MinimumWagePod

The following is a collection of the materials used in creating the twenty-fourth episode of the Citizen Reagan podcast about the Reagan's Radio Commentaries.

Transcript

I'm back! I bit the bullet and put up the money to continue the podcast. You're welcome Internet.

This is the Citizen Reagan podcast and I need to get in the habit of doing a few things with every episode, like asking you to rate and review the podcast with whatever services you use. Like asking you to share us with your friends, family, complete strangers and your worst enemies, I don’t care really, just as long as you share it. Like telling you that you can find past episodes, transcripts, research and more on a wiki on my webspace. The address for the wiki is www.poorrichardsprintshop.com/wiki but if you just visit poorrichardsprintshop.com, I have a variety of other projects there. I sell digitally restored books, magazines and pamphlets. I have constructed an archive of old pulp short stories. I accept donations through Ko-fi, if you're willing help out. It’s all there on the website. Now, with that out of the way, let's get to Reagan.

The minimum wage is a big discussion topic nowadays, so I thought I'd share some of what Reagan had to say about it on his radio show and then offer my extended thoughts on the situation.

In 1977, Jimmy Carter signed legislation to raise the minimum wage from $2.30 per hour to $2.65 on January 1, 1978. The bill also provided for increases the next three years, with the final number being $3.35. In February, 1977, Reagan gave a broadcast about the minimum wage. I don't have the audio, so I'll attempt to summarize it.

Reagan's concern about the minimum wage was its effect on unemployment, and in particular the unemployment of teens and minorities.

In 1954, the minimum wage was 75 cents and black teenage unemployment was 16.5%. By 1968, the minimum wage had risen to $1.60 and black teenage unemployment had grown to 25%. In 1977, with a minimum wage of $2.30, the black teenage unemployment had reached 40%. Unemployment for all teenagers was 2 and a half times the rate of the rest of the population, 20%.

What was Reagan's suggested solution at the time? A two-tier minimum wage, allowing a lower minimum wage for teenage workers and part-time workers. Other countries of western Europe, he says, have tried it and it worked well enough. But he had little hope that Congress would be willing to give it a shot.

What is the history of the minimum wage? In the United States, the first national minimum wage law was put into place in 1938 under FDR, but discussions of having one at all went back into the 19th century where it was intertwined with the eugenics movement. Not a topic I've taken on yet, eugenics is the idea that humanity can improve the species ourselves via social means rather than natural selection. By preventing some people from having children, you, effectively, remove their genetic traits from the population. Do this for a long enough period and the traits will disappear.

In regards to the minimum wage, the idea was that setting a high enough minimum wage would price certain segments out of the job market. Without income, they would be unable to support families and they would be unable to pass on their traits.

That 1938 law, the Fair Labor Standards Act of 1938, not only created the minimum wage, but also established the time-and-a-half requirement for anyone working over 40 hours during a week and setup prohibitions for child labor in hazardous occupations. But back to that minimum wage, the rate established in 1938 was 25 cents per hour, which, thanks to inflation, is roughly equal to $4.70 per hour now.

The minimum wage has not always been as simple as it is now. When first put in place, it only applied to employees of businesses engaged in interstate commerce. This makes sense because until the 1942 Wickard v. Filburn Supreme Court decision, the federal government had no legal right to interfere in business done entirely within a state, that would have been the state's job. Some would say it is still only the state's job. This relates to the Commerce Clause of the Constitution and the 10th Amendment. In 1961, the minimum wage was extended to include more kinds of workers. But the rate was different until 1967. In 1967, it was further extended, but workers on farms had a different minimum wage. In 1978, under President Carter, everything was brought together and the true minimum wage was set.

Before 1938, there had been attempts by individual states to set up their own minimum wages, but they would be struck down by the courts. The court's argument was that it deprived the worker of the chance to set their own price. I’m reminded of an exchange from the movie McLintock, in which a farmer, played by Patrick Wayne, attempts to get a job from the wealthiest rancher in the territory, played by John Wayne. You'll also hear the voice of Chill Wills.

George Washington McLintock: I already told ya son, I got no need for farmers. Or use for them either.

Devlin Warren: Just one minute, Mr. McLintock. My father died last month, that's how come we don't have a homestead. I've got a mother, a little sister to feed. I need that job badly.

George Washington McLintock: What's your name?

Devlin Warren: Devlin Warren.

George Washington McLintock: Well, you've got a job, son. Go see my home ranch foreman. He's over by the corral.

Devlin Warren: Step down off that carriage, mister! [Swings a punch at McLintock and gets thrown to the ground]

George Washington McLintock: Hold that hog leg! I've been punched many a time in my life but never for hirin' anybody.

Devlin Warren: I don't know what to say. Never begged before. Turned my stomach. I suppose I should have been grateful that you gave me the job.

George Washington McLintock: Gave? Boy, you've got it all wrong. I don't give jobs, I hire men.

Drago: You intend to give this man a full day's work, don'tcha boy?

Devlin Warren: You mean you're still hirin' me? Well, yes, sir, I certainly deliver a fair day's work.

George Washington McLintock: And for that I'll pay you a fair day's wage. You won't give me anything and I won't give you anything. We both hold up our heads.

A fair day's work, for a fair day's wage, settled between a business owner and a job seeker. No government interference. That's how it was handled for the majority of our history here in the United States and it seemed to work fine.

By the way, I would recommend the movie. An unrestored edition of the film is in public domain, so it should be very easy to find.

Now, if I may, I’d like to offer my own take on the minimum wage.

1. Having a federal minimum wage is a crock. The cost of living in Youngstown, Ohio or Podunk, New York or, I don't know, just about anywhere in Alabama is a lot different from living in San Francisco, New York City or Washington D.C. The latter would require a much higher minimum wage, if it is to be considered a living wage. When you raise the wage throughout the country, those areas that do not require or cannot afford that higher rate will suffer. In some cases, even a state-wide minimum wage isn't viable. Upstate New York is very different from downtown Manhattan.
2. For the majority of businesses, namely small businesses, owners or managers will be forced into a very difficult position. They can:
   1. Raise their prices so they can cover the added salary burden, more on this in a moment.
   2. Fire employees, freeing up money to pay the remaining workers the new minimum wage. This leads to an increase in unemployment. More on this after I talk about increased prices.
   3. Cut the hours of employees, allowing most, if not all the workers keep their jobs. They may make the same amount, but the business will be unable to stay open for the same amount of hours, hurting its profitability.
   4. Find a way to make cuts elsewhere, like product quality or offerings, if any are available.
3. In the event businesses raise their prices, if enough make this decision, it may lead to an increase in the cost of living, which would mean this new "living wage" is too low, forcing another increase in the minimum wage. There is the potential for an endless inflationary cycle here.
4. In the event employees get fired, who are the most likely to get the axe? Why, those with the least amount of experience, like those teenagers Reagan expressed concern over. Those that know what they are doing and do their job well are the most likely to justify being paid the increased amount of money.
5. When the minimum wage goes up, it cheapens the work of everyone making more than minimum wage. How would it feel to someone with their college degree (and the student loans to go with it) earning $25 per hour to know that their friend from high school who dropped out in 9th grade and now flips burgers at the local fast-food joint makes $15 per hour. That college grad put in a lot of extra work, got the grades and diploma and earned the right to make that extra money. Its now being undercut.
6. In an earlier broadcast, I talked about supply and demand and how government interference disrupts the natural equilibrium between the two. A minimum wage is an interference in that equilibrium. I cannot tell you how many times one of my former coworkers spoke out against Walmart and the treatment of their employees. Paraphrasing: 'Oh, they make low wages and get no benefits. I won’t support a company that treats their workers that way.' I would always point out that, if the situation was so bad at Walmart, no one would want to work there and Walmart would be forced to close its stores. This is an example of how a natural equilibrium should work.
7. Why stop at $15?? Why not increase the minimum wage to $25 or $100 or even $1000? What is so special about that $15/hr number? The fact that someone is calling it "a living wage?"
8. The minimum wage isn’t supposed to be a living wage. It is for the inexperienced, low-skill worker. Once said worker has gained experience and skill, their wages will increase, whether within the job they currently have or by using that experience to gain better employment elsewhere.