The latest effort to increase the minimum wage at the state level died recently in the New Hampshire Senate.
“New Hampshire currently doesn’t set its own minimum wage. Instead, the state follows the federal minimum which is $7.25 per hour,” the Associated Press reports. “The Republican-led Senate voted 14-10 along party lines Thursday to reject a bill that would have set the rate at $10 per hour starting in January and then increased it to $12 two years later.”
Supporters of the legislation described the bill as “a modest step toward supporting working families,” the AP notes. Opponents counter that it would harm young workers, hurt small businesses, and lead to increased automation.
New Hampshire’s rejection of the minimum wage hike comes two weeks after the Senate rejected legislation that would have increased the federal minimum wage to $15 an hour.
The Downside of Minimum Wage Laws
New Hampshire’s decision to not have a state minimum wage might sound radical, but the Granite State is hardly alone.
Currently more than a dozen states, including New Hampshire, have laws that prohibit a minimum wage at the state level, while several others have no minimum laws at all or wage floors below the national rate. (In practice, the distinction doesn’t matter. All states are subject to the $7.25 federal rate.)
Some might see having no state minimum wage as cruel or callous, but this is a mistake. As The New York Times famously argued in a 1987 editorial, the right minimum wage has always been $0.
At the time, many were seeking to increase the federal minimum wage, which had been frozen for six years at $3.35 (sound familiar?). The introduction of legislation designed to raise the federal wage floor was no surprise, considering that at the time it fell below what one could make on unemployment benefits in some states.
Yet the bill was still a mistake, the Times pointed out.
“Anyone working in America surely deserves a better living standard than can be managed on $3.35 an hour,” the Grey Lady explained. “But there's a virtual consensus among economists that the minimum wage is an idea whose time has passed. Raising the minimum wage by a substantial amount would price working poor people out of the job market.”
It's possible that some would benefit from the policy, of course. But it would come with significant tradeoffs, including expanding the underground economy and increasing unemployment, the Times explained:
Raise the legal minimum price of labor above the productivity of the least skilled workers and fewer will be hired. If a higher minimum means fewer jobs, why does it remain on the agenda of some liberals? A higher minimum would undoubtedly raise the living standard of the majority of low-wage workers who could keep their jobs. That gain, it is argued, would justify the sacrifice of the minority who became unemployable. The argument isn't convincing. Those at greatest risk from a higher minimum would be young, poor workers, who already face formidable barriers to getting and keeping jobs.
Unfortunately, these considerations are often overlooked in modern debates on the minimum wage because the policy is almost always framed as a binary moral issue: people who care about the poor support raising the minimum wage; people who oppose increasing the minimum wage don’t care about the poor.
A recent example of this mindset can be found in the reaction to Arizona Sen. Kyrsten Sinema, one of eight Democratic senators who voted against raising the federal minimum wage to $15 an hour.
Following her vote, which Sinema made with a flourish that angered minimum wage supporters, the first term senator was mocked, criticized, and generally pilloried for weeks on Twitter. Most of the tweets directed her way suggested that Sinema’s vote demonstrates she simply doesn’t care about poor people.
Who gets this excited about voting to keep their constituents in poverty?— kyle lucas (@itskylelucas) March 5, 2021
Oh that’s right, you do. https://t.co/r1Q5b0VTTW
Is this you? Did you have a brunch to get to or something? Despicable. pic.twitter.com/MIalhrfFFC— Adam Cerious (@Browtweaten) March 5, 2021
The Reality of Tradeoffs
In some ways, the reaction should not surprise us. It’s Twitter, after all, a platform known for high invective and low thought. Additionally, politics itself is largely theater. In such environments, people are inclined to see issues in stark moral terms—minimum wage good, no minimum wage bad—rather than acknowledging that minimum wage laws involve tradeoffs.
As the Times explained, the simplistic “good vs. bad” framework is a false dichotomy. Minimum wage hikes might help some workers, to be sure. But the reality is that they come with tradeoffs, like any public policy. These often include businesses closures and adverse employment consequences for the most vulnerable in society—people with few job skills, criminal records, and little education who are priced out of labor markets.
This phenomenon is well understood by economists and is supported by an abundance of academic research.
“[The] body of evidence and its conclusions point strongly toward negative effects of minimum wages on employment of less-skilled workers, especially for the types of studies that would be expected to reveal these negative employment effects most clearly,” economists David Neumark and Peter Shirley explained in a recently published National Bureau of Economic Research paper that surveyed the body of economic research on minimum wage.
Yet minimum wage laws persist, in large part because, as the economist Thomas Sowell has observed, "The first lesson of politics is to disregard the first lesson of economics."
The Real Moral Issue
Utility of the policy aside, minimum wage laws are indeed a moral issue. Wage floor supporters are simply on the wrong side of the matter.
It’s important to remember that depriving individuals of the dignity of work is no small matter. Work, after all, is how we survive. This why the philosopher John Locke saw labor as a God-given right inextricably tied to ownership over oneself.
“Though the earth, and all inferior creatures, be common to all men, yet every man has a property in his own person: this no Body has any Right to but himself,” Locke wrote in his Second Treatise. “The Labour of his Body, and the work of his Hands, we may say, are properly his.”
This is why the minimum wage should be $0. Quite simply, the government has no right restricting how individuals choose to spend their labor in an effort to improve their situation. To do so is an unjust taking of his property, one that very well might prevent him from earning a living.
Members of the New Hampshire state senate might not win a popularity contest for their vote—minimum wage laws remain more popular with voters than economists, at least when their negative consequences are concealed—but they made the right call.
The right minimum wage is $0.