Tuesday, August 01, 2006

Wal-Mart, Health Benefits, and the Minimum Wage

In today's WSJ [subscription required], there is a good piece, "If Only Most Americans Understood," by David Henderson that recounts the arguments and evidence as to why raising the minimum wage law mostly hurts those it purports to help. Henderson explains most economists understand that raising the minimum wage "will help only a subset of the people it is thought to help, and will help them only a little--while hurting some of them a lot."

If the weight of evidence shows that mandating an increase in the minimum wage costs jobs and hurts those workers it purports to help, what is the impetus for the current federal increase proposal and the slew of state proposals? Henderson explains that quite nicely: "The focused support for the minimum wage comes mainly from the labor unions, all of whose members earn more than the minimum. This isn't benevolence at work, but greed. Their leaders understand that the minimum wage prices out their low-wage competition: it acts like an internal tariff. If only most Americans understood."

Of course, the adverse overall impact on the number of available jobs is the very same when the Maryland General Assembly mandates a minimum wage increase or mandates payment of a higher level of employee health insurance costs by Wal-Mart. (See the essay by FSF's Trevor Bothwell.) And the source the impetus for such new mandates is the same: from those who want to eliminate low-wage competition. Apart from hurting those whose jobs disappear, it is hard to see how this benefits consumers.