Trends

THE ESCALATING CASE AGAINST MINIMUM WAGE LAWS

Minimum wage laws provide a striking example of the inadequacy of the "common sense" approach to solving social problems. Are people receiving low wages? Then why not pass a law setting a "decent" minimum, thereby raising people out of poverty? Libertarian economists have long replied that the system is not that simple and that a likely consequence of such laws is a contraction of the demand for employees. Thus, although those who stay employed will benefit, others will either be fired or never hired. The big unknown, however, was how significant this effect might be.

The early studies were ominous in their implications. Economist Yale Brozen's findings of an apparent correlation between increases in the minimum wage level and unemployment rates—particularly among nonwhite teenagers—should have given the policymakers pause. But opposition to minimum wages appeared to be politically suicidal in the early 60s (and, besides, weren't Brozen and colleague Milton Friedman just a pair of reactionaries?). It has taken twenty years of steady increase in the ratio of nonwhite to white unemployment (from 1.0 in 1948 to 2.3 in 1968) to awaken the rest of the economic community. Within the past year a host of studies have been completed, demonstrating to the satisfaction of most economists that Brozen's analysis was correct.

Econometric models constructed at Ohio University, the National Bureau of Economic Research, and RAND Corporation consistently demonstrate a strong correlation between youth unemployment and minimum wage level increases. Gene Chapin and Douglas Adie of Ohio University state flatly that "Increases in the federal minimum wage cause unemployment among teenagers. The effects tend to persist for considerable periods of time. And the effects seem to be strengthening as coverage is increased and enforcement of the laws becomes more rigorous." Finis Welch and Marvin Kosters, in a RAND study last year, found that as the minimum wage rises "teenagers are able to obtain fewer jobs, and their jobs are less secure over the business cycle. A disproportionate share of these unfavorable effects accrues to nonwhite teenagers." Even Paul Samuelson of MIT, long a champion of interventionism, has seen the light, asking "What good does it do a black youth to know that an employer must pay him $1.60 per hour if the fact that he must be paid that amount is what keeps him from getting a job?"

The AFL-CIO is now mounting a major lobbying effort in favor of an immediate increase in the federally-required minimum from $1.60 to $2.00 per hour. In view of Milton Friedman's apt description of the minimum wage law as "the most anti-Negro law on our statute books," it will be interesting to see who supports and who opposes the AFL-CIO proposal.

SOURCES:
• Brozen, Yale, "The Untruth of the Obvious: The Minimum Wage Law," THE FREEMAN, June 1968.
• "When Minimum Wage Means No Wage At All," BUSINESS WEEK, 15 May 1971.

THE RIGHT TO SECEDE

If government "by the consent of the governed" is to have any moral validity, the right of people to withdraw their consent must always be acknowledged. Recent years have seen several attempts at secession from existing governments—Kantanga, Anguilla, Biafra—crushed by force of arms. A lone Englishman took over an abandoned "Texas tower" off the coast of England several years ago and declared it an independent, sovereign nation; but he was careful to pick a location outside any national three-mile limit.

Now, however, an Australian farmer is making an attempt to secede where others failed, within the confines of an existing state. He has declared his 30 square mile farm a separate province, independent of Western Australia. Fed up with the government wheat board's restrictive production quotas, Les Casley has set up the Hutt River Province with himself and his three sons as the government. Wayne Casley, age 20, is in charge of foreign affairs, while 22-year-old Ian Casley is director of postal services. Total population is on the order of 20.

Hutt River Province has formally notified the Australian governor-general, the Western Australian state government, and the federal prime minister of its newly-independent status (and a letter also went out to Queen Elizabeth). Thus, the world will soon have a chance to observe whether Australia's brand of liberty is any less of a sham than that available from governments elsewhere.

SOURCE:
• "Australian Aiming for Own State," Reuters News Service, LOS ANGELES TIMES, 18 April 1971.