Minimum Wage, Maximum Harm
NOVEMBER 01, 1988 by PERRY E. GRESHAM
Dr. Perry E. Gresham is President Emeritus and Distinguished Professor, Bethany College. Bethany, West Virginia.
I learned a very big lesson in a very small town. I was president of a small college, but that college was the biggest thing in town; in fact it was about the only place of employment. Teachers were the principal earners, and their salaries were modest. Children came to town anyway. The baby boom reached into the Allegheny foothills. Town children had limited opportunities to earn spending money. They played in the streets and sometimes got into minor mischief.
At about that time we built a new college library. Moving more than 100,000 books was a considerable project. Money was scarce and costs were rising. A bid to move the books seemed exorbitant. We decided to train the town’s young people to carry, haul in small hand wagons and wheelbarrows, and place the books in such a manner that our librarians could complete the process. The youngsters loved it. They earned some spending money and had the new self-esteem that comes from joining a work force. They were learning to go to work on time and feel the thrill of doing something significant for the college.
We had hardly started when the comptroller was informed that we were breaking two laws—child labor and minimum wage. The town young were distressed, and the college was subjected to unnecessary expense. I remembered the wise words of Walter Lippmann. In his book, The Good Society, he made the observation that good intentions in the field of government action for social change often bring about unexpected and unfortunate results. The legislators who perpetrated the laws meant to help the children and the poor. The effect of the laws was damage to both the poor and the eager young.
Van Wyck Brooks called America one of the oldest countries in the world. He used the term “old” in a pejorative sense as neglected, run down, cluttered with trash, dilapidated, and smitten with desuetude. The work of cleaning up the countryside or doing minor chores around the house is inexpensive, but unlikely to command minimum wage. Old, handicapped, inexperienced, and otherwise limited workers could find occupation in such endeavors—but few employers would be willing to pay the minimum wage. Only the rich or the government could afford to spend a qualified worker’s wage for such marginal activity. The government could do it only by increasing taxes.
One’s labor is the most valuable property one has to sell. If I wish to work for a small wage, and someone wishes to hire me, why should the law forbid it? The answer is that politicians find this kind of legislation to be popular with special interest groups and, at the same time, small drain on the public purse. They are apparently insensitive to the damage wrought against the young, the old, the handicapped, and the unemployed.
In order to gain perspective on this problem, let us talk about houses. A person who wishes to sell a house would be in great trouble if the government were to establish a minimum price for houses. Suppose an average home sells for $100,000 in our bloated market. The builders might form a lobby for a minimum housing law that would permit no sale for less than $75,000. The politicians might weaken and pass the law. What happens to the old person who loves his modest $50,000 home but, for reasons of age, must give it up? Think, also, of the poor person who needs shelter, but cannot afford a $75,000 home.
Or we might think about commodities. Wheat now sells for about $3 per bushel. Suppose Congress were to pass a law fixing $2 as the minimum price for wheat—this with severe penalties for those who sell wheat of lesser quality for $1.75 per bushel. What could a farmer do with his crop of inferior wheat? Those who need less expensive grain for animal food or any one of many purposes would fred the purchase of $1.75 wheat to be illegal. Both seller and buyer would be guilty of crime.
Consider the effect if live cattle, now selling for $75 per hundredweight, were to fall victim to those attempting to jack up the price by law, and Congress would make selling cattle at $50 a hundredweight a felony. What happens to the marginal rancher whose cattle are worth no more than $50? An honest farmer or rancher, selling inferior cattle to eager buyers, might go to jail.
Lyndon Baines Johnson, my old friend from Texas, loved to say, “Come now, let us reason together.” He then proceeded to ignore reason and rush to government intervention. If we would truly reason together we would know that many people have labor to sell, while but few have houses, wheat, and cattle to sell. Some such labor is substandard. Beginners are worth less on the market than experienced workers. Mentally handicapped persons, who could perform such useful but impecunious tasks as collecting abandoned trash or sweeping sidewalks, cannot sell their labor on the market for as much as those who handle computers or analyze the stock market. Why should Congress feel free to pass laws that would send people to jail for selling their labor for less than the minimum wage? Yet some prominent people are talking of raising it to $5 an hour!
Experience has taught me that political opinions are not influenced by reason. People often misread their own best interests on account of group opinion. Many young people who are offered work which is legally excluded from the minimum wage law destroy their opportunities to gain experience, and spending money, by demanding minimum wage. How hard it is to see clearly that the choice is not between $10 a day and the minimum wage, but between $10 a day and nothing.
I hear the cry that low-salaried workers are shockingly underpaid—that they do not make enough to live on. This is tree. No one in history has ever been able to guarantee plenty for everybody. The idea that everybody can live at the expense of everybody else is very appealing, but impossible. There is a way for low-wage people to improve their earnings: Develop the skills that our society needs and a higher wage will be forthcoming. If a person is working for minimum wage at a fast-food place and wishes to make as much as $5 an hour, the way to accomplish this challenging feat is to do the work so well that the wage is increased, or else find an employer who has sense enough to hire competence and pay for it. The market, and not the government, is the open road to the happy land of higher wages.
Those of you who chance to read this article will probably agree with it and say, “Ho hum, what can I do about it?” If, by accident, the article catches the attention of an advocate of minimum wage legislation, my words will be dismissed as the blather of an old and inexperienced professor. The problem, however, will not go away. Repeated witness to the truth will have an influence on sensitive persons. Reaction to over- extended government will eventuate. High taxes and the loss of liberty are as relentless as the tides of the sea, and eventually, corrections will come. A will to learn and repeated witness will exert more influence than we might suppose.
Education is the only solution to the problem. When enough people come to understand the effects of minimum wage laws, the laws will change. Our land could have zero unemployment if we would free ourselves from well-meant restrictions. We could have a beautiful land with tidiness, cleanliness, and affordable help for the sick and the feeble. Special interests would rise in moral wrath against so-called “sweating” or “slave labor,” but the workers and the employers would create a free and happy society wherein a person could sell his own labor to the highest bidder. Then we could truly sing, “Sweet Land of Liberty.”