Right-Wing Think Tanks want to eliminate the minimum wage. RWTTs arguments against the minium wage often mention studies and their findings, but rarely provide sufficient information to track down and assess them. Below are some of the most common arguments made by RWTTs.

Common Arguments Against the Minimum Wage

1. Almost noone is paid at minimum wage or is paid at minimum wage for long. This argument is often accompanied by claims that most of those paid minimum wage are teenagers or people who do not depend on their wages for support. In any case, people can give themselves raises by learning new skills and being more productive.

But even if these claims were true -- and they are not^* -- the minimum wage affects more than those paid it. Raising the minimum wage has a ripple effect, increasing the wages of those paid slightly above minimum. A useful source for data on the minimum wage is Economic Policy Institute's "Minimum Wage: Facts at a Glance."

2. The minimum wage is anti-poor people. Some argue the minimum wage increases unemployment, and unemployment is worse than poverty wages. If an employer could pay whatever it wanted, it would pay less but hire more workers.

But while this seems plausible, it is just as likely that the employer would keep the same number of workers and pocket the rest as profit. It is also important to realize that poverty debases people and makes them desperate. In New Zealand, in the early 1990's when official unemployment was above 13%, employers who offered no-wage, experience-only jobs were rewarded with hundreds of desperate applicants hoping that if they showed themselves to be eager, they would be hired for paying jobs. Their hopes were dashed. In the US, we have unofficial internships and students willing to take unpaid work hoping for a real job. This was illegal in both New Zealand and the US, yet it continues.

3. People are paid what they are worth.
4. People paid minimum wage don't have the skills to compete and will never get them, because they will never get their first paid job.

But are wages are really tightly tied to skills? A look at the pay of airline CEOs shows this is a myth. There is some relationship, but there is a lot of play in the system.

5. The minimum wage is the cause for higher black youth unemployment.

But while it is touching that RWTTs are concerned about minorities, they ignore racism as the more likely cause of their higher unemployment rates.

How the RWTTs Make Their Arguments

Here are some examples of how these arguments are actually made. Notice both the arguments and the way they are made and supported.

The minimum wage is the cause for higher black youth unemployment.

The bias of minimum wage laws against disadvantaged minorities has been conspicuous ever since 1956, when the minimum wage shot up from 75 cents to $1.00 an hour. During the next two years, nonwhite teenage unemployment spiralled from 14 to 24 percent. The recent 1996 hike in the minimum wage to $5.15 an hour had a similar effect: unemployment among black male teenagers jumped from 37 to 41 percent almost immediately, at a time when the economy was doing well for almost everyone else. That's why Milton Friedman, the Nobel Prize winning economist, once called the minimum wage "the most anti-black law on the books."

Source: Dr. Burton W. Folsom, "Minimum Wage Causes Maximum Pain," Mackinac Center (Michigan RWTT)

The minimum wage is anti-poor people. It causes unemployment.

The working poor targeted by the minimum wage plan would now have to compete for jobs not only against others willing to work for minimum wage, but also against those with higher skills who are willing to work for $8 an hour, $9 an hour, all the way up to the living wage. Thus, not only are they not making $100 an hour, they are making $0. While this may seem to be an extreme example, the principle is the same for any "living wage" law; the results will simply take place on a smaller scale. It is precisely the people who are trying to work their way up in the world that are hurt the most by minimum and "living wage" laws.

Source: "Let's End Poverty by Decree! 'Living Wage' Laws Defy Basic Economics and Hurt Intended Beneficiaries," Reason Public Policy Institute (Southern California RWTT)

Duke University researchers have found that after an increase in the minimum wage, the lowest skilled adults are crowded out of their jobs as better-educated teenagers (frequently from wealthier families) are drawn into the workforce. Their "need"? Simply to earn money for video games and iPods. But because they require less training, employers eagerly hire these higher-skilled teenagers to get the most out of their higher payroll costs.

Source: Craig Garthwaite, "Minimum Wage Increase Hurts Low-Income Families," Employment Policies Institute [not to be confused with the Economic Policy Institute]

Employers cannot simply pay any old wage that makes workers happy. Businesses are constrained by the value that the workers add to the firm. If a worker's contribution to the firm is such that his output brings in revenue of $5 for every hour of his output, the business cannot afford to pay him any more than that and still break even. If he is forced to pay this employee $7 an hour, he is losing $2 an hour every hour that worker is employed. A minimum wage increase provides an incentive to hand him the pink slip.

Source: Shawn Ritenour, "What You Need to Know About the Minimum Wage," Mises Institute (an Alabama RWTT). [A similar piece by the same author is listed by Privatization.org, which links to Reason?s website and this piece: Shawn Ritenour, "Give Lower-Skilled Workers a Chance."]

Some Additional RWTT Links FYI

• Craig Garthwaite, "Hiking Minimum Wage: Be Careful What You Wish" (Philadelphia Inquirer).
• Employment Policies Institute, "the Minimum Wage" and "Who Actually Earns the Minimum Wage?"

The RWTTs anti-minimum wage propaganda is not just a US issue. It is of interest to right-wing organizations around the world, as you can see at the Web site of the International Society for Individual Liberty.

Now you have an introduction to what the RWTT arguments against the minimum wage are and how they make their points. You have some brief talking points to counter their arguments. Read "The Minimum Wage, Part Two" tomorrow for more powerful intellectual weapons against RWTT propaganda.

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