Hunger Strikes For Raised Wages

Several students at Georgetown University staged a hunger strike to shame the University into raising the wages it pays to its janitors. Today that strike ended when the University agreed to increase janitors’ wages and fringe benefits.

I have nothing against Georgetown U. raising the amount it pays to its janitors. But the full picture of this little episode is different than the cropped snapshots that I see in the newspapers and hear on the local radio stations. The pop image is of selfless, concerned students making a noble sacrifice to help voiceless, hapless janitors get a better deal from a penny-pinching University bureaucracy.

This pop image is distorted.

Why was the pre-strike janitorial wage as low as it was? Answer: because Georgetown University discovered that, at that wage, it got as many janitors as it needed, of sufficient quality, to perform the desired cleaning services. To pay more would have been an act of charity to the janitors and not a act of commerce.

Now there’s nothing wrong with charity; I applaud it (when it’s done wisely). But why, in this case, did the hunger-striking students single out Georgetown University as an alleged malefactor? Why was the janitors’ employer targeted for its failure to extend charity?

Why didn’t the hunger-strikers demand that George Mason University or Catholic University extend charity to Georgetown University’s janitors? Or why didn’t these strikers demand that all merchants in Northwest DC extend charity to these janitors? Why didn’t the strikers give their own money as charity to the janitors? (They’re students, you say; so they don’t have much extra cash. Well, they can take out loans to give charity today to the janitors and then work after graduation to repay these loans.) Or why didn’t these hunger-striking students demand that Georgetown University increase its charitable contributions, not to its relatively well-off janitors, but to seriously poor people in sub-Saharan Africa?

I’m not being flippant. I’m quite serious. Because Georgetown University is no monopsonistic buyer of janitorial services, it must compete in the market to buy these services. The wages it pays for its janitors are, therefore, competitive. Paying anything more than these wages to secure the desired number of janitors is, therefore, charity. And while there’s nothing wrong with Georgetown University extending charity to its janitors (or to anyone else), there’s also nothing obligatory about it. The fact that Georgetown paid its janitors what it did was not, contrary to the hunger-striking student’s claims, a moral breach.

Post can be found here. 

Should We Ban All Motels?

Mark Steckbeck, professor at Hillsdale College, writes:

The virtue of a free market economy is that it serves disparate tastes and talents—wants and skills. Hotels and motels, for example, differ in their locations, amenities offered, cleanliness, etc. In fact, some are utter fleabags many of us might deem unseemly. But they serve the wants of others, especially those with few or no other housing alternatives such as migrant workers and the near homeless. These customers obviously find inexpensive motels their best alternative, notwithstanding my objections.

If a minimum quality standard was legislated on motels (let’s say in the name of justice to protect the poor), forcing them to provide middle class quality and ammenities, are the customers of inexpensive motels made better off? If we force owners of motels to provide a certain level of service and quality—say a “living” quality—that forces some hotels raise their rates or to shut down, are their customers made better off? Is anyone made better off by eliminating the best market alternative currently available to them? If hoteliers refuse to treat their customers to the standards compatible with my interests I don’t want them around any way. That makes the poor better off, right?

If you say no, how is this any different than someone saying this about Wal-Mart:

Look, no one should have to work in a Wal-Mart; I just plain don't care if the state loses the jobs that the chain might 'create'. What's the point of having those jobs when they don't pay a living wage and don't provide any sort of healthcare? Not to mention the way they destroy the workers' souls.

Steckbeck concludes with:

Although I'm sure the author didn't intend it, his argument is a callous disregard for the poor and the unskilled. The effect is to say, "Let’s remove the only employment alternative available to many Wal-Mart workers, and for many the bottom rung needed to acquire experience and skills necessary to obtain higher paying jobs. Yeah, let’s just get rid of those."

You may not like the job or the compensation package, but like the example of inexpensive motels, remove their best alternative and they are made worse off. Be grateful that you have the skills and opportunities that allow you to earn a decent compensation package, but don't destroy someone else's best alternaitve because it isn't compatible with your idea of fairness. How noble and righteous is it to make the people who lack the skills and opportunities currently available to you worse off?

The full article can be found here (broken). (Originally posted 03/14/2006)

Question For Supporters Of The Minimum Wage

Given by economist Don Boudreaux:

In the U.S. in 1948, quoting my colleague Walter Williams, “the unemployment rate for white 16-17 year olds was 10.2 percent while that for blacks was 9.4 percent. Among white 18-19 year-olds, unemployment was 9.4 percent and for blacks it was 10.5 percent.” Today (October 2013) the unemployment rate for white 16-19 year olds is 19.4%; the unemployment rate for black 16-19 year olds is 36.0% - nearly double the rate of white teenage unemployment. (In 2006 – the year before the current recession began – the unemployment rate for white 16-19 year olds was 13.2%; the unemployment rate for black 16-19 years olds was 29.0% - slightly more than double the rate of white teenage unemployment.)

That is, the unemployment rate of black teenagers in 1948 was comparable to that of white teenagers, and about 2.5 times higher than the overall unemployment rate of 3.8%. Today, the unemployment rate for black teenagers is much higher than that for white teenagers, and nearly 5 times higher than the overall unemployment rate of 7.3%. (In 2006, the year before the current recession began, the unemployment rate for black teenagers was 6.3 times higher than the overall unemployment rate of 4.6%.)

How do you explain these data? Are American employers more prejudiced in 2013 than in 1948 against teenagers? More importantly, are Americans more racist in 2013 than they were in 1948?

These facts about teenage unemployment are straightforwardly explained by the standard economic theory that predicts that a legislated minimum wage causes the lowest-skilled, most poorly educated, or otherwise least-desirable workers to be the first to be fired and the last to be hired. What is your alternative explanation?

The Best Anti-Immigration Plan Ever: Raise The Minimum Wage

Former Democrat Presidential candidate Michael Dukakis and Daniel J. B. Mitchell, professor of management and public policy at the University of California at Los Angeles, write in the New York Times one of the most economically sound anti-immigration plans I have ever read:

Raise Wages, Not Walls
By MICHAEL S. DUKAKIS and DANIEL J. B. MITCHELL
Published: July 25, 2006
THERE are two approaches to illegal immigration currently being debated in Congress. One, supported by the House, emphasizes border control and law enforcement, including a wall along the Mexican border and increased border patrols. The other, which is supported by the Bush administration and has been passed by the Senate, relies on employers to police the workplace. Both proposals have serious flaws.

As opponents of the House plan have rightly pointed out, walls rarely work; illegal immigrants will get around them one way or another. Unless we erect something akin to the Berlin Wall, which would cost billions to build and police, a barrier on the border would be monitored by largely symbolic patrols and easily evaded.

The Senate approach is more realistic but it, too, has problems. It creates a temporary worker program but requires employers first to attempt to recruit American workers to fill job openings. It allows for more border fencing, but makes no effort to disguise the basic futility of the enterprise. Instead, it calls on employers to enforce immigration laws in the workplace, a plan that can only succeed through the creation and distribution of a costly national identification card.

A national ID card raises serious questions about civil liberties, but they are not the sole concern. The cost estimates for producing and distributing a counterfeit-proof card for the roughly 150 million people currently in the labor force — and the millions more who will seek work in the near future — extend into the billions of dollars. Employers would have to verify the identity of every American worker, otherwise the program would be as unreliable as the one in place now. Anyone erroneously denied a card in this bureaucratic labyrinth would be unemployable.

There is a simpler alternative. If we are really serious about turning back the tide of illegal immigration, we should start by raising the minimum wage from $5.15 per hour to something closer to $8. The Massachusetts legislature recently voted to raise the state minimum to $8 and California may soon set its minimum even higher. Once the minimum wage has been significantly increased, we can begin vigorously enforcing the wage law and other basic labor standards.

Millions of illegal immigrants work for minimum and even sub-minimum wages in workplaces that don’t come close to meeting health and safety standards. It is nonsense to say, as President Bush did recently, that these jobs are filled by illegal immigrants because Americans won’t do them. Before we had mass illegal immigration in this country, hotel beds were made, office floors were cleaned, restaurant dishes were washed and crops were picked — by Americans.

Americans will work at jobs that are risky, dirty or unpleasant so long as they provide decent wages and working conditions, especially if employers also provide health insurance. Plenty of Americans now work in such jobs, from mining coal to picking up garbage. The difference is they are paid a decent wage and provided benefits for their labor.

However, Americans won’t work for peanuts, and these days the national minimum wage is less than peanuts. For full-time work, it doesn’t even come close to the poverty line for an individual, let alone provide a family with a living wage. It hasn’t been raised since 1997 and isn’t enforced even at its currently ridiculous level.

Yet enforcing the minimum wage doesn’t require walling off a porous border or trying to distinguish yesterday’s illegal immigrant from tomorrow’s “guest worker.” All it takes is a willingness by the federal government to inspect workplaces to determine which employers obey the law.

Curiously, most members of Congress who take a hard line on immigration also strongly oppose increasing the minimum wage, claiming it will hurt businesses and reduce jobs. For some reason, they don’t seem eager to acknowledge that many of the jobs they claim to hold dear are held by the same illegal immigrants they are trying to deport.

But if we want to reduce illegal immigration, it makes sense to reduce the abundance of extremely low-paying jobs that fuels it. If we raise the minimum wage, it’s possible some low-end jobs may be lost; but more Americans would also be willing to work in such jobs, thereby denying them to people who aren’t supposed to be here in the first place. And tough enforcement of wage rules would curtail the growth of an underground economy in which both illegal immigration and employer abuses thrive.

Raising the minimum wage and increasing enforcement would prove far more effective and less costly than either proposal currently under consideration in Congress. If Congress would only remove its blinders about the minimum wage, it may see a plan to deal effectively with illegal immigration, too.

Michael S. Dukakis, the governor of Massachusetts from 1975 to 1979 and from 1983 to 1991, is a professor of political science at Northeastern University. Daniel J. B. Mitchell is a professor of management and public policy at the University of California at Los Angeles.

Economists have always argued that the minimum wage harms those at the bottom the most so the argument here is very sound - I am just surprised at how this is so openly and unapologetically used against those very people at the bottom. A message to those who wish to raise the minimum wage: you are doing exactly what anti-immigration activists want. Economist Alex Tabarrok responds to the article here.

The Minority Case Against The Minimum Wage

Most of you have heard the standard arguments against the minimum wage - that it is a weak poverty reduction tool, it increases prices, increases unemployment, hurts small businesses, makes the economy less efficient, etc, etc, but what I want to write about today is the harm done by the minimum wage that is least discussed - its affect on minorities, especially poor and unskilled minorities.

Have you ever wondered why poor areas have more empty lots than rich areas? Why unemployment is much higher in poor areas than in rich areas? Why minorities, especially blacks, high school drop outs and those with the least amount of skills have a harder time finding a job than others? A lot of the reason for all of this is the minimum wage, and that is what I want to write about today.

Before I go on, we have to ask who is on the minimum wage? If you look at government stats (see here, here and here) you will see that most of the people that are on minimum wage are part time workers and a full four-fifths of all minimum wage workers are not poor. People like, stay-at-home moms who want to supplement their full-time spouse's earnings, teenagers working after school, and other students. These are students that tend to live in good neighborhoods, are relatively well educated, and are already doing okay, being that mommy and daddy pays most of their bills. Of course there are some 'single mothers of four' and other truly poor people living on the minimum wage but they are an extremely small percentage, by far the bulk of people on the minimum wage are young college kids starting their working lives. In addition, most people on the minimum wage are on there for a relatively short amount of time. In other words, the minimum wage is only their first step in a long road ahead of higher wages and more opportunities. The minimum wage in this respect is the gate way, the entry point, where an employer takes on a relatively small risk to hire you and see what you can do, after all, a teenager fresh into the work force has little to no work experience to be evaluated on.

Okay, so what happens if the minimum wage starts to increase? While economists may disagree on the magnitude of the effects of the minimum wage, here are a few things that economists universally would agree, and all things that primarily affect minorities.

1. The minimum wage harms the least productive most

What politicians won't tell you but what ALL economists know is that the people who are most likely to lose their job due to an increase in the minimum wage are the least educated, the ones with the least skills, and the ones that are likely to keep their jobs are the more educated, the ones with the most skills. For example, if you had to lay someone off, with all things being equal would you rather lay off someone with or without a high school diploma? With or without the ability to speak english? With or without a criminal record? Remember, as the minimum wage goes up the market becomes an employers market (supply increases and demand drops) so that employer now has more people to choose from.

So being that minorities are the ones that tend to be less educated either because of a poor public school system, or the lack of english speaking parents at home, it is primarily poor minorities that feel the brunt of the minimum wage - while middle class white students reap most of the rewards.
Free exchange, a blog provided by the Economist magazine, explains it this way:

It seems very likely to me that the small number of people made redundant as a result of a modest minimum wage hike are very likely to be the worst off of the poor: convicted felons, recovering drug addicts, welfare mothers, the cognitively disabled, high school dropouts, those whose backgrounds were too chaotic to impart good work habits. The well-connected, well-socialised middle class teenaged and twenty-something students, on the other hand, seem disproportionately likely to keep their jobs.

In short, the minimum wage is a subsidy to relatively affluent workers at the expense of poor, less educated workers.

2. The minimum wage harms poor areas over rich areas

In addition to harming primarily poor people, the minimum wage harms primarily poor areas. Think of it this way, lets say that you were a person looking to open up a new business and you were looking for communities to open that business in. Well, if you wanted to open up that business in a poor neighborhood you would have alot of things working against you - you would tend to have a lower educated work force, customers with less buying power, and sometimes an area with a high crime rate (higher security risks and costs etc). Well, if you were able to pay whatever you wanted, you could pay your employees lower wages to compensate for some of those disadvantages but a minimum wage takes that option away. So now, especially for those companies that are not extremely profitable, your choices are more limited. You can't, even if you wanted to, open up in a poor neighborhood because your costs will exceed your profits. So what is that poor community left with? Nothing - with less companies opening up shop there. Have you ever wondered why poor neighborhoods have so many empty lots? Well the minimum wage is a big reason for that...and of course the neighborhoods that benefit are those neighborhoods with more educated citizens, with less crime, and with more disposable income. In short, the minimum wage harms the poor communities to the benefit of the richer communities.

To think of this another way, it is important to note that the minimum wage was first passed at the national level in 1938, around the time of the second wave of the great depression. If you were to look at the voting record of that legislation, one of the things you would discover is that the northern senators voted almost unanimously in favor of the minimum wage and the southern senators voted almost unanimously against the minimum wage. The reason for that is that wages were alot lower in the south, the south being the part of the country with the most ex-slaves. So the minimum wage was basically set at a level above southern wages but below northern wages. The minimum wage was set by the northerners as a way to keep jobs in the north by preventing businesses from moving to the south to take advantage of the lower wages. Who paid for this minimum wage? Unemployment during that time was almost all poor southern workers, primarily black southern workers, who were basically priced out of the labor market (the minimum wage was also used to price women out of the labor market, see here ). In short, the more you raise the minimum wage, the more you harm poor areas at the benefit of rich areas.

Is it a coincidence that the minimum wage is primarily supported by legislators from San Francisco, New Jersey, Massachusetts, and other high cost areas, where the minimum wage is more symbolic than anything else, because wages already have to be high to cover the extremely expensive living costs? I don't think so.

3. The minimum wage makes discrimination less costly, therefore easier to discriminate

Lets talk about racism and how the minimum wage helps racists. Lets say that I was a racist and I wanted to open up a restaurant but I hated Mexicans so much that I refused to hire any in my shop. My shop is to have whites, and whites only. Well one of the first things I will learn, as any restaurant owner will tell you, is that Mexicans are extremely productive at such a cheap price. To put it another way, it is hard to get any other group of people to work so hard for such little money. Try hiring a bunch of middle class white kids to wash dishes, clean tables, sweep the floor, cook the food, all for close to the minimum wage, it just isn't going to happen. So okay, I am a stubborn racist and decide to do it anyway - problem is, to get the same quality of workers I have to now pay them more per hour, say $8, or $10/hour. That is the beauty of the market system, I now have to pay for my racism. Whereas the non-racists are getting the same productivity from their works as I am but at a much lower rate, I have to forego precious profits to support my racist beliefs. Furthermore, in a really competitive market this is enough to put me out of business!

Now, factor in the minimum wage and what happens? Well you have just made it easier for me to be racist. Now I may have to pay $8/hour or $10/hour but you know what, so does everyone else, in other words, you have reduced and spread out the costs I previously had to incur to follow my racist beliefs....and the Mexicans that used to work there? Sure, some of them keep their job but some would surely be replaced. Think of it this way, if you were an employer and you had to pay an employee $10/hour no matter what, would you rather have one that spoke english or one that didn't? One with more education or less? One with a criminal record or one without? In other words, the minimum wage is to the benefit of those who have more skills and makes it less costly to discriminate. For more on this, go here, here, and here.

With the accumulation of the above taken into account, it is easy to understand why the harm of the minimum wage falls primarily on poor, low educated, low skilled, minorities, especially blacks.

David Neumark, professor of economics at UC Irvine and Olena Nizalovaof have a NBER study on the long-run effects of the minimum wage, it states ( here ):

Exposure to minimum wages at young ages may lead to longer-run effects. Among the possible adverse longer-run effects are decreased labor market experience and accumulation of tenure, lower current labor supply because of lower wages, and diminished training and skill acquisition. Beneficial longer-run effects could arise if minimum wages increase skill acquisition, or if short-term wage increases are long-lasting. We estimate the longer-run effects of minimum wages by using information on the minimum wage history that workers have faced since potentially entering the labor market. The evidence indicates that even as individuals reach their late 20's, they work less and earn less the longer they were exposed to a higher minimum wage, especially as a teenager. The adverse longer-run effects of facing high minimum wages as a teenager are stronger for blacks. From a policy perspective, these longer-run effects of minimum wages are likely more significant than the contemporaneous effects of minimum wages on youths that are the focus of most research and policy debate.(emphasis added)

The more the minimum wage is lifted, the harder it is for those with less skills, less education, and more barriers to climb (english, racism, etc) to overcome, leading to more and more people being priced out of the labor force, and so it should be no suprise that the minimum wage hits hardest those who are most vulnerable to racism, living in bad areas, and low education.


In addition to all of this, the minimum wage benefits large businesses and harms small businesses, it causes an increase in prices, it increases unemployment and it reduces competition, all in all, things that primarily harm the poor. But hey, it brings in votes, so who cares right? (Originally published 1/24/2007)