https://bonginoreport.com/opinion/kevin-d-williamson-the-real-solution-to-wage-growth-is-jobs-not-government-interference

Remember all that progressive bellyaching about income inequality a few years ago? Whatever became of that?

Nothing, of course.

As it turns out, US income inequality has not risen in a decade. Is that thanks to minimum-wage increases and big, New Deal-style public-spending programs? No, it is thanks to the best social-welfare program known to man: a tight labor market.

Outside of the recent layoffs in Silicon Valley, things have been looking pretty good for US workers as demand for labor outpaces the supply, producing higher wages, better benefits, and superior working conditions. Even with substantial economic headwinds —COVID-19, geopolitical uncertainty, inflation—the median “real” (meaning inflation-adjusted) household income rose by more than $10,000 over the past decade, according to the Federal Reserve.

According to the Federal Reserve, average American household income has risen by $10,000 over the past decade.
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And there is good news at the lowest end of the income-distribution curve, as well: The wages for US workers in the bottom 10% of earnings are on average a third higher than their states’ minimum wages, according to data from the US Department of Labor analyzed by The Wall Street Journal and Professor Nathan Wilmers of MIT Sloan. Which means that while politicians argue about passing laws to increase the statutory minimum wage, the economy has boosted earnings all on its own. 

Politicians believe that the minimum wage is whatever they say it is, but that is only the legal minimum wage: The economic minimum wage — the real minimum wage — has always will be the same: $0.00 per hour. When the minimum wage gets so high that the cost of a worker is no longer economically sustainable, that worker doesn’t get a raise—he gets fired.

Nathan Vilmer, a professor at MIT, reports that the nation's lowest-earners are actually being paid one-third more than their states' minimum wage
Nathan Vilmer, a professor at MIT, reports that the nation’s lowest-earners are actually being paid one-third more than their states’ minimum wage

Although the effects often are overstated, economists as varied as Milton Friedman and Paul Krugman have confirmed the commonsense proposition that higher minimum wages tend to increase unemployment, particularly among workers with the lowest skill level. Krugman once observed that progressives “very much want to believe that the price of labor . . . can be set based on considerations of justice, not supply and demand, without unpleasant side effects.”

Some politicians hate to admit what Krugman so plainly pointed out, but everybody knows it, which is why the minimum wage in the District of Columbia is $16.10 an hour and not $70 an hour, which is about what you’d need to live comfortably in Washington.

In states like Florida, companies such as Amazon can pay up to $18 an hour, far above the state's $11 minimum wage level.
In states like Florida, companies such as Amazon can pay up to $18 an hour, far above the state’s $11 minimum wage level.
NurPhoto via Getty Images

The big downside here is that workers are in a strong bargaining position in part because so many Americans have exited the workforce entirely. As recently as 2001, two-thirds of working-age Americans were in the labor force, but by 2020 that share fell to 60% — it has since recovered a little, but not much. The story there is complicated: Some of those former workers are stay-at-home parents whose families don’t need the second income, while others are aimless young people who have given up on work prematurely.

But even with the necessary caveats in mind, this is a good time for workers, particularly those in positions that we think of as minimum-wage jobs that today pay considerably more than minimum wage. The minimum wage in Florida, for instance, is $11 an hour, but the starting wage in an Amazon warehouse in Florida ranges from $14 to $18 an hour. Fast-food restaurants from Staten Island to The Bronx currently are hiring at more than New York City’s $15 minimum wage.

To further increase wages of blue-collar employees such as these Washington, DC construction workers, the government needs to reduce competition from undocumented immigrants.
To further increase wages of blue-collar employees such as these Washington, DC construction workers, the government needs to reduce competition from undocumented immigrants.
The Washington Post via Getty Images

If the politicians want to pursue a truly pro-worker agenda, they should forgo legislating higher wages via minimum-wage increases and instead implement policies that will increase a paycheck’s real-world value. What lower-income workers in places such as New York City need most is not simply a higher minimum wage but affordable housing, reliable transit, cost-effective health care and education options, and safe communities. Construction and hospitality workers probably would appreciate having less competition from illegal immigrants, too — though there is little hope that the Biden administration will do anything about that.

The positive Federal Reserve data confirms that boosting household spending power best happens when the government encourages job — rather than wage — growth.
The positive Federal Reserve data confirms that boosting household spending power best happens when the government encourages job — rather than wage — growth.
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The only wage a politician can reliably raise through legislation is his own—and politicians are always happy to do that, as New York lawmakers recently did. But encouraging strong economic growth and the high demand for workers requires the type of intelligent, sustained efforts that are much more urgently important to people who don’t have Wall Street-level incomes to throw at the problems of daily life. Strange that those who talk the loudest about “social justice” often ignore the very problems that the poor and regular workers have to live with — problems that the rich hear about on the news or experience mostly through limousine windows.

As David Neumark of the Center for Population, Inequality, and Policy tells The Wall Street Journal: “I don’t want to say the minimum wage has become irrelevant, but it has certainly become less relevant.” The best kind of policy would be one that makes the minimum wage even less relevant in the future — along with an economy in which high wages are not a gift from politicians but the result of highly productive workers in a highly efficient and flexible labor market.

The politicians, for their part, prefer the patronage model — which is why nobody should trust politicians with their livelihood. 

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