Minimum wage, maximum absurdity

New American, The, Nov 28, 2005 by William P. Hoar

ITEM: The CNN/Money website for October 25 reported: "Wal-Mart CEO Lee Scott said he's urging Congress to consider raising the minimum wage so that Wal-Mart customers don't have to struggle paycheck to paycheck. Scott told Wal-Mart directors and executives in a speech Monday that he believes 'it is time for Congress to take a look at the minimum wage and other legislation that can help working families.'"

Critics seemed unimpressed, said the report. "As the world's largest retailer and largest U.S. non-union private sector employer with more than 1.3 million 'associates' in its U.S. stores, Wal-Mart has been a lightning rod for criticism about its wage and benefits policy as well as lawsuits alleging gender discrimination. It continues to draw fire for allegedly stifling small businesses and squeezing its vendors."

ITEM: Writing for the Hearst newspapers, Helen Thomas reported on October 28 that the United States senators, "who draw salaries of $162,100 a year and enjoy a raft of perks--have rejected a minimum wage hike from $5.15 an hour to $6.25 for blue-collar workers. Can you believe it?" Senator Edward Kennedy (D-Mass.), who sponsored the raise in the minimum wage, "called the vote 'absolutely unconscionable.'" Thomas' article in the San Mateo County Times (Calif) continued: "AFL-CIO president John Sweeney said the rejection was 'outrageous and shocking.' Sweeney said minimum-wage workers 'deserve a pay raise--plain and simple--no strings attached.'"

CORRECTION: There are several double games at play here. Liberals, particularly in the media, continue to maintain the fiction that mandating a raise of the minimum wage is nothing but an unambiguous boon to society. However, the numerous critics of Wal-Mart are uncomfortable because it also supports a raise in the minimum wage, and so they resort to saying that, because the company is not giving raises to all its workers, its action is hypocritical and a publicity stunt.

Does Wal-Mart really believe it can win over its left-wing enemies in this fashion? Probably not. It seems more likely that Wal-Mart is willing to play along with the myths associated with the benefits of raising the minimum wage because if the minimum wage actually were raised, it would hurt its competitors. Indeed, the Wall Street Journal also commented that the retailer's political move amounts to asking for "a hike in the labor costs of its smaller rivals, not to mention any potential start-ups. Wal-Mart already pays its workers an average hourly wage of close to $10 and so Mr. Scott is essentially asking Congress to strengthen its competitive advantage."

The posturing doesn't end there. Senator Kennedy, for his part, said the minimum wage needed to be raised to deal with the effects of Hurricane Katrina and to help single mothers and poor minorities. The facts are otherwise. The Employment Policies Institute (EPI) observes that "only 8 percent of the beneficiaries from [Kennedy's] wage increase will be single mothers, and only 4 percent will be single mothers in poverty." The senator also ignores the significant body of research, says EPI, that demonstrates that "American young adults suffer four times more employment loss from a minimum wage increase than other affected employees. In the four states affected by the hurricane, this would amount to another disaster."

Economist Walter Williams, among others, has explained that the "idea that minimum-wage legislation is an anti-poverty tool is simply sheer nonsense." As Williams put it sardonically earlier this year: "Were it an anti-poverty weapon, we might save loads of foreign aid expenditures simply by advising legislators in the world's poorest countries, such as Haiti, Bangladesh and Ethiopia, to legislate higher minimum wages."

There is also genuine hypocrisy at play when the bosses of organized labor come out for increases in the minimum wage. As most economists agree, such a mandate generally increases unemployment for those who are not in labor unions. Indeed, Professor Thomas Sowell, in his book Basic Economics, recalls that minimum-wage laws "were once advocated explicitly because of the likelihood that they would reduce or eliminate competition of certain minorities"--such as the Japanese in Canada, or blacks in the U.S. or South Africa.

The pretentious dissembling on this issue is remarkable. While none of the proponents of raising the mandatory minimum wage is willing to admit it, all are pushing policies that tend to hurt minorities, the unskilled, and the poor.