Clinton Aides Wrong on Minimum Wage, Labor Law


Contrary to recent assertions of the Clinton administration,"higher minimum wages go hand-in-hand with substantial declines in the employment of low- productivity workers," write economists Donald Deere, Kevin M. Murphy, and Finis Welch in "Sense and Nonsense on the Minimum Wage," a feature article in the latest edition of Cato's Regulation magazine (no. 1, 1995). The issue, devoted to "Labor Pains," takes a close look at the minimum wage, the report of the Commission on the Future of Worker-Management Relations (Dunlop commission), and the Fair Labor Standards Act of 1938. Deere, Murphy, and Welch devote some of their analysis to alleged new evidence, compiled by Princeton University economists David Card and Alan Krueger, that increases in the minimum wage do not reduce employment. The Card-Krueger research is used to support the Clinton administration's plan to raise the minimum wage to $5.15 an hour. After scrutinizing Card and Krueger's studies and identifying methodological shortcomings, the authors conclude, "Artificial increases in the price of unskilled laborers inevitably lead to their reduced employment; the conventional wisdom remains intact."

The Dunlop commission was set up by Secretary of Labor Robert B. Reich and Secretary of Commerce Ronald H. Brown in 1993 to reevaluate American labor. In an examination of the report, New York University labor law professor Samuel Estreicher concludes that "despite some good ideas, the commission was hamstrung by political considerations, and its recommendations fall considerably short of the thoroughgoing reassessment of the legal regime that was called for." Estreicher challenges the commission's premise, arguing, "The collective bargaining system is not working. . . . The current legal regime is based on a model of the employment relationship that poorly reflects modern conditions. . . . The focus of legislative efforts should be on lifting existing restrictions that limit representational options and encourage adversarial contests." Rutgers University economist Leo Troy also contributes an article on the commission report to the issue.

Cato associate policy analyst James Bovard's article argues that the Fair Labor Standards Act "is typical of the dishonesty of the paternalistic state. The FLSA is basically a blank check allowing political manipulation of the labor market in order to reward some people by throwing other people out of work." The labor theme is continued in an article by Cameron D. Reynolds and Morgan O. Reynolds on how state courts are undermining the employment-at-will doctrine.

On another subject, Michael J. Pompili, assistant commissioner of environmental health for Columbus, Ohio, looks at "The Rising Impact of Environmental Mandates on Local Government."