Opinion

Do you want to reduce poverty?

Tuesday, November 4, 2014

Mr. Lester Thornton writes that by increasing the minimum wage, the poverty rate would be reduced. Raising wages is obviously a good idea, but raising wages by government fiat is the wrong way to achieve it.

Our nation was founded as an opportunity society and that opportunity was created by instituting the principles of free market capitalism.

The government does have a role to play in that system and that role is to establish and enforce the rules governing the conduct of business so that everyone is treated equally and operates on a level playing field.

In order for the opportunity to exist for everyone to rise as far as their ambition, skills and intelligence can take them, we must accept the risks inherent in a free market society.

One of those risks is that some may live in reduced circumstances and so, as a compassionate people we have established a social safety net to ensure that no one goes without the basic necessities of life.

The existence of that safety net and also having a minimum wage is, in a sense, a duplication of policy. The two policies do essentially the same thing.

A government dictated minimum wage interferes with free market forces. In a properly functioning free market economy, the demand for labor is sufficient to keep wages at a level that will support a large middle class.

In a free market economy, those who provide labor have the opportunity to negotiate freely with employers including, if they freely choose, to band together to have increased leverage when bargaining with employers.

We were once the leading nation in terms of upward mobility and new job creation but that is no longer true. It is no accident that there is wage stagnation and for some, a relative decrease in wages in relation to the cost of living.

As the government increases the cost of starting and continuing a business, through unnecessary regulation and requirements, fewer jobs are created.

Mr. Thornton writes that some economists think that raising the minimum wage has no effect on employment for low wage workers. By my reading, that number would be exceedingly small. It is common sense that when something costs more, people will consume less of it and there is no exception to this rule for labor.

I offer just one illustration among many in economic literature. When Santa Fe, N.M., increased the minimum wage by 65 percent to $8.50 per hour in 2004, employment for low wage workers dropped by 8.3 percent and hours worked dropped by 3.2 hours per week.

Noted author and economist Walter Williams writes, "the minimum wage law is one of the major causes of unemployment among young blacks."

Nobel prize winning economist Milton Friedman wrote, "minimum wage laws are the new Jim Crow."

Minimum wage laws kill on-the-job training for entry level workers; prevent employers from giving the disabled a chance to show their competence and increases job eliminating mechanization.

Most of us probably think of those who work for minimum wage as a more or less permanent group of people and that is how they are portrayed in the media. That is not the case. Thomas Sowell writes in "Economics in one easy lesson," that, of those working for minimum wage and in the bottom quintile of income, the majority will advance within a short time to a higher salary by virtue of their increased experience, proven job performance and increasing skills.

Those working for minimum wage are largely comprised of teenagers and college students, seniors working part time to supplement their retirement income and entry level workers just out of high school.

There are a small group of people that for various reasons may work most of their lives at or near minimum wage and for those, there are numerous government assistance programs.

The idea that government should dictate a minimum wage is a liberal construct which is embodied in the ideology of a big brother nanny state that will provide for every citizen.

In the depression of the '30s, FDR instituted wage and price controls through the "National Recovery Act."

The policy of government dictated wages didn't work then and they don't work now.

Alexis De Tocqueville wrote in 1838 in "Democracy in America," that there might eventually be created an all-encompassing and enervating system of providing for citizens that would eventually sap the creative energy of our people by removing that great motivator, need, from people's lives.

By providing a cushion on which the people can ultimately rely he predicted that, inch by inch and slowly, by degree, that would happen.

It seems that as the number of people relying on government benefits increases, that is indeed happening.