The right wing would have us believe that the secret to success is less government intervention and less help for the common man. Recently they've taken aim at minimum wage. An op-ed published on Yahoo! Finance by Robert Weinstein is the latest effort by conservatives to discredit the social safety net. Citing higher prices and American Samoa, Weinstein argues that minimum wage does more harm than good. Once again I will answer the question of whether there is any validity to such claims.
Weinstein asserts that American Samoa is the perfect testing ground for minimum wage legislation. "The Fair Minimum Wage Act of 2007 was to increase the minimum wage of American Samoa's workers 50 cents per year until the minimum wage was equal to the rest of United States," he claims. "As a result, some American Samoa's workers received an increase in 2009; however, shortly after, workers were laid off and unemployment increased to around 20%." Unfortunately, Mr. Weinstein did not cite where he came up with these figures, and I have been unable to verify them, because the most current data from a reliable source that I could find is from 2005. However, what I can say for certain is that whether or not Weinstein is correct about the 20-percent figure, American Samoa's unemployment rate was higher in 2005, when it was at 29.8 percent.
Having said that, a jump in unemployment would not be entirely unexpected in 2009, given the economic collapse that resulted from the subprime mortgage crisis of 2008. The U.S., the UK, Spain, France, Denmark, Costa Rica and even China experienced increases in their unemployment rates in 2009.
Mr. Weinstein's claim that consumer goods prices rise thanks to minimum wage is a canard. A quick look at U.S. history tells a very different story. After minimum wage was enacted in 1938 as part of the Fair Labor Standard Act, GDP shot up, as did average household income and disposable personal money income. Americans actually spent more money than they did before. Also worth noting is the fact that prices didn't drastically increase. The percent change in consumer price index on all items after the law was enacted was relatively constant for a decade. The price of food also essentially held constant, while its percentage of disposable personal income declined. Thanks to minimum wage, people had more money in their pockets and were able to spend more on luxury goods, which helped create the middle class.
But hey, don't take my word for it. Let's see what experts have to say about minimum wage. A letter to Congress and President Obama from a list of prominent economists, including Robert Frank (H. J. Louis Professor of Management and Professor of Economics at Cornell University), Lawrence Katz (Elisabeth Allison Professor of Economics at Harvard University), Richard Freeman (Herbert Ascherman Professor of Economics at Harvard University), Joseph Stiglitz (Nobel laureate and Professor of Economics at Columbia University) and Laura Tyson (Professor of Global Management at the Haas School of Business at the University of California at Berkeley), explains:
In recent years there have been important developments in the academic literature on the effect of increases in the minimum wage on employment, with the weight of evidence now showing that increases in the minimum wage have had little or no negative effect on the employment of minimum wage workers, even during times of weakness in the labor market.
In spite of Weinstein's claims that all the arguments for minimum wage are "emotional," the truth seems more to the contrary with such a prestigious list of economists contradicting him. The New Deal is commonly credited with creating America's modern middle class, and the efficacy of its programs has been a thorn in the side of those who believe in laissez-faire. The idea that if we make companies treat their workers better, we won't get our low prices is akin to saying, "My standard of living doesn't matter as long as I can get $20 off the cost of my iPhone." Aside from being completely degrading, arguments like these are simply an effort to dismantle the New Deal, whose legacy has been the corner stone of Democratic and progressive electoral strategy for decades.