Who benefits?

On minimum wage law, it’s unions

When the dead body of an elderly man is found shot in the head, a good detective first considers motive.

Who benefits from this murder? Maybe impatient heirs? Perhaps the young spouse or her lover? Possibly a business competitor? It might be a person he was blackmailing. Evidence is then sought about their alibis. People who gain from the death of the victim are not necessarily the killers, but they are prime suspects.

Something similar occurs in economics. When an episode in the dismal science takes place, and we want to determine its cause, among the first questions the economic detective asks is: Quo bono, who benefits? Let us consider an example.

The economic effects of the minimum-wage law are clear. It creates unemployment for the unskilled. If it is pegged at $12 per hour, no one whose discounted marginal revenue product is lower than that can keep a job in the long run, since the employer will lose profits from such a hire. Take that, Paul Krugman! The black unemployment rate is double that of whites. African Americans, on average, have lower productivity than whites. The unemployment rate for teens is twice as high as that for the middle-aged. The latter are more skilled than the former. The rate of joblessness for black teens is thus quadruple that of adult Caucasians.

So who benefits from this state of affairs? When you cannot find a job, you are bored stiff. Coupled with the natural exuberance of youth, many such youngsters engage in criminal behavior. But the police are bigger, stronger and better organized than they are, so all too many of them end up in prison.

Who benefits from the excessive incarceration of black teenagers? There are several candidates. White supremacists who suffer from ephebiphobia (hatred of young people) might be our prime candidates. The problem with them as causal agents is that none of them support minimum-wage legislation.

The same holds true regarding jailers, psychologists, social workers, all of whom owe their jobs to these stratospheric incarceration rates. There is no evidence of their particular support for this legislation. Thus, they too have an “alibi.”

Labor unions are an entirely different matter. They also gain from the plight of unemployed youth. How so? Whenever organized labor demands a wage boost, the first thought entering the mind of the employer is how to substitute cheaper inputs for them; namely, hire the unskilled. What better way to ensure nothing of this sort occurs than to price these competitors out of the market at the outset?

How? By supporting the minimum-wage law and even raising its level. Have the leaders of the rank and file done any such thing? Of course they have: loudly, vociferously, continuously, proudly. Of course they never say they support such enactments in order to rid themselves of lowwage competitors. They are far too clever for any such thing. Instead, they virtue-signal about helping the poor and downtrodden; the minimum wage will merely cure poverty, in this view.

What is the evidence? According to the Center for Union Facts, organized labor has spent some $70 million since 2012 on the Fight for $15.

According to the AFL-CIO: “Gradually raising the wage to $15 by 2024 would directly lift the wages of 22.5 million working people. The average increase would be $5,100 a year, a 31.3 percent raise.”

In the view of Teamsters General President Jim Hoffa, as reported on the Teamsters blog: “House Approval of Minimum Wage Hike is Long Overdue for Workers.”

As reported on the SEIU blog: “SEIU International President Mary Kay Henry called the Raise the Wage Act ‘a huge step forward in deciding to end poverty work in America.’”

Organized labor is without an “alibi” in this case. We economic detectives may be excused for seeing through this subterfuge. Yes, it relies on widespread economic illiteracy promulgated by universities (other than economics departments) and Democratic politicians (are you listening, Bernie?).

But one of the groups that bears the most responsibility for this evil, vicious law (since it preys on the weakest economic category) is organized unionism.

Walter E. Block, Ph.D., the Harold E. Wirth Eminent Scholar Endowed Chair and Professor of Economics at Loyola University in New Orleans, formerly was professor and chair of the Department of Economics and Finance in the College of Business Administration at the University of Central Arkansas.