President Obama chose the community center of one of Washington DC’s poorest neighborhoods, Anacostia, as the venue to explain his second-term economic policies on December 4th. Here’s a key quote from his speech:
“A broad majority of Americans agree we should raise the minimum wage. That’s why last month voters in New Jersey decided to become the 20th state to raise theirs even higher. That’s why yesterday the D.C. Council voted to do it too. I agree with those voters. I agree with those voters and I’m going to keep pushing until we get a higher minimum wage for hardworking Americans across the entire country. It will be good for our economy. It will be good for our families.”
Good for the economy? Well, I guess it sounds like it could be true.
But does saying it make it true? Does getting votes for it make it true? Does wishing it, over and over, make it true?
No. It’s a progressive fantasy. It flies in the face of economic reality.
I will show you the common sense proof:
Milton Friedman (1912 – 2006), winner of the Nobel Prize in Economics in 1976, explained the fallacy of the minimum wage law in this short video clip:
“The fact is, the programs labeled as being for the poor, or for the needy, almost always have effects exactly the opposite of those which their well-intentioned sponsors intend them to have.
“Let me give you a very simple example – take the minimum wage law. …[T]here are always in these cases two groups of sponsors. There are the well-meaning sponsors and there are the special interests, who are using the well-meaning sponsors as front men. You almost always, when you have bad programs, have an unholy coalition of the do-gooders on the one hand, and the special interests on the other. The minimum wage law is as clear a case as you could want. The special interests are of course the trade unions – the monopolistic craft trade unions in particular. The do-gooders believe that by passing a law saying that nobody shall get less than [$10] per hour [adjusted for today] or whatever the minimum wage is, you are helping poor people who need the money. You are doing nothing of the kind. What you are doing is to assure that people whose skills are not sufficient to justify that kind of a wage will be unemployed….
“The minimum wage law is most properly described as a law saying employers must discriminate against people who have low skills. That’s what the law says. The law says that here’s a man who has a skill that would justify a wage of [$5 or $6] per hour [adjusted for today], but you may not employ him – it’s illegal – because if you employ him you must pay him [$10] per hour. Well what’s the result? To employ him at [$10] per hour is to engage in charity. There’s nothing wrong with charity. But most employers are not in the position to engage in that kind of charity. Thus, the consequences of minimum wage rates have been almost wholly bad. We have increased unemployment and increased poverty.
“Moreover, the effects have been concentrated on the groups that the do-gooders would most like to help. The people who have been hurt most by the minimum wage laws are the blacks. I have often said that the most anti-black law on the books of this land is the minimum wage rate.”
Here is another excellent explanation of the minimum wage fallacy, by doctoral student Orphe Divougny, produced by the Center for Freedom and Prosperity:
So what’s really going on?
I can think of two reasons why President Obama would look the residents of Anacostia directly in the eye and endorse a policy that will hurt their chances to find jobs: 1) He will gain far more political benefit from helping powerful and deep-pocketed trade unions than from helping the unemployed residents of Anacostia, by making it harder for unskilled job seekers to compete with dues-paying union workers; and 2) he is utterly desperate for a distraction from the Obamacare embarrassment.
Folks, I’m just the messenger. If you feel like arguing against economic reality, go ahead…but you ought to review these six additional references first: