A Double Whammy

A double whammy is defined as a situation that is bad in two different ways : a situation in which two bad conditions exist at the same time or two bad things happen one after the other; for example, “with the cold weather and the high cost of heating fuel, homeowners were hit with a double whammy this winter.”

Last December a study by the nonpartisan Congressional Budget Office found that raising the federal minimum wage to $17 an hour from $7.25 by July 2029 could increase wages for more than 18 million people, but at the same time, it could also reduce employment by about 700,000 workers.  Nonetheless, California is moving ahead to increase its minimum wage to $20/hour by April 1^st.   Predictably, fast-food chains have already begun laying off workers and shaving hours ahead of the state mandated minimum-wage increase for chains with at least 60 national locations.

Minimum wage laws have been a point of contention for years.   But what the left doesn’t like to acknowledge is that in a free-market economy, people are for the most part, paid in direct proportion to the difficulty in replacing them.  This doesn’t mean that your local electrician isn’t as valuable as a human being as say a NASA astronaut is because there’s nobility in every type of honest labor, but people in certain occupations are simply more difficult to replace than others, and a free market reflects that reality.

But as with all public policy, the new minimum wage law in California should have been evaluated in terms of who benefits and who doesn’t in both the short and the long term, and whether or not there may be some hidden unintended consequences – and there are always unintended consequences with new public policy!  But liberal thinking seldom examines policy ramifications beyond its initial bumper-sticker impact.  Surely the estimated 18 million people the CBO cited will benefit from a higher minimum wage, but what about the 700,000 people who will lose their jobs?  And the one thing we can be sure of is that these 700,000 people will not be the most highly skilled workers, rather these layoffs will most affect the low-income people the social justice warriors claim they’re trying to help.

~ A Not So Obvious Reason ~

The prime contention of social justice warriors is the reason low-income workers (usually minorities) aren’t compensated as well as other demographics is due to discrimination.  Given that reality, one would think a bit more forethought would be given to the matter.  And God forbid, perhaps they might even heed the words of experts, such as  esteemed economist, Milton Friedman, who denounced minimum wage laws as one of the most if not the most anti-black laws in existence because minimum wage laws reduce the cost of discrimination for the person or organization that’s doing the discriminating. 

In a free and competitive marketplace where prices are determined by the laws of supply and demand, discriminatory practices can have a significant financial cost to an employer who discriminates based on race.  Allow me to illustrate, as wages increase under minimum wage laws it naturally attracts more job applicants, but at the same time, higher labor costs also tend to reduce the number of employees an employer can economically hire, as California’s fast-food chains are already doing.

The net result is a surplus of job applicants end up vying for the same low wage jobs that were most affected by those minimum wage laws.  And with an abundance of candidates, an employer who discriminates based on race can turn away qualified minority applicants because they know they can replace those applicants with other qualified people more to the employer’s liking, and it costs the employer nothing.

However, it’s unlikely there will be a chronic surplus of job applicants when there are no minimum wage laws, because under these circumstances, employers who turn away qualified minority applicants will either have to pay more to attract other qualified applicants or pay their existing employees overtime wages, both of which increase the employer’s labor costs.

So, there’s the double whammy.  With artificially inflated wages many people will not only lose their jobs or experience a cutback in hours (and hence wages) but at the same time the potential for racial discrimination that the social justice warriors are trying to eliminate will become more rather than less likely.

Quote of the day: “When looking at the biggest study of the American dream, the number-one correlate for upward mobility is having two parents in a home.”—Stephen Marche