Op-Ed: The real minimum wage is zero

By William Haupt III | The Center Square

Until 1938, the U.S. Supreme Court sided with business over labor citing it was an unconstitutional delegation of government authority to dictate to industry what to pay workers. The Court continually ruled there was no Constitutional basis for a guaranteed income. In the 1800s during the Industrial Revolution, the Court heard numerous cases as new industries developed but they failed to rule in favor of labor. Their opinion was employers would reward the good workers with increased wages.

Until the Great Depression, the Court ruled that states were responsible for wages and labor under the 10th Amendment. But that would change dramatically under Franklin Roosevelt. From the day he took office, he backed legalization to control industry and empower workers and unions. But it was not until 1938 when he was asked to address child labor conditions in the Depression work place that he had an opportunity to fulfill his New Deal promise to establish a federal minimum wage.

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Federal mandating of higher hourly pay rates places the burden of fighting poverty on the employers of the low-wage workers and the customers of low-wage businesses. It deprives the most vulnerable, least-skilled and least-experienced workers of an opportunity to earn their way into better paying career jobs.

After losing his battle to “pack the court,” FDR lost support from his party, and needed a signature bill. Opportunity knocked when U.S. Sen. Hugo Black proposed legislation to protect child labor and provide a federal minimum wage. And in 1938, Congress passed The Fair Labor Standards Act. It created a federal minimum wage, a 40 hour work week and established child labor protections.

When Congress passed the Fair Labor Standards Act, it represented a major shift in labor policy. For the first time, the federal government was able to dictate to private industry how much they had to pay a person for any job regardless of skills or education requirements. It has haunted us since.

The major objection to the FLSA was each state should control its own minimum wage laws. The federal minimum wage has been $7.25 since 2009. Although the minimum wage is a contentious partisan issue in Congress, states have done this on their own. The federal government does not control state commerce or labor requirements and should not control the minimum wage.

Recent data from The Bureau of Labor Statistics reveals that in seven states, the minimum wage rises based on a cost-of-living index. In another nine states and Washington D.C., the minimum rate rises on a multiyear schedule. Another eight states increase the rate yearly until it reaches a certain plateau and the legislature reviews inflation and cost of living data and they put out a new formula.

It has been over eight decades since the FLSA passed and there is no proof that increases in the minimum wage improves anyone’s standard of living. British magazine “The Economist” lists three countries – Spain, Greece and South Africa – that continually have the highest rate of unemployment regardless of global economics. They have the most generous minimum wage laws in the world.

Over 60% of minimum wage workers in Africa are jobless, according to the World Bank. In North Africa, the youth unemployment rate is 25% and it is even greater in Botswana, the Republic of the Congo, Senegal, and other parts of Africa. With 200 million people between 15 and 24, Africa has the largest population of young people in the world, and the highest per capita unemployment rate.

In contrast, Switzerland has no minimum wage and low unemployment. The World Bank credits the overall health of the Swiss economy to its incentive-driven labor policies that drive productivity. It is also not part of the EU, which allows them to formulate independent lucrative trade deals and control their own immigration policies. The result is an unemployment rate averaging less than 3%.

Biden pledged to double the minimum wage to $15. While the CBO said this would have a negative impact on employment and hurt our recovery, Biden disagreed: “There’s no evidence when you raise the minimum wage, businesses close. They only cut hours and adjust payrolls.”

In 2019, the nonpartisan Congressional Budget Office estimated a $15 minimum wage would eliminate at least 1.3 million jobs. The CBO concluded that an increase this large would reduce business income, raise consumer prices, and it could cause major damage to a weak economy.

The U.S. economy was fragile when Biden took office and the CBO told him not to anticipate much improvement throughout 2021. Our nation needs more business income, not less. We need more jobs, not more unemployment. We do not need anything to slow our economic growth; we need to stimulate growth. Only the Chinese will profit if Biden’s minimum wage stratagem becomes law.

According to the Bureau of Labor Statistics, half of all workers in 20 states earned $18 per hour or less in 2019. In 35 states, the median hourly wage was less than $20. Biden’s desire to raise the minimum wage to mirror the median wage would price many workers out of the market and force businesses to shut down. This massive unemployment would over-tax our social service network.

University of Washington economist Jacob Vigdor studied the effects of Seattle’s increase in its minimum wage to $13 in 2016, on its way to $15. It led to a 9% reduction in low-wage jobs. The pay increase didn’t make up for the reduction in employment, and earnings fell for low-wage workers overall. Vigdor also found that any financial gains were offset with cuts in hours worked.

During one of the presidential debates when Donald Trump accused Biden of bowing down to the socialists, Biden responded, “Trump thinks he’s running against someone else. Well he’s running against Joe Biden. I beat those other guys because I disagreed with them.” Yet a $15 an hour minimum wage is one of the many progressive and socialist policies that Biden now supports?

Thomas Sowell wrote, “Any liberal will tell you government can fix everything.” Federal mandating of higher hourly pay rates places the burden of fighting poverty on the employers of the low-wage workers and the customers of low-wage businesses. It deprives the most vulnerable, least-skilled and least-experienced workers of an opportunity to earn their way into better paying career jobs.

If people demand a minimum wage, then the states must establish it, not the federal government. The central government does not control local labor markets, the states do. Those who think Joe Biden can give them a raise with the stroke of his pen will end up unemployed.

Image courtesy of Flickr/The All-Nite Images
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5 thoughts on “Op-Ed: The real minimum wage is zero

  1. Minimum wages should be set by the states as the cost of living is quite different between states. People also have to ability to pick up and leave if they wish to and move to a state with more generous minimum wage laws. Obviously, if having a higher minimum wage was that important, New Hampshire residents would be flocking to Vermont and VT would have a much better standard of living than NH; that doesn’t seem to be the case. NH is thriving to a much higher degree than nanny-state VT which finds endless ways to “take care of” it’s population and raise its taxes.Ever consider why people are haven’t kids here? Why we’ve got an influx of retirees, who don’t care what minimum wages are. And of course lots of homeless people, criminals, druggies and the like we are moving here to take advantage of our generous benefits. They don’t care what the minimum wage is either as they have no intention of working!

    If unemployment rates are low, businesses will have to raise their rates of pay to attract and keep workers. If an employee does good work the employer will raise their pay rate in order to keep them. That’s more or less the free market. A lower minimum wage allows for those who lack skills or experience to get jobs and work their way up. It allows for teenagers to get their first jobs. Most people don’t work for the minimum wage their entire career. Any that do likely do so as their work output is low and that’s all they’re worth. But better they work than sit around on their duff and get supported by those who do work.

    • So well said.

      There is another corollary to go along with this.

      If you want to live on the dole, you move to where the best free hand outs can be found. What segment of our housing is booming? What Vermont has cleverly named, affordable housing, which is really public assistance housing. Newport for example is experiencing huge waves of big city problems. Landlords are advertising for tenants in NH and MA to pick our public housing. On top of this it’ being built for $525/ sq foot. Would you pay $582, 750 for a single wide trailer? Our state is paying that for the same sq. footage.

      And drugs.

      Where do drug dealers go? Well our state, with some of the most racist legislators are steering people of color into the drug trade by reducing fees. Don’t have police protection. Have sugar mama’s on public assistance house their dealers. PUSH TO LEGALIZE SEX WORKERS. Tell cops they can’t arrest drug dealers. Don’t allow cops to keep drugs from our schools. As a state push doing more drugs. Allow non-citizens to get drivers licenses. Don’t require any heavy permitting or act 250 oversite for you state drug dealing, no heavy fees like any reasonable Oh….and of late tell people illegally coming into our state that we want you! Not the scientists, teachers, engineers, the people breaking laws to get you…WE WANT YOU!

      And what do you think will happen?

      Do you think with all these welcome signs to the drug trade we won’t get more takers? That’s our current plan. Thank you progressives.

  2. Neil,
    The Dem/Prog design goal is dependency.
    Have as many people, voters, dependent on government programs.

    Do not teach them to fish so they can feed themselves forever.
    Teach them to be non-workers, that get rewarded a minimum wage, no matter what.

    My sister, now retired, had a small business employing about 20 people.
    When the minimum wage was raised, she shortened the hours of the least productive people.

    Her attitude was, I am stuck in my business and I need to survive, they have the option to go to other workplaces.

    I am sure, she is not the only business person reacting that way.

  3. Oh oh oh Mr. Kotter, pick me, pick me….

    See it’s a huge win for big government. It’s a huge win if your goal is to subvert a country…because

    …then you get to join in on Vermont’s engineered poverty program, where by everyone involved gets financially fat off keeping Vermont citizens poor on state programs!

    Then they have more people enslaved. Whereby generations learn how to be dependent upon the system, never getting out of poverty.

    Vermont has the highest minimum wages. Vermont has one of the highest home costs. Vermont is one of the least affordable states to live in…..it’s by design.

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