Minimum Wage Law Pushed Again in Oklahoma
By Steve Byas“I think if you did some polling statewide, it would be overwhelmingly popular to raise the minimum wage here in Oklahoma,” said Tim O’Connor, president of the Central Oklahoma AFL-CIO, speaking about the latest push to raise the state’s minimum wage, set by law.
But popularity is hardly the only thing to consider when passing any law. After all, racial segregation, by law, was popular at one time in America.
State Senator Mary Boren (D-Norman) filed a bill last year which would increase the lowest hourly wage to $15 by the year 2027, and is one of those hoping to get the Oklahoma Legislature to enact an increase this year.
Boren opines that it should not be done all at once, though. “If you do incremental changes, then the market can adjust and prices can adjust over time and the employer can adjust over time so they can announce things and then they can plan for things and they can do projections.”
The average hourly worker in Oklahoma makes $18 per hour. “You can’t live on $7.25 an hour,” said O’Connor.
It would be a reasonable question as to why a Union boss would favor an increase in the minimum wage. After all, none of their members are stuck at minimum wage. But unions like minimum wage increases, because they can use that as a negotiating point, arguing to management, “Look, that unskilled guy is getting a raise. Why can’t our more skilled workers get one, too?”
Wages are a price – the price of labor. And like all prices, when they are controlled above or below the market price, it is, in effect, telling a lie, creating a distortion in the market. Control a price below the market and a shortage is created. Control a price above the market price – and that includes wages, the price of labor – and a surplus is created.
Anyone who has read world history would know this. In ancient Babylon, King Hammurabi decreed the politically correct wage level for field laborers, herdsmen, potters, tailors, carpenters, rope makers, and others. As Robert Schuettinger and Eamon Butler commented on this ancient effort at minimum-wage laws in their book Forty Centuries of Wage and Price Controls, “It appears that the very people who were supposed to benefit from the Hammurabi wage and price restrictions were driven out of the market by those and other statutes.”
This is still the case today. First of all, when a business pays a person a wage – stated at $7.25 an hour or whatever – the actual cost to the business owner is much more. In addition to the wage, a business owner must pay for unemployment insurance and workers’ compensation insurance, which would push the actual hourly cost well north of $10 an hour.
And, if the worker does not bring more value to the business than whatever the hourly wage is, then the business owner simply cannot afford to hire that worker. A business owner is not – and cannot be – in business to lose money, which would be the case if the minimum wage cost is too high. After all, if the purpose of the minimum wage is to help some person “make a living,” then why not decree a hundred dollars an hour? Someone might object that no small business can afford something like that, it is ludicrous.
Exactly. Big businesses can certainly handle – because of what is known as “economies of scale” – higher wages than a small business, but they don’t hire many minimum wage workers anyway.
The minimum wage is largely irrelevant in this present economy. Less than five percent of workers receive only the minimum wage, as businesses are having to pay more – much more – than minimum wage to get anyone to work.
But pushing through an increase in the minimum wage would no doubt hurt the most vulnerable low-skilled workers out there. What good does it do for the minimum wage to be raised, if it simply causes the business to fail that would have hired them, or if the business opts not to hire them to keep from going out of business? Having a job at, say $7.25 an hour, is clearly better than not having a job because the minimum wage is $15 an hour.
Government can no more repeal the law of supply and demand – which determines the prices of products and labor (wages) – than it can repeal the law of gravity. They cannot make 2 +2 +5 by a law.
One should not be surprised when Democrats like Boren call for an increased minimum wage. Such demagoguery is just what Democrats do.
At one time, I would have simply dismissed this call for a higher minimum wage as dead on arrival in the Legislature. The Democrats only have 20 seats in the 101-member state House of Representatives, and eight members in the 48-member state Senate, where Boren sits.
And no Republican could be so stupid as to support this idea, right?
I am not sure about that. It was just a few years ago that a bill passed the state Senate to join Oklahoma into the National Popular Vote (NPV) compact – an effort to essentially abolish the Electoral College. I never thought I would have to explain to a Republican legislator why getting rid of the Electoral College is a bad idea. But it was an overwhelmingly Republican Senate that did just that. Fortunately, that effort failed in the House.
Because of this, I no longer am confident that just because a legislator has an R by his or her name, they understand basic economics, or believe in limited government. That is why I decided to write is column on this subject.
Unfortunately, I am not sure that legislators read much on legislation unless it comes from a lobbyist.
Steve Byas is Editor of the Oklahoma Constitution and author of several magazine articles and books, including History’s Greatest Libels. He may be contacted at firstname.lastname@example.org