the audit

John Stossel’s poor logic on minimum wages and jobs

Fox host fails to explain away Australia's high wages and low unemployment
July 30, 2013

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”:

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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.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.