:56 PM

Efficiency gains in one step of a process lowers the cost of that step, typically driving up the demand for the other steps.
Automating the costly step of processing cotton boosted the demand for the laborious tasks of growing and harvesting it.

Count to 10 on December 15, 2008 at 2:40 PM

Rising wages do not cause inflation, just like rising commodity prices do not cause inflation.

MarkTheGreat on December 15, 2008 at 1:16 PM

I disagree. Inflation is nothing more than decreased purchasing power per unit of money, and can arise from many circumstances. Inflation is present in an economy whenever “rising commodity prices” outstrip the ability for those who want them to purchase them. Example: The costs of potatoes (a basic food staple in 19th Century America) in San Francisco during the early part of the Gold Rush. [While serving in California, Ulysses S. Grant got the great idea, after paying $2 for a potato, of planting a field of them; it didn't work out, because quite a few other people had the same idea at about the same time. His field got ruined by excessive rain, and later he was happy because he didn't have to do the work of harvesting them all just to get far less back than he put in. He did nearly break even by selling some of his potatoes to the Army commissary.]

See this, or this, which notes that inflation (and “deflation”) occurs even when the economy is on a specie standard.

unclesmrgol on December 15, 2008 at 2:52 PM

Automating the costly step of processing cotton boosted the demand for the laborious tasks of growing and harvesting it.

Count to 10 on December 15, 2008 at 2:40 PM

Which, in turn, increased the demand for more slave hands at that time. That was how the Southern plantations increased in stature… and the task of freeing the slaves became more difficult as the years passed.

newton on December 15, 2008 at 2:53 PM

Notice that you are now making the case for allowing illegal immigrants to pick lettuce in the US of A.

factoid on December 15, 2008 at 2:28 PM

If you believe that, then you haven’t been paying attention. But then you have already demonstrated that.

MarkTheGreat on December 15, 2008 at 3:01 PM

The luddites wanted to destroy the machines because they were replacing manual labor.

I’m arguing that if you price labor too high, it will be replaced by machines.

I’m having trouble seeing how the two arguments are identical.

MarkTheGreat on December 15, 2008 at 3:02 PM

It’s stupid to talk about minimum wage without the context of poverty labor importation, legal and illegal. Kick the illegal aliens out of the country and end immigration of poor people and all workers wages will double or triple immediately and employers will have to provide great benefits or no one will work for them. If we must have a poverty labor/illegal labor economy, I would push to raise the minimum wage to $40 an hour.

Buddahpundit on December 15, 2008 at 3:06 PM

I disagree. Inflation is nothing more than decreased purchasing power per unit of money, and can arise from many circumstances.

I encourage you to check with any econ book.

The reason purchasing power goes down is because there are more dollars in circulation than things to buy with them. Basic law of supply and demand.

Asset inflation does not and cannot cause general inflation. The reason for this is simple and intuitive. When the price of one thing goes up. People spend more on that one thing. Since there is a fixed supply of money, this means that less is being spent on everything else. Which in turn means that fewer items of everything else are being bought. Lowered demand in other areas means a drop in prices for those other things.

To recap. With asset inflation, an increase in price in one thing results in a drop in price for everything else. The increase and the decrease cancel out, so there is zero general inflation caused. Only by increasing the money supply so that the value of the dollar itself is affected, can general inflation be caused.

MarkTheGreat on December 15, 2008 at 3:06 PM

Minimum wage is price fixing, absolutely!

TheSitRep on December 15, 2008 at 3:45 PM

If you ask a politician if minimum wage laws work, they’d answer: “Of course they work! I got re-elected, didn’t I?”

Socratease on December 15, 2008 at 4:04 PM

It’s stupid to talk about minimum wage without the context of poverty labor importation, legal and illegal. Kick the illegal aliens out of the country and end immigration of poor people and all workers wages will double or triple immediately and employers will have to provide great benefits or no one will work for them. If we must have a poverty labor/illegal labor economy, I would push to raise the minimum wage to $40 an hour.

Buddahpundit on December 15, 2008 at 3:06 PM

So the true goal of the stop illegal aliens movement is to guarentee that all American products are to expensive to be bought by anyone but Americans?

Of course the next step will be to seal the borders against all those products that are now so much cheaper than those being built by Americans.

Can you say Smoot-Hawley boys and girls.

MarkTheGreat on December 15, 2008 at 4:21 PM

Anyone who wants to work in the US, should be allowed to work in the US. (With the proper background checks first, of course.)

MarkTheGreat on December 15, 2008 at 4:22 PM

I’m arguing that if you price labor too high, it will be replaced by machines.

I’m having trouble seeing how the two arguments are identical.

MarkTheGreat on December 15, 2008 at 3:02 PM

Labor is ALWAYS too high in the mind of the employer, and an employer looking to cut their wage burden certainly will consider machines (where they are available) as an alternative. However, if you can’t afford (or, more commonly, won’t afford) to pay someone minimum wage to do a job, then you certainly aren’t the kind of businessperson who’s going to buy a machine (with commensurate capitalization costs far exceeding the salary you would pay) to replace those people whom you are unable (or unwilling) to pay. And, if you are the kind of businessperson to buy the machine, you would have bought it anyway, for reasons other than the wage — such as reliability.

My position is that, as evil as the minimum wage might be, our economy (as well as our society) is structured to function properly with it in place. Remove it, and unforeseen side effects (such as the equivalent to the Luddite movement) will occur. You can do what the British did (call in the Army, and kill people over property crimes), or you can give the Luddites a sop which prevents them from destroying.

unclesmrgol on December 15, 2008 at 5:13 PM

However, if you can’t afford (or, more commonly, won’t afford) to pay someone minimum wage to do a job, then you certainly aren’t the kind of businessperson who’s going to buy a machine (with commensurate capitalization costs far exceeding the salary you would pay) to replace those people whom you are unable (or unwilling) to pay.

If you truely believe this, then your understanding of economics ends at the UAW’s door.

Why should any businessman pay anyone more than they have to?

As to the costs of automation, you need to get out more, it’s coming down, fast. I also believe that you have an unnecessarily restrictive view of what automation is.
Have you noticed that many restaurants, a number of people are wearing mikes and headphones? That’s automation, it allows the people to be more productive by communicating with each other without having to run around.

My position is that, as evil as the minimum wage might be, our economy (as well as our society) is structured to function properly with it in place. Remove it, and unforeseen side effects (such as the equivalent to the Luddite movement) will occur.

The idea that the minimum wage is irredeemably built in to our economy is such a load of horse squeezings, that I don’t even know where to begin in deconstructing it.

MarkTheGreat on December 15, 2008 at 5:48 PM

So the true goal of the stop illegal aliens movement is to guarentee that all American products are to expensive to be bought by anyone but Americans?

Of course the next step will be to seal the borders against all those products that are now so much cheaper than those being built by Americans.

Can you say Smoot-Hawley boys and girls.

MarkTheGreat on December 15, 2008 at 4:21 PM

The main goal of the illegal alien/poverty laborer importers is to drive down wages and increase the gap between rich and poor.

If that strikes you as liberal rhetoric, consider that it is the liberals who are behind it. They can only stay in power with a hopeless majority of willing parasites. You are in lockstep with Ted Kennedy and the other radical leftists on immigration issues, as I’m sure you would freely admit.

Buddahpundit on December 15, 2008 at 6:11 PM

The main goal of the illegal alien/poverty laborer importers is to drive down wages and increase the gap between rich and poor.

So you honestly believe that nobody but the rich benefits from cheap prices?
You honestly believe that pricing American goods out of the international markets benefits the rich?

This kind of rich vs. poor class welfare nonsense is typical liberal garbage, but populists drink from that poisoned well just as eagerly.

Your attempts to get some people a higher wage at the expense of others is doomed to failure, just as every other attempt to gin the market in favor of one group or another has failed.

MarkTheGreat on December 15, 2008 at 6:25 PM

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