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DePrima

The Minimum Wage


By Travis J.A. DePrima

Seven dollars and twenty-five cents. That is the smallest possible wage businesses, big or

small, are required to pay their employees per hour. That does not seem like a lot, right? Well,

Vermont Senator and former Democrat Party presidential nominee Bernie Sanders and the

thousands of Fight for $15 activists believe that everyone should be paid a living wage. This

is not an outrageous statement by any means, but what they are fighting for is. They want every

entry-level employee to be paid a minimum of fifteen dollars an hour. As great as that may

sound, people do not realize the repercussions that ultimately come with raising the minimum

wage a little more than double of what it is now. What these activists and politicians do not

understand is that the people who they want to help are going to be hurt the most by this

proposal. There is nothing wrong with having good intentions, but if those intentions cause bad

results then they mean absolutely nothing. That being said, with pressure on legislation to cater

to groups like Fight for $15 and people living in big cities, basic economic reasoning is being
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overshadowed by economically illiterate politicians and activists who dont understand the

discernable consequences that come with minimum wage laws.

Before jumping right into this topic, its important to understand the history of minimum

wage laws. In 1912, Massachusetts became the first state to erect minimum wage laws. This

piece of legislation was the first of its kind on the state level and it came twenty-six years before

the Fair Labor Standards Act, or simply FLSA, which was signed by President Franklin Delano

Roosevelt in 1938. Between 1913 and 1936, nineteen states, including Massachusetts, passed

legislation that created a minimum wage of some sorts. When the FLSA was passed in 1938, it

required wages of employees to be above twenty-five cents. The passing of the FLSA didnt

come easy for FDR. There were multiple compromises that had to be met, and for a while the

constitutionality of the act was in question. The fascist President even went as far as threatening

the Supreme Court that he was going to appoint six new justices so he could get a favorable

ruling in a case about the constitutionality of Washingtons minimum wage. FDR struck fear in

the eyes of his opponents to get what he ultimately wanted, a federal minimum wage (Neumark

and Wascher 18).

Many economists during this time, and even before the FLSA was passed, were dubious

about the assertion of a minimum wage. John Bates Clark, a late nineteenth century and early

twentieth century economist, said that We can be surethat rising the rate of wages will, of

itself and the absence of any new demand for labor, lessen the number of worker employed.

This was not a radical theory back in the early 1900s. In fact, economists Hastings Lees-Smith

and Frank William Taussig believed that implementing a minimum wage would price low skilled

labor out of the market (Neumark and Wascher 15). The concept of pricing low skilled labor

out of the market has been one of the biggest concerns of minimum wage proponents. Current
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day economists such as Thomas Sowell, former economist at the Hoover Institute, and Walter E.

Williams, economics professor at George Mason University, have both argued that one of the

biggest issues with minimum wage is that it hurts the people its supposed to help--low skilled,

low income, and low experienced individuals. These two brilliant minded individuals are so

passionate about these issues because it effects the communities in which they were brought up

in.

Thomas Sowell once said, The last year in which black unemployment was lower than

white unemployment 1930 was also the last year in which there was no federal minimum

wage [referring to the extremely discriminatory Davis-Bacon Act which was passed in 1930].

For decades, politicians in Washington have made the claim that if you dont support a

minimum wage youre a racist. Well, that argument doesnt have much substance behind it.

And by claiming that a person is a racist for not supporting the raising, or the sheer fact that there

needs to be a minimum wage, than historically speaking their argument is invalid. In an article,

Sowell published in the New York Post, he mentions that Canadians in the Provence of British

Columbia were for minimum wage laws with the intent to price the Japanese out of the lumber

market in 1925. During this era, South African white supremacists demanded minimum wage

laws for everyone so blacks could get priced out of the market (Sowell). In fact, unions in South

Africa who didnt admit any blacks were the biggest supporter of these laws (Williams).

In 1931, Congress passed the Davis-Bacon Act that required a uniform wage for public

works workers (Calton). The Davis-Bacon Act of 1931 is also said to have caused a major

migration of blacks to the North, which resulted in blacks being restricted to poverty stricken,

run down neighborhoods. By no means are politicians in the current day pushing for these types
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of laws because they have racist intentions. One can only assume they have good intentions and

are just ignorant towards the history of minimum wages.

Sowell states in his book Basic Economics, that normally, in economics, there is a

surplus of something when an artificial price is implemented by the government, in this case it's

the price of labor. When the government imposes a price floor in a market, it creates a surplus. In

this case, the surplus that the government has created in the labor market translates to

unemployment because not everyone who is unemployed will work for themselves or get a job

with the government (Sowell 220). For example, if there was no minimum wage and the

equilibrium price of labor was $5.50, there would be near full employment in the sector because

the equilibrium point on a supply and demand graph is the point in which both supply and

demand intersect each other. Because of this price floor, employers generally look for more

skilled, more experienced workers, which in part hurts the teen who is looking for work for the

very first time. This potentially costs a teen the opportunity to make more money faster because

they are denied experience (Sowell 221). It's very important to allow young teens the opportunity

to gain experience, which will lead to more opportunities to make a lot of money down the road.

This is one of the simplest and basic arguments against the minimum wage because it can be

drawn out and physically examined.

Basic economic principles like supply and demand of labor and price floors explain why

minimum wages wont work, and on top of that there are plenty of real world examples that

explain why minimum wage laws hurt employment. In 2015 in Seattle, Washington, the

government increased the minimum wage from $9.96 to $11.14. Economists predicted that this

would increase weekly wages by a little more than $5, but what they found out was that weekly

wages actually decreased by $5.22 (Ehrenfreud). Generally, when there is an increase of


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minimum wages one of two things happen, workers get fired or workers get their hours cut. In

2014, the Congressional Budget Office came out with a report saying that if congress voted on

raising the federal minimum wage to $10.10 it would lift 900,000 people out of poverty. This

sounded great until they found that raising the minimum wage to $10.10 would eliminate

anywhere in between 500,000 jobs to 1,000,000 jobs and would ultimately send that many

people well below the poverty line (CBO). This is the never-ending problem with raising the

minimum wage, no matter how many people might benefit from it there will always be others

who will suffer. This ultimately leads to more inequality of wealth, rather than less.

Many people who oppose the idea of no federal minimum wage will usually argue that

corporations will then take advantage of this and charge people slave-like wages. This is a

common fallacy that can be debunked through basic reasoning. Accepting a minimum wage job

is a consensual agreement between employer and potential employee. A potential employee who

is actively searching for a job in the labor market, especially someone who is joining the labor

force for the very first time, will normally not accept a wage below the price in which that person

values themselves. If that employee turns down a job offer from firm one because firm two

offered him or her more money than firm one will either have to raise their wages or find a

potential employee who would be willing to work for that wage. Most of the time the firm is

stuck raising its wages because it will attract more workers who are generally more qualified.

This reflects the idea of competition in the labor market.

One very big misconception of the minimum wage is the fact that if wages were to be at

their natural equilibrium people wouldnt be able to live. Politicians and activists most

commonly refer to this by saying people need to be given a living wage. Its important to

understand the demographics of who exactly is working for minimum wage. According to a
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2014 Pew Research report, 50.4% of minimum wage earners are between the ages of 16 and 24

and 64% of minimum wage earners are part time (DeSilver). Also, the Bureau of Labor Statistics

discovered in 2015 that people who are 25 years of age or older who make minimum wage only

make up 2% of workers in their group (BLS). This makes it very clear that the minimum wage is

not meant to be lived on. Its pretty clear when you look at the statistics that a large majority of

minimum wage earners are between the ages of 16 to 24. Another factor that should be

considered is that generally minimum wage earners dont make the minimum wage for more

than a year (Sowell). Therefore, claiming that the minimum wage should be raised because

people need to be paid a living wage is not a valid point when a substantial majority of

minimum wage earners are, in fact, just entering the labor market.

Minimum wage laws have proven to price low skilled African Americans and minorities

out of the market while also being used as a form of discrimination in some cases. Also,

minimum wages have proven to hurt overall employment and small businesses all around the

country. With that being said, why do people advocate so profusely about raising the minimum if

most minimum wage earners will most likely earn more in less than a year of employment? Also,

why do politicians who have nothing to lose, like Senator Bernie Sanders, campaign relentlessly

on raising the minimum wage? And most importantly, why do voters, who would benefit the

most from a minimum wage of zero, countlessly support and vote into Washington politicians

who want to inadvertently price them out of the market? Are people generally stupid or are they

just misinformed? People all over the United States of America need to become more educated

on this issue for the sake of their own well-being. World renowned economist, Milton Friedman,

once said, Only a crisis, actual or perceived, produces real change. Well this crisis, that is the

minimum wage, is well overdue for real change.


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Annotated Bibliography

Sowell, Thomas. Basic Economics. 5th ed. Washington: The Perseus Group, 2015. Print. Thomas

Sowell is a revered economist who had attended Harvard, Columbia, and the University

of Chicago for academia. After getting his Ph.D. at the University of Chicago, he went on

to teach at Howard University, Rutgers, Cornell, Brandeis University, Amherst College,

and UCLA while working closely alongside his mentor and Nobel Memorial Prize

winner Milton Friedman. Sowell has written many books, mostly on race and economics,

including the book Basic Economics. This 600-page book, is a long comprehensive guide

on some of the most basic economic ideas, topics, and issues. Sowell focuses on the

effects of certain economic policies rather than the intent that might be behind them. Its

a very helpful and thorough book to understanding economics at a beginners level.

"The Effects of a Minimum-Wage Increase on Employment and Family Income." Congressional

Budget Office. N.p., 12 Aug. 2015. Web. 18 Apr. 2017.

https://www.cbo.gov/publication/44995 This is a report that came out from the

Congressional Budget Office that talks about raising the minimum wage to $10.10 an

hour. The report was released in 2014 when then President Barack Obama planned to

raise the federal minimum wage. The report goes into great detail about the possible

effects of raising the minimum wage and how it would affect the labor force. It also talks

about how it would affect the people who are working for minimum wage.

Ehrenfreund, Max. "Why raising the minimum wage in Seattle did little to help workers,

according to a new study." The Washington Post. WP Company, 29 July 2016. Web. 12

Apr. 2017. https://www.washingtonpost.com/news/wonk/wp/2016/07/29/study-raising-

the-minimum-wage-did-little-for-workers-earnings-in-seattle/?utm_term=.cef4216d846c
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Max Ehrenfreund, who writes for the Washington Post, wrote an article on the results

from a study that was conducted by the University of Washington. The economists who

conducted the study were, Jacob L. Vigdor, Jennifer Romich, Mark C. Long, Scott W.

Allard, Scott Bailey, Heather Hill, Jennifer Otten, Robert Plotnick, Anneliese Vance-

Sherman, Ekaterina Roshchina, Emma van Inwegen, Anne Althauser, Tori Rockwell,

Hilary Wethingm James Busckiewicz, Katherine Getts, who all work at the University of

Washington. The latest study was conducted in April of 2016 and touched upon

minimum wage laws in Seattle, Washington.

SOWELL, THOMAS. "Thomas Sowell: The Left Likes to Gamble with Other People's Money."

Investors Business Daily, 05 Dec. 2016, p. 35. EBSCOhost,

rlib.pace.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=bwh&A

N=120025844&site=eds-live&scope=site. In this article, economist, Thomas Sowell talks

about how politicians like to gamble with other peoples money. Sowell talks about the

difficulties of finding a job now compared to finding a job when he first entered the labor

market as a teenager. He also talks about the high turnover rate that comes with have

minimum wage jobs such as flipping burgers.

Williams, Walter E. "Minimum Wage, Maximum Folly." Human Events, vol. 62, no. 15,

5/1/2006, p. 11. EBSCOhost,

rlib.pace.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=ulh&AN

=20697442&site=eds-live&scope=site. This article talks about the majority of people

who make minimum wage, young people. It also talks about the racist attempts that were

pushed by white labor unions in South Africa. Walter E. Williams uses information from

his book South Africas War Against Capitalism to justify his claims.
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Calton, Chris. "The Racist History of Minimum Wage Laws." Mises Institute. N.p., 16

Apr. 2017. Web. 01 May 2017. https://mises.org/blog/racist-history-minimum-wage-laws

Chris Calton is a writer for the Mises Institute, which is an institution that is named after

classical economist Ludwig von Mises. Calton gives an in-depth look at the racial history

the minimum wage has had in the United States. He provides multiple examples

throughout history of laws past that have had a direct impact on black employment.

DeSilver, Drew. "Who makes minimum wage?" Pew Research Center. N.p., 08 Sept. 2014. Web.

01 May 2017. http://www.pewresearch.org/fact-tank/2014/09/08/who-makes-minimum-

wage/ Drew DeSilver is an author for Pew Research and provides an article determining

who makes minimum wage based on 2013 numbers from the Bureau of Labor Statistics.

He mentions that most minimum wage earners are between the ages of 16-25 (50.4%)

and that most are part time workers (64%).

"Characteristics of minimum wage workers, 2015 : BLS Reports." U.S. Bureau of Labor

Statistics. U.S. Bureau of Labor Statistics, Apr. 2015. Web. 02 May 2017.

https://www.bls.gov/opub/reports/minimum-wage/2015/home.htm This report comes

from the Bureau of Labor Statistics and describes the characteristics of minimum wage

workers from 2015. It gives information on age, gender, race, education, marital status,

full time and part time status, occupation, industry, and state of residence.

Sowell, Thomas. "Why racists love the minimum wage laws." New York Post. N.p., 17 Sept.

2013. Web. 02 May 2017. http://nypost.com/2013/09/17/why-racists-love-the-minimum-

wage-laws/ Economist Thomas Sowell wrote an article about the race implications of the

minimum wage. In the article, he talks about certain moments in history that had a direct

implication on the black community.


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Neumark, David, and William L. Wascher. Minimum wages. Cambridge, MA: MIT Press,

2010. Print. David Neumark and William L. Wascher are both University of

Pennsylvania graduates in economics who teamed up to write a book for the MIT Press

about minimum wages. Their book explains the history of minimum wages along with

comprehensive studies done by the two men. By the end of their research they reported

that the minimum wage does more harm then good.

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