Tag: federal minimum wage

Raise Minimum Wage, Kill Jobs

During his State of the Union address, President Obama announced that he intended to raise minimum wages to $10.10/hour for certain workers. Based on data from EU countries, it is clear that minimum wage laws kill jobs. I concluded that hiking the minimum wage will kill jobs in the U.S., too. Executives surveyed in the Duke University/CFO Magazine Global Business Outlook Survey agree.

Chief Financial Officers from around the world were interviewed and the majority of them concurred: a minimum wage increase from $7.25/hour to $10.10/hour would kill a significant number of jobs.

Here’s what the CFOs had to say:

Unhappy (belated) Birthday National Minimum Wage

I wasn’t in the mood Friday to celebrate the 73rd birthday of the federal minimum wage, created under the Fair Labor Standards Act of 1938.  Looking at youth unemployment numbers can be a little depressing.   Those figures should, however, sober up anyone who is still drunk under the spell of thinking the minimum wage has no impact on unemployment.

The chart above shows the increase in unemployment overall (right axis) and the unemployment rate for workers age 16 to 19 (left axis).  The difference between these two numbers usually runs about 10 percent, even in good times.  Notice that when the minimum wage was raised in July 2009, overall unemployment had started to level off, while youth unemployment sky-rocketed.  We also witnessed a big spike in youth unemployment the last time the minimum wage was raised in July 2008.

For those who truly care about reducing unemployment, as I do, the first thing we can do is recognize that a large part of the problem is being driven by the massive spike in youth unemployment, which the data suggests is partly being driven by the minimum wage.

For a great review of the historical evidence, I suggest David Neumark’s book Minimum Wages.  And yes, I’ve read David Card’s studies, which I think have tons of problems, but that is beyond the discussion here.  The bottom line should be that in a free society, whatever two consenting individuals agree to, should be respected, whether its marriage or the contours of a labor contract.

Can We Take the Truth?

Today POLITICO Arena asks:

Is Alaska Republican Senate nominee Joe Miller correct to suggest that the federal minimum wage is unconstitutional? And beyond that constitutional question, is this a wise political strategy?

My response:

Joe Miller is absolutely right: The federal government has no authority under the Constitution to set a minimum wage – or to do so many of the countless other things it does today. When Nancy Pelosi was asked where in the Constitution Congress was authorized to order Americans to buy health insurance, she responded, “Are you serious?” That’s a mark of how little America’s political elites today understand the document they take an oath to uphold.

James Madison, the principal author of the Constitution, wrote in Federalist 45 that the powers of the new government would be “few and defined” – a far cry from today’s Leviathan. How did the change happen? In a nutshell, the ideas of the Progressives – in particular, wide-ranging rule by elites – were incorporated in “constitutional law” (not to be confused with the Constitution), not by constitutional amendment but by a cowed Supreme Court following Franklin Roosevelt’s infamous 1937 Court-packing scheme. That opened the floodgates to the modern redistributive and regulatory state that so many Americans love so much today. Don’t take my word for it. Here’s Rexford Tugwell, one of the principal architects of the New Deal, reflecting on his work some 30 years later: “To the extent that these new social virtues [i.e., New Deal policies] developed, they were tortured interpretations of a document [i.e., the Constitution] intended to prevent them.”

But that’s changing, if the Tea Party movement is any indication. The American people are waking up to the truth: The governmnet gives nothing that it doesn’t first take. It’s not Santa Claus. And whether the taking is in the form of money, property, or liberty, it comes to the same thing. So in answer to the question whether telling constitutional truths is wise political strategy, we’ll see. If the people can’t take the truth, it’s only a matter of time before we go the way of civilizations before us. Fortunately, we still have enough freedom to tell such truths.