Fox Business’s John Stossel is a long-time opponent of the minimum wage.
I don’t mean he opposes raising the minimum wage, something that puts him decidedly out of the mainstream. I mean he opposes any minimum wage, which puts him roughly in Ayn Rand/WSJ editorial page territory.
The idea being that a minimum wage causes mass unemployment, particularly amongst young and/or unskilled workers who would be profitable employees at $5.25 an hour, say, but who aren’t at $7.25.
The problem for this argument, beyond the raft of research that shows it isn’t true, is the real-world examples that contradict it.
In Australia, for instance, the minimum wage is more than twice ours, at $15 an hour (adjusted for exchange rates). But the unemployment rate there is just 5.7 percent—nearly two full percentage points less than it is here.
Ah, “but statists ignore the details,” says Stossel, in a piece headlined “The Australian Minimum Wage Myth”:
Most people who earn minimum wage are young, unskilled workers. How are they doing in Australia?
In June, Australia’s unemployment rate for workers age 15 to 19 was 16.5%.
If that seems like a compelling argument, note that Stossel fails to report what the American youth unemployment rate is: 24 percent. Youth unemployment is always much higher than adult unemployment, for a variety of reasons:
One thing the anti-labor types like Stossel never imagine is that higher wages incentivize work and lower wages disincentivize it. I recall my own miserable days as a teen worker making $4.25 an hour at hamburger joints, grocery stores, and for three glorious days—Chuck E. Cheese. A few days in, after visualizing my dickhead boss flicking me a quarter every five minutes (roughly my take-home rate) to shovel up cheeseburgers, I realized my youth was better spent elsewhere.
But when I got a job in the lucrative newspaper industry (those were the days!) helping deliver a commercial route, the $8 or $10 an hour I netted made the 2:30 a.m. start times and 100-degree Oklahoma summers spent in the back of a truck covered in ink and news dust quite tolerable.
Unlike us, though, Australia’s minimum wage is tiered by age, something Stossel completely misses:
You’d think, using Stossel’s logic, that since the minimum wage for 16-19 year olds ranges from $7.10 an hour (U.S. dollars) to $12.38 an hour, the kids’ unemployment rate would be lower than the adults’.
Stossel also says Australia’s unions support higher minimum wages because it “reduces competition from unskilled labor.” In other words, those dastardly unions want poor, young kids out of work!
When the Wall Street Journal reported the minimum wage increase in Australia, it called the law “a victory for unions.” But that seems strange because union workers normally make more than minimum wage.But it is a victory for unions because union bosses know that raising the minimum wage reduces competition from unskilled labor. Union support for minimum wage laws is entirely self-serving.
Stossel doesn’t understand that unions want higher minimum wages because they put upward pressure on wages for union workers. It trickles up, so to speak.
What this reporter fails to consider is the vast difference in population vs work in Australia. Australia has a LOT fewer workers and thanks to a huge export business to Asian countries, faces a labor shortage in many industries. They also have a very healthy mining industry. This leaves a lot of minimum wage jobs for teens available while the rest of work force enjoys the more lucrative positions. Land mass wise, Australia is roughly the size of North America with a population of only about 23 million - less than 10% of America.
#1 Posted by tboyce, CJR on Tue 30 Jul 2013 at 09:40 AM
Ryan's last paragraph is simplywrong. Minimum wages protect union labor from unskilled competition. John F. Kennedy, when in the Senate, said explicitly that he was voting for a higher minimum wage to protect Massachusetts textile workers from lower-cost competition in the South. Usually the politicians and union execs who support minimum wages aren't quite so candid.
Here's how it works:Worker A is skilled and unionized. He makes $20 an hour and produces $15 an hour in surplus value for his employer. Worker B is unskilled and will work for $10 an hour. He produces less, but the surplus value of $18 an hour makes him more attractive to an employer. So the supposedly-selfless politicians and unions push for a higher minimum wage. Now it costs the employer $15 an hour to hire Worker B, and his productivity is down to $13 an hour, so the employer keeps the skilled Worker A.
Instead of cherry-picking, Ryan might give us or link to us an explanation of the Euro zone's chronic high employment - around 12% last time I looked. They have strong unions and work rules sought by American leftists there, and unemployment has been in double-digits for a generation. You see these unemployed kids in the big cities, selling toys in the plazas and hanging out. A disproportion number of them are the children of immigrants. Maybe Ryan thinks it just 'happened'.
#2 Posted by Mark Richard, CJR on Tue 30 Jul 2013 at 12:38 PM
Mark, that was an interesting argument, but it would have been more compelling had you actually chosen to make a clear statement, then factually support that statement.
Are you arguing that youth unemployment in Europe results from minimum wage laws? If not, what are you arguing? If so, what is your actual evidence that minimum wage laws are the sole or leading factor in European youth unemployment?
#3 Posted by Aaron, CJR on Tue 30 Jul 2013 at 01:52 PM
The argument against the minimum wage laws should be a moral argument. It is immoral to force a person or company to pay someone else any set amount of money. If someone is willing to work for less than the current minimum wage then they should be free to do so. It's called voluntary free trade. Besides the minimum wage rate in a country is only one factor in the unemployment numbers. How much taxiation and government regulation is their? What kind of banking laws do they have? How's the currency? Government welfare levels, subsidies, etc. Their are numerous studies that compare state by state comparison in the US (which is a more apples to apples comparison) and demonstrate the higher the minimum wage rate the higher youth unemployment is and the higher unemployment is in general. Of course these need to be compared to state with similar levels of state government intervention. It boils down to this. What gives you or the government the right to force people to pay a certain wage rate or above a certain wage rate? The answer is nothing. You have to moral right to initiate force against another.
#4 Posted by Steve Henderson, CJR on Tue 30 Jul 2013 at 03:38 PM
European youth unemployment is a function of tight European Union monetary policy. Everybody's in debt because of the 2007 crash. Under normal circumstances governments would borrow and print money to support the economy while the devalued currency would allow businesses to lower real labor costs, lower real debt costs, and rebuild the economy through exports.
Choices have been made to allow debts to get collected at full value, wages 'internally devalue' through mass unemployment, and businesses to leave since these countries have no competitive advantage and no control over national monetary policy. The youth have been emigrating as a result.
http://www.huffingtonpost.com/william-k-black/the-miraculous-turnaround_b_2329708.html
This has not been good policy, but that's the Euro.
The other aspect of European unemployment to consider is the amount of these who are students:
http://krugman.blogs.nytimes.com/2013/07/12/les-not-so-miserables/
#5 Posted by Thimbles, CJR on Tue 30 Jul 2013 at 04:05 PM
Stossel, unfortunately may have read Rand, but didn't really get her. The argument against a minimum wage is individual rights. The govt is supposed to protect individual rights - of contract - for example. An employer and employee have the right to agree on a wage and the govt only protects their right to do so, not to dictate the terms of the wage agreement.
#6 Posted by Jack Crawford, CJR on Wed 31 Jul 2013 at 08:36 AM
Steve Henderson and Jake Crawford, you make too much sense for this forum. Please learn Keynesian circuitous "logic" and other forms of rhetorical jiujitsu and statist mythology; then, come back with The Correct Response.
#7 Posted by Dan A., CJR on Wed 31 Jul 2013 at 03:21 PM
To Aaron, a quick response will have to do today, since I am in a hurry and your question requires a survey of the research on the subject.
I don't think the minimum wage is the sole cost of Europe's high unemployment, just a contributing factor in a loose job market. It is more a case of the government larding up employment with mandatory benefits that makes unskilled youth unemployable. Germany has the most potent economy in Europe, and it will surprise many to learn that Germany has no minimum wage. France, by contrast, which has rigid labor regulations, has had unemployment of 9% and higher for a generation. Their Arab-heritage youth have been conducting low-level rioting (usually arson) for years now. You'll have to take that on faith, or do some research on your own.
Sometimes I suggest research to disprove me, and Thiimbles usually rises to the occasion to provide refutation, but his links here don't hold up under scrutiny - Euro zone unemployment rates not only predate the 'tight money' regime of the post-2009 (not 2007) period, they predate the Euro itself, and his Krugman link suggests that even a Nobel Prize-winner, when in full partisan dudgeon, can confuse causes and effects. Sometimes in Europe, youths are in college because there aren't any jobs.
#8 Posted by Mark Richard, CJR on Wed 31 Jul 2013 at 04:55 PM
Wow, in a post calling out Stossel on poor logic- hint, you don't want to go up against Stossel on anything to do with logic or reason, only one of the best, brightest reporters out there- your arguments are shot through with illogic.
You’d think, using Stossel’s logic, that since the minimum wage for 16-19 year olds ranges from $7.10 an hour (U.S. dollars) to $12.38 an hour, the kids’ unemployment rate would be lower than the adults’.
Yes, Stossel's claim is that you should compare kids' unemployment to adults', that makes perfect sense. Nothing at all different between those cohorts, other than price. XD
Stossel doesn’t understand that unions want higher minimum wages because they put upward pressure on wages for union workers. It trickles up, so to speak.
Wow, just wow. It is amazing that you will actually admit this, that you support "trickle up!" You haven't disagreed with anything he said: you simply agreed with his statement and admitted that you care more about a handful of high-paid union workers raising their pay even more, instead of any unskilled workers who make in the neighborhood of the minimum wage. Who cares about those struggling to eke by: let them lose their jobs, just as long as my union buddies make more!
#9 Posted by Ajay, CJR on Thu 1 Aug 2013 at 05:27 AM
Australia controls its borders. They have essentially no illegal immigration and therefore a much smaller labor pool in relative terms.
BTW, a Big Mac costs about 75 cents (U.S. $) more than in the U.S., which is about what the higher wages would force McD to do here in the U.S.
#10 Posted by Equalize Now, CJR on Thu 1 Aug 2013 at 04:20 PM
Ajay doesn't even make a lick of sense. If lower wages drove employment, 16 year olds in Australia, who are paid 1/2 the minimum wage, would have 0% unemployment. Instead, their unemployment rate is higher than that of adults who are paid the full minimum wage. Stossel's claim is ludicrous and Ajay's support of it is foolish.
#11 Posted by EdG, CJR on Thu 1 Aug 2013 at 04:35 PM
If the Randian free marketeers had their way, in addition to no minimum wage, we'd have no workplace health and safety regulations, no social safety net, and businesses would be free to discriminate on the basis of race, religion, or any other trait they wanted to, all in the name of "freedom of association" and "the right to contract". That's "moral", to them. Fortunately, their influence in our society has peaked, and we will soon return to a morality that values workers as people, not as expendable labor units.
#12 Posted by TomAmitai, CJR on Thu 1 Aug 2013 at 06:53 PM
>>One thing the anti-labor types like Stossel never imagine is that higher wages incentivize work and lower wages disincentivize it.
!!! Where the @#$%&* did you study economics, Ryan? Higher wages incentivize people ***wanting to SUPPLY their labor*** (a/k/a potential employees); it doesn't incentivize people ***wanting to DEMAND their labor*** (a/k/a potential employers). What you're saying is that wages forced above the supply-and-demand equilibrium point for labor causes more people wanting to supply labor than wanting to hire it ***AT THAT WAGE.***
I believe this is called a "glut of labor" . . . a/k/a UNEMPLOYMENT.
Stossel knows exactly what he's talking about, but you do not.
#13 Posted by Economic Freedom, CJR on Thu 1 Aug 2013 at 08:29 PM
I love Ryan's naivete regarding Australian unemployment figures.
According to published figures from May 2013 in "The Morgan Report," unemployment in Australia was 9.5% ( 4% higher than the official reports published by the Australian government ), PLUS an additional 7.8% of those who were underemployed and still looking for full-time work. Thus, the total number of people NOT in full-time jobs and still looking for work is 17.3%.
And just FYI: more Australians trust the methodology and figures of The Morgan Report than the methodology and figures of their own government.
Now tell us how great it is to have a high minimum wage.
#14 Posted by Economic Freedom, CJR on Thu 1 Aug 2013 at 08:52 PM
>>>I recall my own miserable days as a teen worker making $4.25 an hour at hamburger joints, grocery stores, and for three glorious days—Chuck E. Cheese.
It appears that in Ryan's opinion, to be employed at job in which one actually receives a wage of $4.25/hour is worse than being completely unemployed — and receiving $0 in income — at a wage of $15.00/hour.
In other words, in Ryan's opinion, it's better to work zero hours per day at $15.00/hour and receive $0 in income than it is to work 8 hours per day at $4.25/hour and receive $34.00 in income.
#15 Posted by Economic Freedom, CJR on Thu 1 Aug 2013 at 09:08 PM