MINIMUM CLOTHES IN A MINIMUM WAGE ESTABLISHMENT

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Male cross-dressing young man in McDonalds in Shanghai being served by minimum wage worker

Stigler on Obama

 

By JASON L. RILEY

 

THE WALL STREET JOURNAL

 

Tuesday, 30 July 13

 

 

 

President Obama told a crowd in Chattanooga, Tenn., Tuesday that "because no one who works full-time in America should have to live in poverty, I will keep making the case that we need to raise a minimum wage that in real terms is lower than it was when Ronald Reagan took office."

There are many things wrong with that statement, starting with the implication that the typical minimum-wage earner is supporting a family of four. In fact, most minimum-wage earners are young, part-time workers who aren't poor. According to federal data, their average family income is more than $53,000 a year.

But what's also striking about the president's argument is how long proponents of the minimum wage have been making it, and how long noted economists have been telling those proponents that it's a bad idea. Back in 1946, George Stigler, whom Milton Friedman called "one of the great economists of the twentieth—or any other—century," addressed Mr. Obama's statement 67 years before the president would utter it.

"The minimum wage provisions of the FLSA of 1938"—a reference to the Fair Labor Standards Act, which established a national minimum wage—"have been repealed by inflation," wrote Stigler. "Many voices are now taking up the cry for a higher minimum." Stigler, who would win the Nobel Prize for Economics in 1982, continued: "The popular objective of minimum wage legislation—the elimination of extreme poverty is not seriously debatable. The important questions are rather (1) Does such legislation diminish poverty? and (2) Are there efficient alternatives? The answers are, if I am not mistaken, unusually definite for questions of economic policy. If this is so, these answers should be given. Some readers will probably know my answers already ("no" and "yes," respectively); it is distressing how often one can guess the answer given to an economic question merely by knowing who asks it. But my personal answers are unimportant; the arguments on which they rest are."

There continue to be better alternatives to minimum-wage increases, such as the Earned Income Tax Credit, if the goal is to help the poor. But then, his rhetoric notwithstanding, Mr. Obama isn't pushing for a higher minimum wage to help alleviate poverty. He's advocating it, first and foremost, in deference to Big Labor. Unions like minimum-wages because they price people out of the labor force, and fewer workers means higher wages for their members. As Thomas Sowell, a student of Stigler's at the University of Chicago, writes in "Basic Economics," "Just as businesses seek to have government impose tariffs on imported goods that compete with their products, so labor unions use minimum wage laws as tariffs to force up the price of non-union labor that competes with their members for jobs."

Mr. Obama wants a higher minimum wage because that's what a key Democratic special interest wants. The impact on the poor is at best a secondary concern.