Majorities In Several States Vote To Punish Low-Skill Workers

Majorities In Several States Vote To Punish Low-Skill Workers (Mises Economics Blogs, Nov 8, 2014):

My anti-democracy critics will shake their heads in dismay at me, but I’ve been forced to come to the conclusion that there’s no reason to believe that plebiscitary democracy is any worse than the usual kind. Indeed, in American states that must hold plebiscites to authorize tax increases, one hears regular howls from the pro-tax crowd about how “direct democracy” is awful and that “representative democracy” is so much better.  There’s even this federal lawsuit by pro-tax groups claiming that Colorado’s requirement that voters approve tax increases is unconstitutional. In other words, those who favor tax increases hate voter referendums and initiatives. Internationally, of course, there are the secession votes and the upcoming vote on gold in Switzerland. I have a hard time coming up with a reason why such things are comparatively bad (compared to an alternative in which everything is up to the elected elites).

That said, the news isn’t always good with such voter-approved measures. A majority of voters in four states voted to raise the minimum wage:

If there was upsets and contention in much of midterm voting, there was one topic on which the electorate was largely united: raising the minimum wage. Alaska, Arkansas, Nebraska, and South Dakota all had ballot measures on raising state minimum wages above both their current levels and the federal $7.25 an hour figure.

All four states passed the measures, most by significant margins. More than two-thirds of voters in Alaska agreed to raise minimum wage to $9.75 by 2016. Sixty-five percent of Arkansas voters set the state on course to adopt an $8.50 figure by 2017. In Nebraska, 59 percent said the number should be $9 an hour by 2016. Only South Dakota stood out with a slimmer margin; 53 percent voted to raise minimum wage to $8.50 an hour next year. In Alaska and South Dakota, minimum wage is now pegged to inflation, meaning that it will rise as the cost of living does.

What these voters said with their votes was “I’m in favor of making it illegal for people with low productivity to get a job. Teenagers, people who were poorly educated by failing public schools, people who have never had a job, and people who are not very intelligent, should all just stay home and do nothing because we want to make sure that no one can afford to hire those people.”

Wages are a reflection of the worker’s productivity. When wages increase (assuming a relatively-free market) it is because the worker’s productivity has increased, either because of improved capital (such as better equipment) or because the worker himself has improved (e.g., through more experience).

An employer simply cannot afford to pay an employee something above and beyond what the worker produces for the company. If he does, then the wage is generally being subsidized by the other workers who must now earn less than their level of productivity indicates, because some of that must go to pay the employees who are money-losers.

In practice, the overwhelming effect is this: employers don’t hire low-productivity workers whose productivity is below the minimum wage, and in many cases will simply replace workers with capital (i.e., automated cashiers, etc.) which have been made relatively economical by the increase in the price floor. The federal government itself admits this employment effect, since it has included a loophole in the minimum wage in its own regulations for disabled workers. Early progressives also assumed it would cause unemployment, which they thought was a good thing.

Increasing a minimum wage is a death sentence for the careers of the most “at-risk” members of the population (to use a phrase favored by the left). They will have to earn money under the table (i.e., illegally), work in an unpaid-internship, or simply go on welfare.

Meanwhile, detractors of free markets will say “gee, look, the employment rate looks just fine in NE, SD, etc.” Ken Zahringer explains.

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Still not convinced? Numerous Mises Daily writers have covered this topic, of course. For more, see:

How Minimum Wage Laws Increase Poverty – George Reisman 

The Crippling Nature of MinimumWage Laws – Murray N. Rothbard 

Welfare, Minimum Wages, and Unemployment – Greg Morin 

Even the Feds Admit Minimum Wages Cause Unemployment by Nioholas Freiling

How Special-Interest Groups Benefit from Minimum Wage Laws by Gary Galles

Mythology of the Minimum Wage – D.W. MacKenzie 

The Unseen Costs of the Minimum Wage – Josh Grossman 

The Minimum Wage Forces Low-Skill Workers to Compete with Higher-Skill Workers – George Reisman

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