Thomas Sowell reminds us once again in his latest column why the latest arguments for raising the government-mandated minimum wage make no economic sense.
One of the simplest and most fundamental economic principles is that people tend to buy more when the price is lower and less when the price is higher. Yet advocates of minimum wage laws seem to think that the government can raise the price of labor without reducing the amount of labor that will be hired.
When you turn from economic principles to hard facts, the case against minimum wage laws is even stronger.
Countries with minimum wage laws almost invariably have higher rates of unemployment than countries without minimum wage laws.
Most nations today have minimum wage laws, but they have not always had them. Unemployment rates have been very much lower in places and times when there were no minimum wage laws.
Switzerland is one of the few modern nations without a minimum wage law. In 2003, “The Economist” magazine reported: “Switzerland’s unemployment neared a five-year high of 3.9 percent in February.” In February of this year, Switzerland’s unemployment rate was 3.1 percent. A recent issue of “The Economist” showed Switzerland’s unemployment rate as 2.1 percent.
Most Americans today have never seen unemployment rates that low. However, there was a time when there was no federal minimum wage law in the United States. The last time was during the Coolidge administration, when the annual unemployment rate got as low as 1.8 percent. When Hong Kong was a British colony, it had no minimum wage law. In 1991 its unemployment rate was under 2 percent.
