A Swing and a Miss
Florida voters swung at a lot of pitches on Election Day. We hit a little dying-quail Texas leaguer for president, fouled off the bickering doctors and lawyers and hit the bullet train boondoggle into the center field stands. What really fooled us was the fat, hanging curve of the minimum wage. We took a big cut at what looked like a sure homer for the poor. We swung and missed. Not only did we miss, but the Louisville Slugger of unintended consequences slipped out of our hands and caught Florida’s thousands of unskilled workers square in the chops.
Floridians got suckered into approving another of the peculiar varieties of modern political “compassion” where we reach into someone else’s pocket for a little something for the poor but instead get clipped by a big bucks lobby. We amended the state constitution to put Florida’s minimum wage 20% above the Federal level. That change will saddle us with old Soviet Union style price controls on labor. It will keep thousands of unskilled workers idle and feed an expensive enforcement bureaucracy. But even worse, we tied the minimum wage to inflation and built it into the constitution. To get rid of it, it will have to become as obviously disastrous as the bullet train. Because the damage will be mostly unseen, that will take many years, unlikely success in economic education and a heavy toll on Florida’s economy.
As discouraging as that is, we must refute attractive but ultimately silly economic ideas like hurricane damage being good for business, huge debt being good for consumers, and minimum wages good for the poor if we are ever to enjoy a lasting prosperity.
All supporters of minimum wage laws claim their only concern is for the working poor. But even a lazy roll in the hog wallow of history reveals less noble motives for increasing wages at gunpoint.
The history of minimum wage laws is a classic example of the success of politically influential groups using the law to limit their competition and punish larger, but less influential groups in ways that are hard to detect. What makes it worse is that all the minimum wage logrolling and influence peddling occurs in the cool shade of a vast cloud of concern for the downtrodden.
Franklin Roosevelt pushed the first minimum wage law through Congress in 1938. The new law set the minimum wage at twenty-five cents an hour, a figure that sounds exploitive, but is well over $5 an hour in today’s shrunken Federal Reserve tokens. Economists predicted the law would worsen the nine year depression and destroy jobs. Economists were right. The voters agreed. Roosevelt’s party lost 80 seats to the Republicans in the next election, but not enough to repeal the minimum wage.
The most enthusiastic promoters of the law were not organizations representing the working poor but those supporting the highly paid textile workers of New England. For years Massachusetts had been losing textile manufacturing businesses to southern states where the cost of living and the cost of labor were lower. Northern politicians were candid about their intent in passing a minimum wage. They wanted to raise wages in the south to reduce competition for northern industry.
During the debate Congressman Sam McReynolds of Tennessee said this, "Northern industries are trying to stop the progress of the South, and they feel if they can pass this [minimum wage] bill it will really be a tariff against Southern goods."
Sam knew what he was talking about. Northern politicians were no strangers to the benefits of protective tariffs. A minimum wage is simply an internal tariff on labor — a tax that shields high paid workers from competition much more effectively than it helps the low paid. Southerners accurately pointed out that no law could increase the economic value of a man’s labor beyond what he could produce. But such laws could eliminate his job. If a man couldn’t find a job that paid the minimum, he wouldn’t be able to find any job at all.
As the idea of a minimum wage has become more entrenched the people who were supposed to benefit have suffered the most, including blacks, teenagers, the unskilled and the inexperienced.
The racist nature of the law became dramatically clear in 1956 when the wage went from 75 cents to $1.00 an hour. Black teenage unemployment went quickly from 14 to 24 percent. The 1996 wage hike had a similar effect. Nobel Prize winning economist Milton Friedman has called the minimum wage “the most anti-black law on the books.”
Minimum wage laws work the same way internationally. In South Africa before the end of Apartheid minimum wage laws protected white workers from black competitors. At the height of the British Empire the Brits promoted a minimum wage in India to protect British industry.
And today, the most vocal backers of the minimum wage are still coalitions of well paid labor unions who are better able to keep their own above market pay when competing wages are proportionately higher.
Until we get another swing at it in a future constitutional referendum, Florida’s new automatically increasing minimum wage will provide cover for unions and punish the poorest among us. I hope we will be ready for that pitch when it comes.