L. Neil Smith's

Number 9, June 1996

Congress OKs New Middle-Class Pay Cut; Democrats Cheer

By Vin Suprynowicz

Special to The Libertarian Enterprise

         Do you make $12 per hour? $18?
         The House of Representatives just cut your pay.
         As of May 22, with the minimum wage set at $4.25, the $12 worker was earning and receiving 2.8 times what a trainee ketchup-squirter earns at the local burger joint; the $18-an-hour worker was making 4.2 times that standard.
         But -- without requiring the ketchup-squirters to be any more productive, to learn any more skills or produce any more product or value for their employers -- 93 "conservative" Republicans including such "radical" freshmen as Congressman John Ensign of Nevada abandoned sound economic principle and went belly-up to union bullying rather than be labeled "haters of the poor," voting with cheering Democrats May 23 to require all employers, under penalty of law, to pay even the most retarded menial leaf-raker or bun-butterer at least $4.75 per hour as of July 1, and at least $5.15 per hour starting a year later.
         At that point, the $12 per hour American worker will no longer be earning 2.8 "ketchup squirter equivalents," but only 2.3 "ketchup squirter equivalents. The $18-an-hour worker's earnings will also drop, in comparison to that measurable national standard, from 4.2 to 3.5.
         Is this nothing but idle number-shuffling? Far from it.
         True, not all poor high school kids and day care center blanket-tuckers will see their promised raises from $4.25 to $5.15. Some will just be quietly laid off as even more replacement robot machinery and "out-sourcing" of routine tasks are thus made cost-effective.
         And we will never know the additional number of young minority men, staring that thousand-yard stare as they stand around the ghetto penny-pitch, vowing in desperation to "do some crimes" if some honest work doesn't turn up soon, who might have been able to reach the first rung of the employment ladder at $4.25, but for whom $5.15 will remain permanently out of reach.
         But most employers will find a way to pay $5.15 ... and pass it on to their customers.
         The effects will be incremental, and hard to attribute to the government wage intervention alone. But trust me, the price of that hamburger, that gallon of gas at the self-serve island, the price of having your lawn mowed or your hair cut or your child diapered will now creep up that much faster.
         If the $12 and the $18 workers are smart, they won't wait, but will start militating now for their own 21 percent raises, based on the anticipated (and now inevitable) hike in the cost of living over the next several years.
         That's what the labor unions -- who pushed this move, though few to none of their members settle for $4.25, or $5.15, or even $6.05 an hour -- have been counting on: the ripple effect.
         And once that begins, of course, the magic "I" word -- inflation -- will again ripple through the councils of the stock and bond traders, leading to retrenchments which could also limit the return on the invested retirement funds of all those $12 and $18-an-hour workers. (You were thinking of retiring to San Diego? Biloxi is also nice.)
         None of this is news. Nor is it rocket science. When Congress declares that a thing of fixed value, once worth $4.25, shall now be worth $5.15, they have not increased the value of the thing (no one can do that with the stroke of a pen) -- they have merely devalued the dollar ... the dollar in which all the rest of us are paid.
         Majority Leader Dick Armey of Texas, a former economics professor, said before the vote he believed with "every fiber of my being" that raising the wage floor would boomerang against the disadvantaged young workers who need jobs the most. That effect is such a basic principle of economics, he said, that Joseph E. Stiglitz, a top economics adviser to the president, included it in his textbook.
         "If a college freshman doesn't grasp this, he's not likely to pass the course," said Mr. Armey.
         But why should the Congress worry about such well-known and inevitable effects?
         It's an election year, and all that's required now is to demonstrate good intentions.

Vin Suprynowicz is the assistant editorial page editor of the Las Vegas Review-Journal. Readers may contact him via e-mail at vin@lvrj.com. The web site for the Suprynowicz column is at http://www.nguworld.com/vindex/. The column is syndicated in the United States and Canada via Mountain Media Syndications, P.O. Box 4422, Las Vegas Nev. 89127.

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