I kept updating my
entry on the minimum wage controversy in the USA with new posts by Greg Mankiw. And yet again thanks to Professor
Mankiw's blog (he does have a great influence on me, doesn't he!), I think I found one close-to-perfect illustrative debate on the USA federal minimum wage issue that certainly deserves a separate entry in my blog.
This is a fragment from a wonderful article called
"An infuriating man" written as part of a book by Leo Rosten (in 1970!!!), about his good friend "Fenwick", who is no one else than the late Milton Friedman. Having read Leo Rosten's literary view on Milton Friedman's character (this piece is something I would call THE "ode to Milton Friedman") only deepens my regret of
not having met Professor Friedman. Fortunately it is still possible to meet him virtually thanks to IdeaChannelTv's amazing idea of
making freely available all the original Free to Choose tv series (be patient and hit restart a couple of times, the server is most likely overloaded with requests), which I just started watching for the first time and will continue watching in my spare time.
But coming back to the minimum wage issue, below is the exact fragment depicting the debate between a self-confident and calm (and thus, very infuriating!), Fenwick, who leads the debate all the way, and a very impatient, unsure, although very militant character, Shmidlapp. Although written in 1970 this is EXACTLY touching on the very hot potato in the US Congress today. Same old story after almost 4 decades, many Shmidlapps...
[...] Fenwick and a friend of mine from Washington, a sociological Meistersinger named Rupert Shmidlapp, were talking about minimum wages, which Congress had just voted to raise from $1.25 an hour to $1.40—and ultimately to $1.60. Fenwick stunned Shmidlapp, whom I had forgotten to brief in advance, by mournfully remarking that the minimum-wage laws would of course create unemployment, and that these particular laws would wreak havoc precisely among those unskilled workers (Negroes, teenagers, Puerto Ricans) they were supposed to help.
“What?” gulped Shmidlapp.
“To begin with,” said Fenwick, “the American wage-earner today gets twice $1.40 an hour, so the bill is not going to affect him——-”
“The bill is designed to help the unskilled and the undereducated,” retorted Shmidlapp.
“An admirable intention,” beamed Fenwick, “because a tragic proportion of that group is unemployed. But if employers aren’t hiring them at $1.25 an hour, is there any reason on earth why they will hire them at $1.40?”
I poured a stiff drink for Shmidlapp.
Fenwick continued: “Surely the unemployed will have less chance of finding a job under the new, higher minimum-wage laws than they had under the old.”
"What?” cried Shmidlapp. “Can you prove that?”
“Yes,” said Fenwick. “Every time minimum wages have been raised, the ratio of unemployed teenagers has risen— and mostly among Negroes and Puerto Ricans, who are the teenagers it seems absolutely insane, if you look at the crime rate, to force onto the streets with nothing to do! ... Don’t you agree that every time you raise the minimum, you must push more unskilled or inexperienced or poorly educated or discriminated-against workers onto the unemployment and relief rolls?”
Instead of repairing his fences, Shmidlapp attacked on the flanks. “What about the greedy employers,” he demanded, “who cruelly exploit their workers by not paying them enough to live on?!”
A twinge of pain crossed Fenwick’s boyish features. “Oh, very, very few employers can hold on to their workmen if they pay them less than the workers can get elsewhere.”
“It isn’t what they can ‘get,’ it’s what they’re worth!” Shmidlapp thundered.
“Only God can decide how much a man is ‘worth,’” sighed Fenwick. “Let us consider the best wage a man can get— for his labor, services or talent——”
“Some men just can’t live on that! Or feed and clothe their children! Or pay their medical bills!” This was Shmidlapp at his best.
"We certainly ought to remedy that,” said Fenwick. “No American who wants to work should go hungry because of the objective (and therefore efficient) forces of supply and demand. Let us by all means give and guarantee the poor a minimum income; that does far less economic and political damage than a minimum wage. A minimum income does not discriminate against the black, the illiterate, the inept——”
“Do you mean to stand there and tell me”—Shmidlapp was too agitated to notice that Fenwick was sitting, not standing— "that no workers are actually helped when Congress raises the minimum wage? !“
“Oh, some workers will have their wages raised from $1.25 to $1.40 an hour,” said Fenwick, “but far more will not get a job they might have gotten at $1.25! And fewer teenagers and Negroes will get on-the-job training, which they desperately need. It is just too costly to train them at $1.40, much less $1.60 an hour—especially for skills that take long training periods. This makes a raise in minimum wages absolutely heartless,” mourned Fenwick. “It prices decent, innocent, willing workingmen right out of the labor market!”
“Then why does Congress pass such laws?” shouted Shmidlapp.Fenwick blinked. “Are you suggesting that Congress never passes foolish or short-sighted——”
“I am asking why, if minimum wages are so goddam stupid, far-sighted humanitarian leaders like Lyndon Johnson and Hubert Humphrey and Governor Rockefeller support them?!”
"Politics,” chuckled Fenwick. “Or innocence. Or ignorance. Or all three. Politicians and labor leaders get a lot of public credit for raising wages, and considerable private satisfaction in imagining all the good they have done.”
“I happen to know that many business leaders, Republicans and conservatives, favor minimum-wage legislation!” swooped Shmidlapp.
“Of course they do. They can be just as wrong, ignorant, or selfish as anyone else,” said Fenwick. “Many of them are manufacturing products in the North——”
“What does geography have to do with it?” demanded Shmidlapp.
“Well, northern manufacturers are delighted to force up their competitors’ costs in the South; in that way, businessmen in the North won’t have to face the desirable effects of that free-enterprise system conservatives and Republicans love to extol.”
“But opinion polls show that the public——”“The public,” sighed Fenwick, “is not well-informed about economics, and will pay for its innocence. Increased minimum wages lead to increased costs, which lead to higher ......... Then many honest, low-wage earners in the South (where the cost of living is lower; which is one reason wages there stay lower) will become disemployed. And many more of the young and no-skilled, in Harlem no less than Dixie, will remain more hopelessly unemployed than they already are.” Fenwick regarded Rupert Shmidlapp innocently. “Tell me, honestly: Would you rather work for $1.25 an hour or be unemployed at $1.40?”
While Shmidlapp was wrestling with many unkind thoughts, Fenwick gave his guileless smile: “I am strongly in favor of wages’ rising—which is entirely different from raising wages. Let wages go up as far as they can and deserve to, for the right reasons, which means in response to demand and supply and freedom to choose... Take domestic servants, Mr. Shmidlapp. Why maids, cooks, cleaning women, laundresses have enjoyed a fantastic increase in their earnings. And notice, please, that domestic servants are not organized; they don’t have a union, or a congressional lobby. Or take bank clerks. . .”
But I can’t bear to go on. I guess you can see why Fenwick is so unpopular. The man is infuriating.
