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Jerry Shenk


The Minimum Wage Illusion

by Jerry Shenk
 

The New York Times reports that New York State will increase its current $8.75/hour minimum wage to $15.00 - butonly for fast-food workers. Inexplicably, thousands of other low wageearners are unaffected.

Increases are mandated statewide over six years, but over three in New York City where living costs are higher.

Service Employee International Union (SEIU) and other activists convinced a state panel that the wage provides pay that "covers basic needs" that "taxpayers were subsidizing the workforces of some.corporations, like
McDonald's, that were not paying enough to keep their workers from relying on food stamps and other welfare benefits."

Pennsylvania's minimum wage is $7.25/hour, but Governor Tom Wolf advocates boosting the wage to $10.10 and tying future increases to inflation. A Harrisburg lawmaker has already filed such a bill

Why only $10.10 or $15.00/hour? Why not $50.00 or $100.00?

Low-skilled workers are paid minimally, because their labor, like any other commodity, is only worth what buyers (employers) will pay for it.

Anyone who thinks there's a supply of low-wage workers who are more skilled and productive than they're paid must convince themselves that all parties to the equation -- workers, employers, competing businesses and industries -
misunderstand labor's value, and that politicians who advocate higher minimums have unique insights into labor markets, job requirements and worker's skills.

The opposing -- and correct - Introductory Economics argument posits that artificially raising the price of anything will reduce demand. Only legitimate increases in demand for scarce labor increases wages.

There's no maximum wage, so employers are free to pay $15/hour - or more.

Many do -- for experienced, in-demand, educated, trained, productive workers.

Facing higher minimums, employers are also free to reduce costs by closing, automating or moving out of New York or Pennsylvania. Many will.

In fact, the Congressional Budget Office estimated that a $10.10 nationwide minimum wage would cost 500,000 lower-wage jobs for the same workers advocates say increases would help -- a $15.00 minimum would cost 3.3 million American
jobs.

In 2012, only about 1.6 million Americans out of more than 75 million hourly workers were paid the minimum
wage. Only 4.7 percent of those were adult family breadwinners working full-time, most of whom already received welfare and earned-income tax credits. Nearly 30% of increases would go to part-timers from families three
times or more above the poverty line.

Politicians propose raising the minimum wage as a secondary, less-obvious form of publicly-unpopular welfare benefits, as political theater - and to
harvest campaign funds from unions like SEIU.

Ironically, one Los Angeles unionseeks exemption from a $15.00 minimum wage it fought for. In Seattle, which already has a $15.00 minimum wage, businesses are
closing or moving, jobs are disappearing and, as wages rise, some surviving workers are requesting fewer hours to avoid losing welfare and other subsidies.

Indeed, the limitations of many low-skilled, inexperienced workers who generate little economic value are products of America's welfare culture and poor public education.

Realistically, as chronically-unemployed people already know, the real minimum wage is $0.00.


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