Many people believe that the minimum wage is a
state policy that helps poor people. Some even think it should be higher
than it currently is. People who actually understand the real effects of the
minimum wage – a club you’d hope would be larger than it is – know that this is
economic foolishness: that the minimum wage actually makes the vast majority of
poor people worse off (see my Minimum Wage / Living Wage side bar on this).
Some people know something
else on top of that – that, actually, far from being a state policy that helps
poor people, the minimum wage was actually sinisterly invented as a
eugenics-type method of keeping so-called ‘undesirables' out of the job market
(I wrote an
article about this for the Adam Smith Institute – re-printed in full below).
When politicians support
economically foolish policies, the relevant incompetent
or dishonest? question looms large: Do they support foolish policies
because they don’t understand they are foolish, or do they know the policies
are foolish but support them anyway because they are popular vote-winners? Of
course, added to the second option is the reality that in some cases they
support a policy because to not support it would be damagingly unpopular.
One clue of the answer to that question might
be this. We all know of instances in which politicians understand that artificially
raising the cost of something will reduce its consumption, because that's what
they try to do with taxes on goods like sugar and alcohol. They seem to
understand the basic principle that their actions will reduce consumption of the thing they're
taxing, so they probably could work out that artificially raising the cost of
employment will reduce employment. To me it indicates that in many cases they probably know the policies are foolish but
support them anyway because they are popular vote-winners.
Here is that article I was
talking about, talking about the minimum wage's very dark history:
We
read today that the national minimum wage will increase by 20p an hour to £6.70
from October, and that this will benefit more than 1.4 million workers. What we
hardly ever hear from politicians is how many people will feel the costs of
this increase, in addition to the people who are already being hurt by having a
minimum wage law in the first place.
The
problem with state-enforced minimum wage laws is pretty standard economic text
book stuff: the minimum wage makes it harder for low-skilled workers to get a
foot on the labour market ladder, it unfairly loads the burden on firms that
employ low-wage earners (a burden that could be avoided by simply reducing the
tax low-earners pay, or taking them out of tax altogether), and as a result it
often causes inflation of prices and reduction in staff as firms try to recoup
their losses.
With
the announcement today, and with the Budget looming, I was very interested to
stumble upon an article this week by Jeffrey Tucker about a Eugenics Plot
Behind the Minimum Wage, in which we find out that in the early 20th century
some eugenicists tried to introduce the minimum wage as a means of getting some
of the lesser able people out of the employment market. Here are some relevant
quotes that are bound to shock:
A careful look at its
history shows that the minimum wage was originally conceived as part of a
eugenics strategy — an attempt to engineer a master race through public policy
designed to cleanse the citizenry of undesirables. To that end, the state would
have to bring about the isolation, sterilization, and extermination of
nonprivileged populations.
It was during this period
and for this reason that we saw the first trial runs of the minimum wage in Massachusetts
Leonard documents an
alarming series of academic articles and books appearing between the 1890s and
the 1920s that were remarkably explicit about a variety of legislative attempts
to squeeze people out of the work force. These articles were not written by
marginal figures or radicals but by the leaders of the profession, the authors
of the great textbooks, and the opinion leaders who shaped public policy.
“Progressive economists,
like their neoclassical critics,” Leonard explains, “believed that binding
minimum wages would cause job losses. However, the progressive economists also
believed that the job loss induced by minimum wages was a social benefit, as it
performed the eugenic service ridding the labor force of the ‘unemployable.’”
So
when we hear politicians make minimum wage commitments in the run-up to the
election, bear in mind that those that preceded them were always fully aware
that wage floors precluded people from the labour market, and that they were
once deliberately implemented to expunge the demographic landscape of those
they thought inferior citizens that were unworthy of earning a living. That
they so readily endorse a policy that places a barrier to employment for so
many people tells you just about all you need to know about the extent to which
winning votes matters far more than aiding people’s job prospects.
I
hope that, in my lifetime, politicians and social commentators begin to get the
simple message that if you artificially remove the lower rungs on the labour
ladder, you make it difficult (often impossible) for people to climb it, or in
some cases, get on it at all.
