SPRINGFIELD – The Chicago City Council is all for requiring all the city's employers pay at least $15 per hour to their employees – that includes everyone, even 16 year olds who live at home with parents and are experiencing their first jobs.
Cook County Board of Commissioners soon followed suit, although the four Republicans on the board objected. Thus far, six home rule municipalities within the county have exercised their independence and exempted themselves from Cook County's mandate – declaring instead that they choose to adhere to an Illinois Supreme Court ruling that gives the state, not counties, the right to impose such dramatic changes on employment.
In the past week, the $15 minimum wage mandate passed committee in the Illinois House, headed for a floor vote. If the Democrat majority passes the mandate in the House, its companion bill in the Senate is likely to pass with an even larger Democrat majority. The Democrats' effort will then be in the hands of Republican Governor Bruce Rauner – who is juggling low approval ratings and an impending re-election campaign in 2018.
Proponents of a higher minimum wage point to the obvious and visible benefits to some workers – those who may find a job at the higher wage or keep their existing job and get a higher wage.
"But that is only part of the story – there are many less obvious downsides to an artificially high minimum wages that take longer to recognize, and it’s those inevitable negative effects that lead economists to generally oppose minimum wage laws," Mark Perry of the American Enterprise Institute writes.
What are the specific objections of economists to the minimum wage and why do they generally favor market wages instead? Perry lists ten reasons in favor of market wages over a government-mandated minimum wage:
- Proposed minimum wages are almost always arbitrary and never based on sound economic analysis. Why $10.10 an hour and not $9.10? Why $15 an hour and not $16 an hour?
- A uniform federal minimum wage may be sub-optimal for many states, and uniform state minimum wages may be sub-optimal for many cities. A one-size-fits-all approach to the minimum wage is really a “one-size-fits-none.”
- Minimum wage laws require costly taxpayer-funded monitoring and enforcement mechanisms, whereas market wages don’t.
- Minimum wage laws discriminate against unskilled workers in favor of skilled workers, and the greatest amount of discrimination takes place against minority groups, like blacks.
- Adjustments to total compensation following minimum wage laws will disadvantage workers in the form of reduced hours, reduced fringe benefits, and reduced on-the-job training.
- Many unskilled workers will be unable to find work and will be denied valuable on-the-job training and the opportunity to acquire experience and skills.
- Minimum wage laws prevent mutually advantageous, voluntary labor agreements between employers and employees from taking place.
- To the extent that higher minimum wages result in lower firm profits and higher retail prices, that’s a form of legal plunder by workers from employers and consumers that is objectionable.
- Market-determined wages are efficient, whereas government-mandated wages create distortions in the labor markets that prevent labor markets from clearing.
- Like all government price controls, minimum wage laws are distortionary. If you trust government officials and politicians to legislate and enforce a minimum wage for unskilled workers, you should logically trust those same bureaucrats to set all prices, wages and interest rates in the economy. Realistically, if you agree that those economy-wide price controls would be undesirable, then you should also agree that the minimum wage law is also undesirable.
In summary, despite arguments proponents claim about economists not being concerned about unskilled workers, the overall effect of maximized employment opportunities lead economists to oppose the minimum wage.
"Simply put, we would rather see unskilled workers employed at a market wage – even if that wage is only $5, $6 an hour – that allows them to gain valuable work experience and on-the-job training, than to be unemployed at $0.00 an hour" Perry writes. "And unfortunately, a $15 minimum wage maximizes the probability that an unskilled worker will be unemployed at $0.00 an hour instead of being gainfully employed."
Published first at American Enterprise Institute
