Thomas Sowell

It was a common political move when Chicago's city council voted recently to impose a $10 an hour minimum wage on big-box retailers. There is nothing that politicians like better than handing out benefits to be paid for by someone else.

What was uncommon was the reaction. Chicago's Mayor Richard M. Daley denounced the bill as "redlining," since it would have the net effect of keeping much-needed stores and jobs out of black neighborhoods. Both Chicago newspapers also denounced the bill.

The crowning touch came when Andrew Young, former civil rights leader and former mayor of Atlanta, went to Chicago to criticize local black leaders who supported this bill.

While the $10 an hour minimum wage was politics as usual, the unusual backlash against it provides at least a glimmer of hope that more people are beginning to consider the economic consequences of such feel-good legislation.

A survey has shown that 85 percent of the economists in Canada and 90 percent of the economists in the United States say that minimum wage laws reduce employment. But you don't need a Ph.D. in economics to know that jacking up prices leads fewer people to buy. Those people include employers, who hire less labor when labor is made artificially more expensive.

It happens in France, it happens in South Africa, it happens in New Zealand. How surprised should we be when it happens in Chicago?

The economic consequence of political largess -- whether in the form of minimum wage laws or medical or other benefits mandated to be paid for by employers -- is to make labor artificially more expensive.

Countries with generous employee benefits mandated by law -- Germany and France, for example -- have chronically higher unemployment rates than unemployment rates in the United States, where jobs are created at a far higher rate than in Europe.

There is no free lunch. Higher labor costs mean fewer jobs.

Since all workers do not have the same skill or experience, minimum wage laws have more impact on some than on others. Young, inexperienced and unskilled workers are especially likely to find it harder to get a job when wage rates have been set higher than the value of their productivity.

In France, where the national unemployment rate is 10 percent, the unemployment rate among workers less than 26 years old is 23 percent. Among young people from the Muslim minority, the unemployment rate is even higher.

In the United States, the group hardest hit by minimum wage laws are black male teenagers. Those who refuse to admit that the minimum wage is the reason for high unemployment rates among young blacks blame racism, lack of education and whatever else occurs to them.


Thomas Sowell

Thomas Sowell is a senior fellow at the Hoover Institute and author of The Housing Boom and Bust.

Creators Syndicate