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The Minimum Wage in a Nutshell: Drama versus Economic Reality

By: Fergus Hodgson - @FergHodgson - Jan 30, 2014, 12:10 pm

The minimum wage is one of those absurdities that won’t seem to go away. Its mere existence affirms the presence of not only widespread tolerance for but a welcoming attitude towards the central planning of prices.

Respect for individual freedom and privacy alone should negate its existence. However, when that seems to be lost, we find ourselves in a debate over outcomes: does it help the poor and vulnerable or not?

Even if unintentionally, Tuesday’s episode of The Daily Show demonstrated the personal attacks and economic denial that pass for arguments in favor of the mandate — and it wasn’t so funny on this occasion. If you don’t support and want to raise the minimum wage, you must hate the poor!

First, the notion that the poor and vulnerable — those just struggling to get by — have any sway in politics is, of course, ridiculous. These laws exist not because of their efforts, but because of trade lobbies that do not want competition from the very people they purport to help in this instance.

The Daily Show clip also draws on the broken window fallacy — as though forcing people to pay more will generate economic activity. The recipients will spend more money, the line goes, and let’s ignore that other people have less money to spend.

As Steve Hanke, an economist at Johns Hopkins University, points out, far from helping the poor, “Minimum Wage Laws Kill Jobs.” He points to variations across the European Union as a clear example:

In the 21 countries with a minimum wage, the average country has an unemployment rate of 11.8%; whereas, the average unemployment rate in the seven nations without a minimum wage is about one third lower – at 7.9%.

eu-min-wageIf John Stewart and his contributor Samantha Bee want a role model for reporting on this topic, albeit without the comedic gimmicks, they need look no further than Brian Lilley of the Sun News Network in Canada. Unlike his US competitor, he actually looks at the research on the matter and takes it seriously. A tip of my hat to him and his courage to speak frankly, in the face of demonization.

Fergus Hodgson Fergus Hodgson

Fergus Hodgson was the founding editor in chief of the PanAm Post, up until January 2016, and he now studies finance at Tulane University in Louisiana and Francisco Marroquín University in Guatemala. Originally from New Zealand, he has also lived in Argentina, Canada, Colombia, Ecuador, Ireland, and the United States. Follow @FergHodgson and his Facebook page.