Thursday

Milton Friedman on minimum wage laws

“There are always in these cases two groups of sponsors: there are the well-meaning sponsors and there are the special interests who are using the well-meaning sponsors as front men….The special interests [in this case) are, of course, the trade unions…The do-gooders believe that by passing a law saying that nobody should get less than….whatever the minimum wage rate is you are helping poor people who need the money. You are doing nothing of the kind. What you are doing is to ensure that people whose skills are not sufficient to justify that kind of a wage will be unemployed. It is no accident that the teenage unemployment rate…is over twice as high as the overall unemployment rate. It is no accident that that was not always the case until the 1950s when the minimum wage rate was raised very drastically, very quickly. Teenage unemployment was higher than ordinary unemployment because of course the teenagers are the ones who are just coming into the labour market… but it was nothing like the extraordinary level it has now reached. It’s close to 20pc. Why? Because the minimum wage law is most properly described as a law saying that employers must discriminate against people who have low skills…The consequences of minimum wage rates have been almost wholly bad: to increase unemployment and to increase poverty. Moreover the effects have been concentrated on the groups that the do-gooders would most like to help. The people who have been hurt most by minimum wage laws are the blacks. I have often said that the most anti-negro law on the books of this land is the minimum wage rate. ”

Transcribed from video  http://www.youtube.com/watch?v=ca8Z__o52sk

As ever, the clarity and logic of his comments are compelling.

I would add two things. First, with the government earnings supplements that now exist – but did not when Friedman was speaking, I suspect – if there were not minimum wages some employers would offer wages well below the minimum wage because both the employer and the employee would know that the government would make up the difference. That is always the trouble with government wage supplements.

Secondly sometimes welfare benefits can take the place of minimum wage rates. You might have a very low or non-existent minimum wage. But if you have easily obtained welfare benefits, they take the place of the minimum wage. Their effect can be even more pernicious since, in some places, you can take the benefit and also work on the side.

If anyone has information about when this recording was made or what the programme was, I would be most grateful for it.

 

 

 

 

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3 Responses to Milton Friedman on minimum wage laws

  1. It should not be forgotten in the debate that most people staring to work for minimum wage does actually advance in life and only 5 percent or less in U.S. does stay at minimum wage over a lifetime. To price out young people from the labour market is to artificially create an enormous damage to the individuals and the entire society.

  2. Pingback: Sask. min.-wage earners increase productivity 26% over 5 years « Huck Online

  3. Pingback: Mindestlohn und Reichen-Steuer: Die Politik als leeres Ritual | Ruf-der-Heimat

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