How Minimum Wage Kills Jobs

By Joseph Farah

June 8, 2007

If you have any doubts government-mandated minimum-wage laws kill jobs for the poor rather than lift them out of poverty, just take a look at what is happening right now in American Samoa.

The latest minimum-wage law passed by Congress calls specifically for hikes in the U.S. territory 50 cents a year annually until the continental rate of $7.25 is reached.

This Washington-knows-best, one-size-fits-all approach is killing jobs in Samoa already just days after it was signed into law by President Bush last Friday.

StarKist had planned to expand its tuna production next month by hiring some 200-300 workers. But before the ink was dry on the new law, the company put the expansion on hold.

A spokeswoman for Del Monte, which owns StarKist, says the company "is disappointed" with the passage of the minimum-wage bill, adding that "the initial increase, combined with the further annual automatic increases has the potential to radically change the economics of tuna production and negatively impact American Samoa."

Mary G. Sestric continued: "We are concerned that without a successful resolution, the economic realities will force StarKist to review ongoing tuna sourcing and operating plans as well as altering our current investment program to expand our Samoan operations, both of which will lead to lower levels of employment and we believe will not be in the best interest of all parties concerned."

Ironically, Del Monte is based in San Francisco, the district House Speaker Nancy Pelosi calls home.

Don't be surprised if a special exemption is forthcoming. But that's not really the point, is it?

The problem with artificially imposed minimum-wage laws is that they kill American jobs everywhere. We just can't always see the results as starkly as we can in American Samoa.

And if we kill manufacturing and production in America, we rely more heavily on imports from countries like China, which don't have minimum-wage laws. In fact, China forces some to work as slaves or near slaves to bolster its own economic standing n the world.

How is any of this supposedly well-intentioned, compassionate meddling by government achieving its stated goals?

It's bad enough that federal wage laws treat Americans living in dramatically different economies as if they were all facing the same conditions; now they are treating American Samoa as if it were a sixth borough of New York.

The fact of the matter is no one is helped by hikes in the minimum wage. No one. They are actually intended to keep poor people in dependence to government, not to increase prosperity. I can prove it.

If raising the minimum wage is a good thing, why are proponents always so cheap?

Instead of raising it 50 cents or $1 at a time, why not raise it 100 percent? Or, better yet, how about 1,000 percent? If raising the minimum wage doesn't have any negative effects on the economy, why not mandate salaries of $100,000 a year?

If these incremental hikes in the minimum wage are really so good for the economy, if they don't have any negative effects on people, why not make them much bigger, much more "generous"? Why not hit our target the first time? Why do we have to keep going back to the well?

The reason, I think, is clear. Everyone acknowledges that such large mandates on private commerce would have a devastating impact. We would destroy the U.S. economy. If there is major harm done by large-scale intrusion of the government in private business matters, then smaller injuries perhaps even undetectable hurts are occurring with the smaller mandates.

No one is suggesting the economy flourishes because of increases in the minimum wage. What they argue is that the damage they do hasn't been very severe which means they concede there has been some damage. And that means our economy would be stronger by some degree if these increases had not been approved. So, why on earth would we want to keep gambling? Why would we take an action that could very well start the next recession? Why would we want to slow down the economy by even a tiny percentage? Why take action to hurt the economy at all? Why would we want to deprive some people of any jobs so others can make a pittance more? How is this healthy? How is this moral?

Pragmatic, common-sense economic principles should be enough to end wacky ideas like minimum-wage laws. But there is an even more important argument against them. There is simply no constitutional justification for such intervention by government in the private affairs of men. If you think there is, spell it out for me. Where is the constitutional authority for Washington dictating what you can pay me or what I can pay you? That is a private matter, not a public matter, not one requiring government regulation.

And that brings me to the real issue. It's no wonder opponents of the minimum wage lose nearly ever time this subject is debated because they argue against the next increase. That's not what I am doing. What I am doing is arguing that the minimum wage should and must be scrapped altogether.

There is no legal authority for it, and there is no practical economic argument for it. It is simply a means by which one political class keeps it boot on the neck of another.