Paul Jacob

Lobbyist Jack Abramoff got used to power. He bought favors for his clients from congressmen. Favor-trading, logrolling, porkbarrelling and the like go on all the time in Washington. But Abramoff took it to extremes. He was blatant. He got caught. Got prosecuted. And got powerless.

But not every exercise of influence by a man who illegally peddles influence offends against common sense and decency. For example, pre-total-disgrace, Abramoff represented business interests in the Commonwealth of Northern Mariana Islands. In that capacity, he helped prevent federal minimum wage laws from being imposed on the backwater economy.

Abramoff can no longer use his nefarious Republican lobbying power to prevent the contract-making rights of those Island businesses from routine, systematic violation. So the minimum-wage legislation just passed by the House includes a provision to impose it on the Northern Mariana Islands.

Meanwhile, however, the Democratic delegate of American Samoa, one Eni F.H. Faleomavaega, has successfully thwarted attempts to impose the same minimum wage on the Samoan economy, where employees are typically paid half the minimum workers collect in the U.S.

One moment Congress passed its minimum wage bill, and the next? Controversy erupted. If the minimum wage is so grand, why exempt American Samoa from its blessings?

Seems that StarKist Tuna, a division of Del Monte Foods, is headquartered in the San Francisco district of Speaker Nancy Pelosi but packs tuna in American Samoa. Word leaked out. Madame Speaker responded to the ensuing hullabaloo by pledging that the bill would indeed be altered to sock it to . . . er, I mean, to apply it to Samoa. Ah, fairness.

It’s still hard to know precisely what politics will ultimately beget exactly which public policy.

But it’s easy to predict what would happen when Samoan shops suddenly must pay the U.S. minimum wage. Maybe the same thing that will happen in the Northern Mariana Islands. Officials in the latter think that the boosted minimum wage — $1.50 more an hour in the first year of a four-year phase-in — could cause as much as 30 percent unemployment.

Letting the Samoan economy off the hook may constitute a double standard. But this is mercy in addition to hypocrisy. Socking it to Samoa ain’t the best cure for hypocrisy.

Politicians don’t like hearing it, but no businesses should be clobbered with a minimum wage requirement — including businesses in these United States. A minimum wage is a price control, and to the extent that price controls have an impact, they distort and hamper markets, and make life harder for the very people they’re supposed to help.

Suppose an economy is so rich that even the most unskilled and entry-level employees will make at least five dollars an hour. If an employer doesn’t pay at least five bucks an hour, there’s a good chance his workers will be bid away by other employers. No minimum wage law required.

In that case, the impact of a minimum wage law is nothing, or next to nothing. On the other hand, we can easily imagine circumstances in which an employer might be willing to give a guy a chance if he could pay him four dollars an hour, but not be willing if he had to pay five dollars an hour. This is easy to imagine because, for many low-skilled workers, this is their reality.

A first step into the job world can be an enormous benefit to the employee, even if the pay is low. That’s why students accept internships that pay little or nothing. It’s about getting a foot in the door. In fact, most people who earn minimum wage are young people. Or live in a household with other income earners.

What happens when minimum wage laws do generally increase the cost of unskilled or entry-level labor in an economy, as they will in the Northern Mariana Islands and to a lesser extent in the wealthier United States?

Then, employees on the margin are forced out of work. Or don’t get their foot in the door in the first place. No company has unlimited resources, and when a firm’s labor costs substantially increase, it just might have to cut down on its use of labor. When an economy can afford to pay all entry-level workers a certain minimum wage, that is the level to which the wage will rise naturally. Interfere with that economic process, and you just throw people out of work.

A minimum wage law with no impact is pointless. A minimum wage law that does have an impact is destructive.

Voters impatient with the federal government have used the initiative process to boost the minimum wage in several states. Popular isn’t always right. Voters have secured for their labors — by force of law — a payment for services rendered that cannot be obtained by voluntary agreement. These actions harm the interests of employees and employers both, and violate the rights of both parties to freely enter into an employment contract.

One might notice something amiss in the slogan for many of these minimum wage initiatives: Give yourself a raise. Voters should no more give themselves a raise with someone else’s money than congressmen should give themselves a raise with our money.

It may annoy us that bad guys like Jack Abramoff, even as they giddily indulge in their unfettered corruption, sometimes advance propositions such as 2+2 = 4; or that even certain Democrats protecting the business interests of those whom they represent might agree.

But two plus two still does equal four.

And minimum wage laws kill jobs.


Paul Jacob

Paul Jacob is President of Citizens in Charge Foundation and Citizens in Charge. His daily Common Sense commentary appears on the Web and via e-mail.