Nov.28, 2004

Why Florida Minimum Wage is Blind-Man Leap-Frog

A huge majority of Floridians jumped aboard the minimum-wage gravy train this month as it hurtles toward the end of the line.

A state constitution amendment --setting a minimum wage $1 above the national rate of $6.15 an hour -- was adopted by 71 percent of voters.

Only the amendment setting limits on medical liability awards scored higher with 81 percent.

Now, ten states have minimum wage laws higher than the national amount.

A national, minimum wage of 25 cents per hour was adopted in 1938 to alleviate the Great Depression.

The Depression faded during World War II. However, wage minimum took on a new mission -- fighting the War On Poverty. The poverty-level index was recalculated frequently to higher amounts. The minimum wage, of course, had to keep pace.

Florida’s new minimum wage starts in six months and thereafter is indexed annually to inflation. This is blind-man leap-frog on the edge of Economic Canyon.

Ominously the law does not specify what happens if we hit a patch of dis-inflation.

The first law of economics is: “What goes up, comes down.” Pertinent question: who is ready to take a pay cut cheerfully?

Labor unions and social activists say you can’t raise a family on jobs paying the present $5.15 per hour.

Yes indeed. Nor on Sen. Edward Kennedy’s proposed $7. Congress aims to up it somewhere in between.

Few full-time jobs pay the mandated minimum. Competition keeps the rate well above that. Jobs paying the minimum are mostly first-time or part- time.

The nation would be well served if there were no minimum. Inexperienced, or under-educated, or needy youth -- or non-English-speaking migrants -- could more easily work their ways into the economic main stream.

Labor unions promote minimum wage dictates -- even though the lowest rate for their members is five times greater.

Foremost in result is the “ripple effect.” This hikes wage rates for the entire workforce to preserve relative purchasing power of higher skills.

Within two months, minimum wage earners are back where they started in purchasing power – gigged by monetary deflation affecting everyone.

You can’t beat Mother Nature, the Federal Reserve or Uncle Sam. How much do you pay today for a loaf of bread that used to cost 10-cents – or half a dollar?

Wage rates are only part of the labor costs borne by employers. They match the Social Security deductions of their employees -- plus unemployment taxes, personal injury taxes, paid vacations, personal time-off and perhaps health plans.

More insidious is the supposed fondness of labor unions for the welfare of non-union workers.

Highly paid unions gain when labor costs are raised for small non-union businesses selling competing products. Their product prices go up to meet new expenses.

The unforeseen consequence is that non-union companies in foreign countries become more competitive.

Shareholders of over-taxed and over-regulated American companies struggle to stay competitive. They do this by automation, technology, raising prices or decreasing quantity and quality of their products.

As a last resort, they “outsource” over-priced jobs overseas. When income taxes and regulation reach a tipping point, whole companies relocate overseas.

If you think this is theory, consider the U.S. automobile industry that was a world monopoly until tax-favored companies in Japan muscled in.

Even service jobs – last bastion against technology – are affected.

We serve ourselves at fast-food restaurants, pump our own gasoline, sort and carry household trash to the curb, push ATM buttons to get our bank money and tap confusing phone keys to eliminate office secretaries.

The concept of minimum wage laws is flawed. More jobs are destroyed than workers benefit. Florida, relying on a service-related economy, will lose more than it will gain.

States that mandate above average minimum wage rates experience higher job loss. Check out Washington, D.C., Alaska and Oregon.

If fiat can produce wealth, why don’t we raise the minimum wage to $100 an hour? Then we could all get rich mowing each other’s lawns.

Of course, that is a no-brainer -- like Santa Claus, Easter Bunny and Tooth Fairy.

Nevertheless, politicians make brownie points, part-timers are grateful and voters feel noble supposedly spending some one else’s money.

That’s a sucker’s trifecta hard to beat.

Lindsey Williams is a Sun columnist who can be contacted at linwms@lindseywilliams.org