The Concise Guide To Economics

by Jim Cox

 

Home

Introduction

Basics and Applications

  1. Overview of the Schools of Economic Thought
  2. Entrepreneurship
  3. Profit/Loss System
  4. The Capitalist Function
  5. The Minimum Wage
  6. Price Gouging
  7. Price Controls
  8. Regulation
  9. Licensing
  10. Monopoly
  11. Anti-Trust
  12. Unions
  13. Advertising
  14. Speculators
  15. Heroic Insider Trading
  16. Owners vs. Managers
  17. Market vs. Government Provision of Goods
  18. Market vs. Command Economy
  19. Free Trade vs. Protectionism

Money and Banking

  1. Money
  2. Inflation
  3. The Gold Standard
  4. The Federal Reserve System
  5. The Business Cycle
  6. Black Tuesday
  7. The Great Depression

Technicals

  1. Methodology
  2. Labor Theory of Value
  3. The Trade Deficit
  4. Economic Class Analysis
  5. Justice, Property Rights and Inheritance
  6. Cost Push
  7. The Phillips Curve
  8. Perfect Competition
  9. The Multiplier
  10. The Calculation Debate
  11. The History of Economic Thought

A Chronology

About the Author

Praise for the Book


5. The Minimum Wage

Minimum wage legislation is one of the great civil wrongs perpetrated against the low-skilled who need the opportunities which middle-class workers, future professionals and the self-employed can legally take for granted.  What the minimum wage law does to the poor is to deny to them the same freely chosen opportunities others follow for their own well-being. 

A middle-class 20-year old college student, for example, can work part-time at $5.00 per hour for half the hours in a work week and attend classes to better his future employment prospects the other half.  In effect, such a student is earning not $5.00 per hour for his efforts but a sub-minimum wage of only $2.50 for the full work week of 40 hours (20 hours on the job at $5.00 and 20 hours in class and study time at $0).  And if the costs of tuition, books, and gas are included the student is possibly earning an effective wage which is negative!  This is done by the student voluntarily--a subminimum wage effort is freely chosen as a civil right not denied by government.

An up and coming 30-year old doctor chooses a similar route of economic well-being.  The hours spent not only in undergraduate school as in the case of the 20-year old, but, in medical school as well, pay no wage.  In fact, both are paying to learn now in order to earn a much higher income later.  Again, the future doctor exercises this option as a civil right--there are no laws preventing him from doing so. 

An enterprising individual starting his own business will often lose money for months, even years, prior to earning a profit on a new venture.  Again, he is earning a wage much less than that mandated by minimum wage legislation.  But, he is perfectly free, as an entrepreneur, to engage in such behavior--it is not illegal.

But what of the low-skilled citizen with no prospects of college training or a medical career or of starting his own business?  Here the heavy hand of government literally outlaws an option freely chosen by others.  A worker worth only $3.00 an hour to an employer is denied the opportunity to accept this low wage for the opportunity to learn not in the formal setting of a college classroom or a training hospital or as an actual business owner but in the workplace itself.  It's a safe bet that most readers of this page made wage gains once on the job, not by way of formal training but by way of learning and proving themselves on their jobs.

Anyone doubtful that the minimum wage law is a civil rights issue need only look at the unemployment statistics to see the truth of this question.  The unemployment figures below make it clear that identifiable segments of society are being legally discriminated against--discriminated against because their low productive value places them in a position where they cannot legally choose the combination of wages and job training they may prefer.

CATEGORY UNEMPLOYMENT RATE
August 1996
Overall5.1%
16 - 19 years of age17.2%
Blacks 16 - 19 years of age37.6%
25 - 54 years of age4.1%

Source: Monthly Labor Review, October 1995

Given this analysis it must be asked why are what I'll call "effective-wage rights" denied to some segments of society?  The answer is that denying such a right to the low-skilled has no negative political consequences.  Unlike other groups, these populations generally don't vote, don't contribute to campaigns, don't write letters-to-the-editor, and don't in general make themselves heard politically--these people can be denied a civil right the rest enjoy, because they do not count politically.

The minimum wage law is a cruelty inflicted by government on a group of people who can afford it the least, while politicians reap the benefits of appearing to be kinder and gentler.  It is a clear violation of the equal protection clause of the Fourteenth Amendment.  In the name of the poor themselves, it is time to abolish this shameful civil wrong.




 

The Concise Guide To Economics © 1995, 1997 Jim Cox