The idea behind the minimum wage is a simple one: Mandate by law that employers must pay a certain governmentally set minimum wage to their employees. The minimum wage is supposed to ensure that those at the bottom of the economic ladder will be paid at least a subsistence wage and not be exploited by their employers.
The assumption, of course, was that everyone would get a job — one that would pay the minimum wage.
That assumption was always faulty.
After all, the minimum wage law doesn’t require employers to hire or retain anyone. Under the law, they remain free not to hire people they don’t wish to hire. Also, the law does not prevent them from laying people off.
What is that important? Because rationally speaking, an employer is not going to hire someone who is going to cost him money. If an employer is required to pay a worker, say, $10 an hour when the worker is generating revenue of, say, $7 an hour, why would the employer hire him? Since the employer is losing the equivalent of $3 an hour, it doesn’t behoove him to hire the worker. If the worker is already working there, it behooves the employer to lay him off.
In a remarkable development, New York Times columnist Paul Krugman, one of the most famous liberals in the world, acknowledged this principle in a recent article. Writing about the economic crisis in Puerto Rico, Krugman stated:
A recent report commissioned by the commonwealth’s government argues that its economy is hurt by sharing the U.S. minimum wage, which raises costs, and also by federal benefits that encourage adults to drop out of the work force. In principle these complaints could be right. In particular, even economists who support a higher U.S. minimum wage, myself included, generally agree that it could be a problem if set too high relative to productivity — and Puerto Rican productivity is far below mainland levels.
Wow!
For decades, liberals have told us that the minimum wage is one of the keys to alleviating poverty by ensuring that people are being paid a minimum wage. Yet, here is Krugman telling us something different — he saying that in some instances the minimum wage can actually a detriment to those at the bottom of the economic ladder by preventing them from working.
That’s precisely what we libertarians have been saying for decades!
And that’s precisely what has happened in Puerto Rico, a relatively poor society that was forced by the U.S. Empire that colonized it to comply with the same minimum-wage laws that apply in the United States, the wealthiest society in the world. That ended up producing a large and permanent class of unemployed people in Puerto Rico.
By the way, the minimum wage is also the reason there has long been a chronic unemployment rate of around 40 percent among black teenagers here in the United States. Some liberals scratch their heads in befuddlement over that phenomenon. They need to check with Krugman or with libertarians to learn that it’s the minimum wage that has caused that chronic unemployment, just as it has caused the chronic unemployment in Puerto Rico.
Recently one of our supporters sent me one of the most remarkable editorials in the history of the New York Times. It was dated January 14, 1987, when the minimum wage was $3.35. It was entitled, “The Right Minimum Wage: $0.00.”
Shocking, right? After all, that’s what we libertarians say — that the right minimum wage is $0.00.
Here is what the Times writes:
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…. 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.
Imagine that! The NYT editorial board at that time — the same newspaper that today carries Paul Krugman’s column — saw the light about the minimum wage! They understood that a government-mandated minimum wage hurts the poor. It locks them out of the labor market. It prevents them from placing their foot on the bottom rung of the economic ladder. It consigns them to a life of poverty and welfare.
Repealing (as in terminating and abolishing, not reducing) the minimum wage would be the best thing that could ever happen to Puerto Ricans, to black teenagers in America, and to everyone else who is unemployed in the United States. Like the drug war, the minimum wage is an immoral, destructive, racist, and failed government program that deserves to be cast into the dustbin of history forever.