Increasing the Minimum Wage

The latest in a long running series of efforts to thwart the hopes and ambitions of the young and poor sped to success on January 23, when the Vermont House passed and sent to the Senate a bill once again increasing Vermont's minimum wage.

Under it, the present state minimum wage would increase from the present $4.75 an hour to $5.00 in 1997 and $5.25 in 1998. That will put the Vermont minimum wage 23% above the Federal minimum, which despite the best efforts of the labor unions and Labor Secretary Robert Reich, Congress is highly unlikely to raise any time soon.

The battle lines on this issue have long been sharply defined, and there are three, not two, opposing views on the subject.

The proponents of an ever higher minimum wage, largely Democrats and labor union activists, argue that "a family can't live on $4.75 an hour. The state should thus mandate that all covered employers must pay all of their employees at least $X an hour."

The major group of opponents, made up mostly of pro-business Republicans and employers of low skill employees, object on the grounds that a higher minimum wage simply drives up labor costs and makes those businesses less competitive. It may not matter much for local fast food outlets, but where customers have the options of cross-border, mail order, telephone and now Internet shopping, the labor cost differential sends patronage away from the high-wage retail and service businesses.

Since the legislators who identify with this second group see higher minimum wages as a burden on businesses, they have an unfortunate tendency to yield to political pressure, vote to raise the wage, and then find some way to make it up to injured businesses by tinkering with the tax code or workmen's compensation rules.

The third group views the minimum wage (a wage fixed above the free market level by a government mandate) as a crime against low-skilled working people, particularly young people just starting out. The most eloquent among this group are the noted economists Thomas Sowell at Stanford University and Walter Williams at George Mason.

Sowell and Williams, both of whom grew up black and poor, know that an above-market minimum wage is the death of opportunity especially for young blacks emerging with low skills from pathetic inner city public high schools. Sowell calls minimum wage increases "economic insanity and social callousness masquerading as compassion." Williams, in his remarkable book "The State Against Blacks", shows in detail how the minimum wage was deliberately designed by labor unions in the Thirties (and in apartheid South Africa) to tilt the scales against black workers competing for "white" jobs.

Even the liberal New York Times finds itself in this third group, editorializing that" legislators are right to search for ways to help the working poor, but wrong to think that raising the minimum wage is one of them." President Clinton himself took that position until pressure from the labor unions critical to his reelection forced him to come out for a minimum wage increase.

Sadly, this small and unorganized third group has virtually no influence on minimum wage debates. There is, alas, no powerful lobby of poor people who are fighting for opportunity to work their way into the middle class in a growing economy. In Vermont what passes for the "poor lobby", the Vermont Low Income Advocacy Council, is pretty much a mouthpiece for the anti-poverty bureaucracies, the unions, the redistributionists, and assorted indemnity-seekers.

The Council's counterpart in California, however, is made of better stuff. ACORN (Associations of Community Organizations for Reform Now) bills itself as "the largest low-and moderate-income membership organization in the country." Last year it filed suit in San Diego against the State of California, arguing that the state's minimum wage is unconstitutional under the First Amendment.

ACORN's argument is that the State, by forcing ACORN to pay its political action workers $4.25 an hour, puts an effective limit on the number of advocates that can be hired with the group's limited funds, thus reducing the strength of its advocacy. An appeals court rejected the argument, but whether or not one buys the first amendment rationale, ACORN has figured out that minimum wages force would-be employers to cut back on their entry level workers.

Here in Vermont, the Democrats will weep over the low wage worker who needs more money. The Senate Republicans will reluctantly go along, looking meanwhile for some tax plum for business to redeem themselves for supporting increased labor costs. Nobody will speak for the young, low-skilled worker willing to start at $4.25 an hour and prove herself. And as a result, she'll be out of work, out of opportunity, and quite possibly onto welfare.

But this victim of labor price fixing will never amass the political power to fight back. It's a pity - a tragedy -that almost no one in Montpelier cares about her.

February 1996