http://www.worldnetdaily.com/news/article.asp?ARTICLE_ID=49917

Professor Williams points out the folly and deceit in the minimum wage discussion.

When we raise the minimum wage, who does it hurt? The fellow who loses his minimum wage job. The taxpayer who funds the dole. And, the usually small business man who has a need but can’t afford to fill it. Good job gummamint! Who wins? The politicians!

Allow me to recount a personal story that demonstrated what I call “pulling up the lowest rung of the economic ladder”. It’s a well-known often-predicted aspect of increasing the minimum wage. So let’s look at the operation of this foul piece of government interference in the free market for labor.

At that time, AT&T was big New York employer. It was known to be a plum job. Remember this is back in the days of Japanese style life time employment. If you showed up on time, did your job, didn’t get drunk, steal, or mess with the opposite sex on company time or company premise, then you were pretty assured of a long career ending with a good pension. If you took advantage of the various savings plans, then the average worker would have literally a million dollars at retirement. They pushed savings bonds, stocks, and financial education.

AT&T hired lots of people. High school graduates were started as glorified gophers with a pay grade of N (November). Non graduates could get unskilled jobs with a pay grade O (Oscar). After six months, all O’s were eligible for promotion to N. After 12 months, all O’s were AUTOMATICALLY considered for promotion. Even if the person was not promoted, they were well treated. They were sent for training, special assignments, and rotated thru other O level jobs. Those that managed of the pools of O’s were evaluated on many factors. One of those factors was how they “developed” the O pool. Move them up, move them out, or rotate them were all acceptable plans. It was OK for someone to be an O for a lifetime, but they wouldn’t treated badly at all. So, one of the O level jobs was elevator operator. You literally needed to just show up and they would teach you to “run” an elevator. These elevators were all push button. So, you had to wear a uniform, be pleasant, and refer all questions to your “starter”. I knew the honcho who ran the 195 Building and asked why they did this. His reply was that it was a great way to get talented people into the organization who did do well in school. I know one O who eventually wound up in Bell Labs in an R&D position. She was trained, grew, matured, went to school on the tuition refund program, and became a valuable asset.

Now to my cousin. I’d respectfully say, with as much Christian charity as I can muster, that she was not the brightest bulb in the bin. She accepted an elevator operator’s job and she was lucky she wasn’t fired. This in the lifetime employment company. She messed up a lot. She “lost” her elevator a few times. [How do you “lose” an elevator?  Remember these are really automatic elevators like we have today, staffed for other reasons. If the operator was out of the car, say holding the door open to talk to the operator in the next car, hand slips, and the doors close, then the elevator would do what elevators do. Go to where they are summoned. Hence the operator was said to have lost her elevator. Very bad!] She got caught chewing gum a few times. All sorts of stuff. She was destined to be a 45 year employee, retiring as an elevator operator. But she’d have been employed for all that time and have earned a pension.

My cousin’s world crashed when the government raised the minimum wage.

The economics changed drastically. O’s would have to make more. But that wasn’t so so bad. It was “only” a quarter an hour over what they were making already. What really hurt was that all the pay grades had to escalate up also. That was a lot of money. The Bell System had over 1.5 Million people. Give everyone a fifty cents per hour raise translates to $20 per week or $1040 per year. That times 1.5 million people is 1.5 billion dollars. It change the economics of the industry.

So my cousin being displaced by automation. To fully automate these almost fully automated elevators cost $250 per elevator. SO the elevator operators were history. And it was the same everywhere in the city. Every company was doing the same thing.

The AT&T management tried to get a place for everyone, but she and many others were at their level of competence. She, as many others, was terminated with a severance package and tears. It was traumatic.

She never worked again. She was crushed. There was a not a lot of demand for unsuccessful operators, remember there was LOTS of them, and she eventual became one of those “discouraged; no longer looking” unemployed.

What this is illustrating is that a government action hurts those at the very bottom rung whose contribution is not worth the higher wage.

(I wish I was as eloquent as Walter Williams, Tom Sowell, or others. Maybe I’ll send this to Doctor Williams for help.)

Raising the minimum wage is like pulling up the bottom rung of the economic ladder.

(I envision a fire escape where the bottom run is unreachable from the street that descends to the street from above when under load. However in this case, let’s imagine the ladder is reachable by every passer by. Each time we raise the minimum wage it get pulled up a little higher. Until it out of reach of everyone but the basketball player. And, eventually it’s out their reach as well. Crazy!)

If a worker can’t make a contribution greater than the cost of his employment, then he doesn’t work. He then is trained to turn to the government for welfare, unemployment, or other relief. Envision the teenager, educated in the government skools, trying to contribute more than he earns. No wonder minority unemployment is huge. No wonder youth unemployment is huge. No wonder the government keeps it this way. You have to look at the margins.

That is why I “like” that elevator operator story. Government imposed a hidden tax and big business looks like the villain.

The Liberals, Conservatives, and Churches in my strongly-held not-so-humble opinion err when they gets into tactical details of the minimum wage. They can say with all their authority that we as individuals in a society have to provide effective compassion for the poor. No argument there! They are well within their area of expertise or common sense. But, the minute they say “raise the minimum wage” they are now into the Economist’s area of expertise.

I believe that we can demonstrate:(1) raising the minimum wage hurts poor people; (2) is used by politicians to give money to the labor unions bosses; (3) is used by politicians to increases the amount of money that they get in taxes; (4) transfers the benefits of effective charity from us as individuals to the government; and (5) trains the citizens to look to government as the savior and protector.

(1) HURTS  I believe this is shown by the anecdote about my cousin being displaced by automation WHEN the government raised the minimum wage. Illustrating that government action hurts those at the very bottom rung whose contribution is not worth the higher wage.

(2) UNION BOSSES Politicians, via the mechanism of raising the overall wage rate of the employment ladder, funnel more money into their contributor’s pockets. Raise the minimum wage. All wages rise to keep the ladder. The side effect is marginal business fail. Union members get a raise. Union dues go up. Thus, politicians have funneled more money into the hands of the union bosses who turn around and contribute to their favorite politicians. Business, who are really just transfer agent, have to raise prices to cover their increased labor costs, if they can. Labor, in general, is now priced higher and at a competitive disadvantage to other political jurisdictions. Can anyone spell “outsourced to India”? No wonder the minium wage is increased very year. Oh yeah, it does. No wonder why some states have higher than the federal government minimum wage. Oh yeah, some do.  No wonder, we’re on a treadmill.

Mental experiment. The politicians raise the minimum wage to $7 per hour. Why not $10? Why not $100? The answer is? The Communist Socialist experiment call USSR demonstrated that politicians can’t manage squat! The reason that America is an economic engine is the relatively free economy, at least by comparison to the rest of the world. Markets enable people to make choices. The market economy ensures that everyone who makes a contribution gets rewarded. Big contributions, big rewards. Little, little. When the government inserts itself into free exchanges, then we have problems. Why not say everyone has to be paid 200k like a politicians? Because there would be no service that anyone, almost anyone, could offer that would be worth that 200k. Oh yeah, maybe hitting a baseball 500 yards. But who’d be in the seats?

(3) TAXES Oh yeah, when you earn your $1 an hour more, 40 times 52 = 2080k per year, guess what happens to the old 1040 next year? Yup, you betcha, you’ll give more to the President, the Governor, and the Mayor. Now when the costs in the federal government, state government, county government, town government, and skool system go up, guess what also will go up? Yup, taxes. And when everything goes up, prices will go up. So who takes it in the tush? Yup, the marginal employee, the fixed income senior citizen, the poor, and businesses that don’t have the ability to raise their prices. Don’t ya just wish they took a gun and robbed you? Oh yeah, they are.

(4) CHARITY I always cite http://www.acton.org/publicat/books/transformwelfare/olasky.html for the principals of effective compassion. If I pay a dollar in tax, then I know a huge percentage is wasted. I give every month to HomeFrontNJ http://www.homefrontnj.org/ to help the poor. I know that Connie Mercer, the director can make 21 nickles out of every dollar that comes in the door. I feel better about that contribution because I know it is being used to make a difference. My taxes go to yet another phony war on poverty. If it was funded by government, they’d take a chunk of my contribution for handling. It’s estimated that 95% of every dollar we give the government is wasted.

http://www.acton.org/ppolicy/compassion/

How are the poor best aided? After a thirty year governmental “War on Poverty” failed to reduce poverty in America, a consensus developed that the centralized entitlement approach of the federal government created more problems than it solved. Consequently, in 1996 welfare reform and its “Charitable Choice” provision paved the way for more involvement by the private sector, especially by faith-based institutions, in helping the poor make the transition from welfare to work. The welfare reform law of 1996 was a first step away from direct federal control of help to the poor and toward private sector solutions-but it was only a first step. The Acton Institute envisions a revivified civil society that is energetically involved in transforming the lives of the poor with a minimum of government intervention. I’d say the government at ALL levels should get out of the charity business.

(5) TRAINING All this government assumption of “space” trains the American population to look to the government for answers. We are as conditioned as sheep ready to be shorn. The pioneer spirit is drained from the average Joe or Jane as more government “help” increases the load we have to carry. The American Revolution was over pennies on the dollar. We have been “baloney sliced” to death. No single slice (i.e., the inflation of our currency, the phony war on drugs, the victim disarmament laws, the wars of aggression, welfare, medicare, medicaid, and “social security”) could be fought, and cumulatively it all loads up the camel.

I know that this is a long. But, it hits a nerve. I am afraid that we may have already killed, or will soon kill, the golden goose of the American dream. We certainly did it to my cousin!

Others have said it much better:

http://www.conciseguidetoeconomics.com/minimumwage/

My bottom line: When some one says “raise the minimum wage”, remember my cousin and what the government stole from her!