Monday, September 28

Labor's clout and a mindless adherence to liberal gospel

The New York Post is reporting that unemployment among young workers (aged 16-24, excluding students) has reached a postwar high of 52.2 percent. It had never topped 50 percent before.

A recession is always going to hit the unskilled the hardest, and most of this age group are unskilled. But the increase in the minimum wage on July 24, 2009, adversely impacted this group as well, for it raised the price of unskilled labor by no less than 10.7 percent in the teeth of an already growing unemployment rate. Since 2006, as the seeds of recession were beginning to germinate, the minimum wage has increased by a whopping 40.8 percent. This could only have reduced the demand for unskilled labor. A small-business owner with 10 minimum-wage employees in 2006 could have hired another four with the wage increase he has been forced to pay to the ones he already had. So, of course, many of them didn’t hire anybody.

The evidence that minimum-wage laws work against, not for, the interests of the unskilled is pretty clear. There are, for instance, 13 states, ranging from California to New England, with minimum wages above the federal level. Their unemployment rates among the unskilled average higher than the national unemployment rate. That’s unlikely to be a coincidence.

The biggest backer of a higher minimum wage has long been Big Labor, few of whose workers are paid the minimum wage. But many of their workers are paid wages that are multiples of the minimum wage, so any increase in the minimum boosts their wages as well.

The stimulus bill did nothing for those earning the minimum wage. Had a substantial portion been designated to fund tax relief for employers who added minimum-wage jobs to their payrolls, the unemployment rate would have been immediately impacted for the better by lowering the cost of unskilled labor. Instead, the Obama administration made it harder for employers to hire the unskilled, not easier. Why? First, because Big Labor has enormous clout in this administration; second, because of this administration’s intellectual rigidity and mindless adherence to the gospel of liberalism.

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