Proposed minimum wage increase will probably shuffle around rather than destroy jobs in Massachusetts
I read in the Metro Boston today that a couple of state legislators have proposed increasing the state’s minimum wage to $8.25, from the current $6.75, compared to the federal minimum wage of $5.15. A group of economists - virtually all in the insulated field of higher education - has expressed its support for the proposal, and I assume it also has backing from trade unions, public employees unions, community activists and all the other usual suspects. Its opposed by all the usual suspects on the other side. The Beacon Hill Institute, for example, claims that the proposed wage hike could cost the states almost 27,000 jobs.
I’m a free-market guy, but I’m not dogmatically, or even passionately, opposed to minimum-wage laws. It’s easy to say that such laws aren’t necessary since the market will ensure that people get their fair pay anyway, but that argument overlooks that some people are what used to be called morons, people who have no notion of what the prevailing market rate might be and therefore could easily be taken advantage of by predatory employers. They could obviously be taken advantage of anyway, but minimum wage laws at least provide them with legal means to get backpay. One could counter that I should know better since my Old Country doesn’t have a minimum wage at all, but while that is true, it ignores that rates there are set by collective bargaining agreements that all employers are forced to adhere to, regardless of whether their employees are organized or not.
As a conservative, I am not overly impressed by libertarian/free-market arguments that government has no business making such laws. As I suggested above, I believe that there in fact are compelling reasons for why there should be a minimum wage law.
On the other hand, simply setting minimum rates at an inflated level for political gain and moral comfort does little good. I don’t think Massachusetts’ economy and labor pool support the current minimum rate at $6.75 an hour very well. They certainly don’t support one at $8.25.
Having said that, I don’t think many jobs will actually be lost. Instead, I think we’ll see - or rather, not see - a shift to under-the-table jobs. You probably think you know where I’m going with this, and you are right: Illegal aliens will make additional inroads in our labor market as employers turn some minimum wage or near minimum wage jobs into “undocumented” positions, often by contracting out certain jobs.
If the proposed minimum wage hike becomes law it will most likely never show up in the unemployment statistics because the affected workers are likely to move up in, move out of, or drop out of the job market. I venture to guess that African-Americans are likely to get hit the hardest, followed by whites and Hispanic citizens/legal residents. But that’s just my guess.
As I said, I’m not particularly opposed to minimum wage laws or the occasional hiking of minimum wage rates, but I think this is a good time to hold off for another few years, or if push comes to shove, settle for a smaller raise, to, say, $7.15.
Tying future increases to inflation, as one State senator has proposed, is an unsound idea that should be scrapped outright. It’s far better to revisit the rate issue every few years.
Pro-immigration types who are also anti-minimum-wage should ask themselves why it’s OK to artificially increase labor supply through mass immigration, but not OK to artificially increase pay through minimum-wage legislation. Likewise, people who are both pro-immigration and pro-minimum wage and who don’t subscribe to ethnic-nationalism should ask themselves why they pursue such blatantly contradictory policies.
