Barack Obama and the Teachable Wage

February 17, 2013

The U.S. President wants to up the national minimum wage to $9 per hour. How daring.

Such pushes to increase the legal minimum wage often succeed. There’s no mystery why. Most folks’ wages are not directly affected; we work for far more than that minimum. So it’s about other people. One consequence of this is that we don’t think very carefully about the logic of the regulation.

Which is why so many of us simply bow to social pressure, thinking that opposition to raising the minimum wage is “uncaring.”

That’s why it’s such a favorite issue among liberal Democrats, for they can play the “caring” card, their favorite in the deck.

And yet it is these Democrats who are obviously uncaring.

They could raise the minimum wage to $49 an hour, or more. It’s not Republican greed stopping them. I am sure that if Republicans did the smart thing and engaged in irony, demanding no minimum wage increase unless it was substantial, like, say, to $49 an hour — a substantial pay raise for all, not just a marginal increase for the few! — the Democrats would backpedal faster than Lance Armstrong, approaching a sunrise, on blood transfusions from Vlad the Impaler.

The truth is, the president’s paltry $1.75 increase is suspicious.

Why so little?

The reason is simple. Minimum wage laws hurt the poor the most. The poor don’t vote as much as seniors and college grads and union workers. And the one group here that often competes for low wages — college graduates — is helped by the minimum wage, for it cuts out least skilled workers from the job market.

How?

Minimum wage laws do not give out pay raises. That’s not what the law does.

A minimum wage law is a price floor. It prohibits transactions, in this case the hiring of somebody for wages or salary, below a certain amount. The current minimum wage is $7.25, and applies to most workers in most industries. (There are a few exceptions.) When legislators enact such laws, they are not giving people earning the minimum a wage hike. (They can do so only with their own employees, and, notoriously, legislatures often exempt themselves from their own employment rules.) They are prohibiting workers from working for wages lower, and prohibiting employers from hiring workers for less, than the minimum.