Compassion in America

How to de-incentivize the work force without really trying

By Sam Huntington

One of the most fundamental principles of economics is that people tend to purchase more when prices are lower, and they purchase less when prices are higher. No matter, those who think that the way to stimulate the economy is through federal spending of borrowed money also think that the way to increase employment is to raise the minimum wage. There is simply no shortage of incredulousness on the political left, but they do celebrate how kindhearted they are. Sadly, and this is a trend, no one on the left considers the consequences of their poorly contrived schemes.

Here is an interesting fact: nations with minimum wage laws almost always have higher rates of unemployment, compared to those without minimum wage laws. One of these is Switzerland, which in 2003 reported a five-year unemployment high of 3.9 percent. Ten years later, the unemployment rate is 3.1 percent. You will not find such low numbers in the United States since the administration of Calvin Coolidge, and there is a reason for this: when the cost of labor to employers is low, unemployment is low. When the cost of labor to employers is high, unemployment is high.


As for demonstrating compassion toward the poor, first define what it is to be poor in the United States of America today. According to the US Census Bureau, 15% of the American people live in poverty. This equates to about 46 million people, which is no small number. In 2012, the poverty rate was higher than it was in 2007. This should tell us something about what a genius our bi-polar president is. Nevertheless, what does it mean to be poor in the United States, and generate a demand from the left of more empathy for the economically disadvantaged? For starters, the poorest American today lives better than the richest persons did one hundred years ago. Here are some interesting facts:

• If poverty suggests lacking nutritious food, adequate housing, climate controlled environment, and adequate clothing for a family, then very few of the people classified as living in poverty by the Census bureau could be characterized as poor
• Most of the people classified as poor owned one automobile
• Most had air conditioning systems in their homes
• Most had two color television sets
• Most had cable or satellite television
• Most had a computer
• Most had a DVD player, or a VCR
• Most with children had a game system, such as X-box or Play Station
• Most households had a refrigerator, oven, stove, and microwave
• Most households had washing machines, dryers, ceiling fans, and cordless phones
• Most people classified as poor had smart-phones

Yes, there are people living in poverty in the United States, but we should wonder how many of these are poor in a meaningful sense. We must address this question because the official definition of poverty originates with the federal government, who has an agenda. The people who provide these definitions are the same bureaucrats who offer a rationale for maintaining the welfare state; not incidentally, the same people whose jobs depend on general acceptance of these official standards and definitions. Likewise, if I need to say it, the same people who argue that welfare benefits should exceed the minimum wage.

Here is another fact: most people in the lower income brackets do not remain in poverty for very long. Most working people in the bottom 20% of income do not stay there for more than a few years. Most of these people ultimately end up in the top 20% income bracket. You see, this is how it works. It is why most cruise ship passengers are older people, rather than 20-somethings. The longer you work, the wealthier you become—generally. There is nothing enigmatic about the fact that most people begin their working career in entry-level jobs. As people gain more experience in the work place, the more money they are likely to earn.

What are these compassionate progressives really doing for young people, or for the poor, by demanding an increase in the minimum wage? Well, for starters, they are keeping them from getting a job. Employers hire when the cost of labor is low. Next, because young people cannot access entry-level jobs, the left-wingers are more or less guaranteeing a reduction in income over the working life of that individual. They also miss valuable work experience —the kind of knowledge that might qualify them for a better paying job in the future.

A few months ago, the US unemployment rate fell to 7.7%, which is still somewhat high. Among black young people, however, the unemployment rate for the same period was 43.1%. We must return to the original question: how does the leftist demand for an increase to the minimum wage actually help to reduce unemployment?