In an interview with the Wichita Eagle about government regulations, the CEO of Koch industries suggested that the U.S. eliminate the minimum wage as a means to improve economic freedom and prosperity for the poor.
“We want to do a better job of raising up the disadvantaged and the poorest in this country, rather than saying ‘Oh, we’re just fine now,'" he said ahead of the launch of his advertising campaign promoting smaller government.
"What we’re saying is, we need to analyze all these additional policies, these subsidies, this cronyism, this avalanche of regulations, all these things that are creating a culture of dependency.
"And like permitting, to start a business, in many cities, to drive a taxicab, to become a hairdresser. Anything that people with limited capital can do to raise themselves up, they keep throwing obstacles in their way. And so we’ve got to clear those out. Or the minimum wage. Or anything that reduces the mobility of labor."
He said a lot there but what is getting a lot of attention — in the U.S. — is that he talked about the minimum wage as an obstacle to economic freedom.
So, is eliminating the minimum wage such a crazy idea?
The Fraser Institute's Charles Lammam suggests that there might be some validity to it.
"There is an economic rationale that workers should be able to exchange their labour voluntarily for a wage that is acceptable to both them and their employer, independent of whatever the legislated minimum wage is," he told Yahoo! Canada News in an email exchange.
"Some workers may be willing to accept jobs at less than the legal minimum and some employers are willing to hire in that wage range.
"A legislated minimum wage means some workers and employers are worse off because they are unable to engage in what would have been a mutually beneficial exchange."
Lammam adds says that minimum wages can reduce job opportunities and hurt the very people they are intended to help.
"Minimum wage legislation...can “price” certain workers out of the labour market because their productivity is lower than the legal wage rate," he said.
"In the end, the wage legislation reduces the number of job opportunities (and income) for workers whose productivity tends to be lower—the young and low-skilled."
In the United States, there's a federally mandated minimum wage of $7.25/hour but States are free to set their own rates above that.
Canada's minimum wages range from $9.75 in Alberta to $11.00 in Nunavut.
On both sides of the border, there continues to be a large outcry from unions and worker advocate groups insisting that those minimums be raised. The Workers' Action Centre in Ontario, for example, argues that someone could be working full-time at minimum wage and be stuck in a cycle of poverty.
But Lammam implies that type of statistical analysis is a red herring.
"Proponents of minimum wage hikes...ignore the fact that workers don’t earn the minimum wage for their entire working life. Being a minimum wage earners is generally temporary as people enter the workforce with little education, skills, and experience.
"Research shows that after one year, approximately 60 per cent of minimum wage workers earn more than the minimum wage, with a typical wage gain of about 20 per cent. After two years, the percentage of workers earning more than the minimum wage increases to 80 per cent."
YouTube Video of the Koch Foundation's campaign:
(Photo courtesy of Reuters)
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