Of all the many political issues that might qualify, the minimum wage debate is probably the best example of the “governing by demagoguery” that is so pervasive in our discourse. I remember a time 20 years ago when we were having the same debate on a national level and I was serving as Chairman of the Texas Association of Business. We were conducting a roadshow on policy issues around the state and this issue would surface at every stop. My standard response was then and is now that there are a lot of complicated issues, but this isn’t one of them. It’s a no-brainer–we know after over a half-century of research and studies that minimum wage increases always reduce employment for people at the lower end of the skill range, the very people it is supposedly designed to help.
Thomas Sowell, in his 2011 book, Basic Economics, explains it this way: “Minimum wage laws make it illegal to pay less than the government-specified price for labor. By the simplest and most basic economics, a price artificially raised tends to cause more to be supplied and less to be demanded than when prices are left to be determined by supply and demand in a free market. The result is a surplus, whether the price that is set artificially high is that of farm produce or labor”. Not complicated.
Early last month, both California and New York (which incidentally rank first and second, respectively, as the worst states for business by Chief Executive Magazine) raised the minimum wage to $15. In signing the bill, Gov. Brown of California (they didn’t nickname him Moonbeam for nothing) called the move an act of “social justice”, and said that “economically, minimum wage rates may not make sense, but they make sense morally, socially, and politically”. This is the ultimate in what I call governing by demagoguery, but, as so well noted by Jonah Goldberg, it’s worse—this is grotesque cowardice on the part of the left, because if Brown understands that the policy doesn’t make sense economically, he must know that the moral benefits will never materialize, only the political benefits that accrue to him. Shameful.