Does the minimum wage help workers? Lawrence Reed, president emeritus of the Foundation for Economic Education, says the question answers itself once you remember that wages are the price of labor. Fix the price of a good and you get a shortage; fix the price of labor and you get fewer jobs. You cannot make a person worth $15 an hour by making it illegal to pay him $8. The job is still worth $8, so the employer either eats the loss or decides the job is not worth having.
Jenny Beth Martin has watched it happen. In college she worked at Radio Shack on commission, with the minimum wage as the floor for anyone who did not sell enough. One young coworker was not much of a salesperson, but at the old minimum she sold just enough to keep her job. Then the minimum wage went up. Soon after, the store raised the hourly sales quota, and anyone under it was put on notice. Four months later the coworker was let go. Everyone else earned a quarter more an hour; she earned nothing.
Reed takes it from there. The people priced out are the unskilled, the newly employed, the teenagers being paid to learn how to show up on time, and the small businesses that create most new jobs. If $15 really helped, why not $50? And not one politician who voted for the hike, he says, ever wrote to the people who lost their jobs to apologize for pricing them out of the labor market. Their answer, Jenny Beth Martin adds, would just be more government programs.
Guest: Lawrence W. Reed, economist, president emeritus of the Foundation for Economic Education, and author of Born of Ideas and Was Jesus a Socialist?
In this segment:
• Wages are the price of labor: the higher the price, the less gets bought
• You cannot make a person worth $15 by making it illegal to pay him $8
• If $15 helps, why not $50 an hour?
• Who gets priced out: the unskilled, the newly employed, the first rung of the ladder
• Jenny Beth's Radio Shack story: a higher quota, four months, a lost job
• Why a fast-food meal costs $15 now, and the value of a first job
• No politician wrote the apology letter
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00:00 — Myth one: does the minimum wage help workers?
00:58 — Wages are the price of labor
01:13 — You cannot make a person worth $15 by outlawing $8
01:51 — Eat the loss, or the job goes away
02:19 — If $15 helps, why not $50 an hour?
02:38 — Who gets unemployed: the unskilled on the first rung
03:15 — Jenny Beth's Radio Shack job on commission
04:20 — The minimum wage goes up, the sales quota goes up
04:51 — Four months later, she lost her job
05:28 — A quarter more for everyone else, nothing for her
05:42 — Why fast food costs $15 now
06:20 — The value of being paid to learn how to work
06:58 — No politician wrote the apology letter
07:21 — Their answer: more government programs
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