Maximum unemployment with the minimum wage

© 2014 Michael Swickard, Ph.D. Nobel Prize winner in Economics Milton Friedman not only opposed raising the minimum wage, he opposed the very concept of a minimum wage. There was not any government program of mandated wages that he embraced. The reason he gave for his opposition was that the notion of a government mandated wage violated economic principles and would harm the very people said to need it.
     In his 1980 television series, Free to Choose, Friedman says, “The minimum wage law is most properly described as a law saying that employers must discriminate against people who have low skills… The law says here’s a man who has a skill that would justify a wage of $5 or $6 per hour (adjusted for 2014), but you may not employ him, it’s illegal, because if you employ him you must pay him $9 per hour.”
     Friedman continues, “So what’s the result? To employ him at $9 per hour is to engage in charity. There’s nothing wrong with charity. But most employers are not in the position to engage in that kind of charity. Thus, the consequences of minimum wage laws have been almost wholly bad. We have increased unemployment and increased poverty.”
     When the minimum wage was first proposed the effect on the least skilled workers was understood by those politicians. Only recently have the media been able to obscure these outcomes. The political opportunities were such that politicians and labor unions could prosper while the least productive members of our society paid a dreadful price.
     The minimum wage debate is almost entirely from the side of the person without adequate productive skills. That person must exist on very little money. I worry about someone else. What about those least skilled citizens who do not have a job and cannot get one? They are now less likely to be employed.
     This is especially so for young people who have never had a job. Getting that first job is a problem because they have no job history and unless they come from a technical high school or college, they do not have the productive skills such that the employer can make a fair trade.
So most of these young people sit at home, mostly in their parent’s home and they do not gain skills while the politicians and unions talk about raising the minimum wage even higher. Alas, the unemployed cheer for a higher minimum wage without realizing a higher minimum wage puts jobs even further out of their reach.
     The unemployed have a much harder road to live than anyone employed. Read full column