An artificial hurdle to employment, not a route in.
With all the kerfuffle about free buses, stricter rent controls, support for child care, and government groceries, Mr. Mamdani’s views on the minimum wage law have not been given the attention they deserve, slipping slyly below the radar.
The Mayor-elect of New York City opined, “When working people have more money in their pocket, the overall economy thrives… Right now, if you are earning a minimum wage in the city, you simply cannot afford to continue calling it your home. We have to change that.”
What is his plan? Under Mamdani’s proposal, the town’s minimum wage would improve to $20 per hour in 2027, $23.50 in 2028, $27 in 2029 and $30 in 2030. This is almost double the present minimum wage currently prevailing in the Big Apple, at $16.50.
Say what you will against this policy; it is a bold one, worthy of comparison, at least in terms of radicalism, to all of his other proposals. Just as Mamdani proved adept at coining phrases, $30 in ’30 has a nice poetic ring to it.
But there is something amiss here. You don’t hear Mr. Mandani postponing his plans regarding buses, kindergartens, rent control, groceries, etc., being phased in. Rather, his intention on day one of his administration is to implement them all at once. No grass will grow under any of his other initiatives. If the value of the minimum wage being raised is so obvious, why only phase in his supposed gift to the workers of the city? Why not enact it forthwith? Is he losing his radicalism in this one policy area?
The obvious answer is that he and his economic advisors are hoping that in the next five years inflation will proceed apace, and reduce the real value of his proposed new wage floor. If inflation doubled by 2030, then the real value of $30 per hour would be almost equal to what it is now. Buying power stays the same, but to the average person, they have more money in their bank account.
This is the nub of the issue: an apparent “increase” in the real value of the minimum wage will harm its supposed beneficiaries.
This is, of course, something the new Mayor should have learned in his Economics 101 class, if ever he took one that was not Marxist-oriented (he majored in Africana Studies, with a smattering of social justice and sociology).
The point is, the minimum wage law is not a floor, raising wages above the level stipulated by the enactment. Rather, it is a barrier over which one has to jump in order to get a job in the first place, and then to retain it.
Suppose that a worker’s discounted marginal revenue product, or productivity, is $25 per hour. This means that for every 60 minutes the employee is on the shop floor, or behind a desk, or repairing some machinery, the employer can add that amount, and none other, to his bottom line. If he is compelled by law, however, to pay such a person $30, he will lose $5 per hour.
That is not a paying proposition. That is not sustainable. Such a person will not be hired in the first place, and if he is, he will not be in the role for long. If not, and if the business firm keeps him on the payroll despite the logic of the foregoing, it will be inviting bankruptcy.
The minimum wage law, like it or not, is an attack upon the unskilled and semi-skilled people whose productivity level lies below that wage required by law. It consigns them to all but permanent unemployment.
If such legislation really could boost wages, all else held constant, then why stop at $30? Why not make it $300, or $3,000 per hour? Then we would all be rich. Then, everyone, skilled or not, could afford to live in Manhattan. Not even Bernie Sanders, Zohran Mamdani’s mentor, would go that far. That is to say, neither of these politicians understands the economic law we have been discussing.
Take another case in point. Many socialists buy into a lower teenaged minimum wage exception. For example, the minimum wage law in New York City, as mentioned above, is $16.50 per hour. But for those under 18, it is only a measly $13. Mamdani has not mentioned that he intends to repeal this exception, so we are entitled to deduce he supports it. It would be a stretch to suggest the new Mayor of NYC hates young people; indeed, they were amongst his most fervent supporters. What, then, accounts for this bifurcated minimum wage?
Obviously, it is that youngsters at $16.50 are all but unemployable. At $13, more of them can hop over this lower barrier into employment. But this is proof positive that even the supporters of this pernicious legislation, perhaps subconsciously, acknowledge that this law is an impediment to employment, not a floor, pushing up wages.
