The Times It Is A-Changin'
When we first saw it, we thought it had to be a practical joke played by some free-market imp in the New York Times print shop. "The Right Minimum Wage: $0.00," screamed the lead editorial. Now the Times is nowhere near as liberal as legend has it. But still, isn't the minimum wage a sacrosanct pillar of the modern state?
Well, not to economists it's not, and apparently their lectures have gradually seeped into downtown Manhattan. The federal minimum wage is a New Deal legacy, created as part of the Fair Labor Standards Act of 1938. The current minimum of $3.35 an hour (it was 25 cents in 1938) took effect in 1981. And there are rumblings in Washington that organized labor will be mounting a major offensive to jack the minimum wage up an even dollar, to $4.35.
No decent person can deny that it's tough to get by on $3.35 an hour. But the minimum wage, like so much well-intentioned social legislation, has pernicious, often-unseen effects. Economist George Stigler predicted, in a seminal 1946 paper, that it would effectively render the least-skilled members of the workforce unemployable. Experience has confirmed Stigler's prophecy: the minimum wage harms teenagers with spotty educational records the most, consigning them to the streets rather than entry-level jobs where basic job skills are learned and work habits inculcated.
"There's a virtual consensus among economists that the minimum wage is an idea whose time has passed," asserted the Times editors. They proceeded to repeat the new consensus line: "Raise the legal minimum wage of labor above the productivity of the least skilled workers and fewer will be hired."
The significance of the Times's change of heart shouldn't be brushed aside too cavalierly. (In the past, they've expressed cautious support for a lower minimum wage for teens but never questioned universal coverage.) A less adventurous crew would be difficult to find; most of the paper's pontifications recommend years of study, appointments of blue-ribbon commissions, etc., etc., before the slightest nudge of the status quo. So this willingness to scrap the minimum wage may portend a broad, robust debate on a heretofore off-limits subject.
Let's close with a blast from the past from Billy Carter, the best economist of Plains's first family. Ole Billy told Newsweek in 1977: "Every time [the minimum wage] goes up, we have to lay off a few more people. I'd rather give these people jobs, but I have to look at costs."
99 Certificates On the Wall
Do you feel better knowing that your doctor is certified by a licensing board? If so, consider this: Two recent studies—from such different groups as the pro-freedom Cato Institute and the pro-old-people American Association of Retired Persons (AARP)—conclude that licensing of professionals costs consumers plenty but does not improve service quality.
Cato analyst Stanley J. Gross, professor of counseling psychology at Indiana State University, reviewed previous studies on the effects of entry restrictions in a variety of professions, including medicine, pharmacy, real estate, and law. He found no conclusive evidence to support the rationale for licensing: improving the quality of services and preventing incompetent practices. "Because licensing boards mostly respond to complaints rather than pursue their own investigations, and because there is only a remote chance that any substantial penalty will be imposed, there is no support for the claim that licensing agencies hold practitioners accountable to high ethical standards."
Gross also found that licensing creates such problems as the exclusion of minorities from some professions, the underutilization of less costly paraprofessionals, and professionals' lack of freedom to relocate from one state to another (causing a maldistribution of professional services that especially hurts the elderly, the urban poor, and the geographically isolated). "The professional monopolies that result [from licensing] cause the loss of one aspect of economic freedom—namely, the right to choose an occupation," he notes. "Given the high value that political and economic freedom have in the United States, the burden of proof should be on the states and the professionals they regulate to show that the loss of freedom is justified."
Such a justification certainly can't be found in the AARP's report, "Unreasonable Regulation = Unreasonable Prices." The group analyzed three services of particular interest to older Americans—optometry, dentistry, and funeral sales—and concluded that "consumers pay more than they should for goods and services sold by an artificially limited number of providers."
The report noted that many licensing policies are designed more to guard professional self-interest than to monitor the credentials or competence of licensees. This is especially true of "business practice" or "marketing" restrictions, which are unrelated to the quality of the service provided—prohibitions against advertising, locating in a shopping mall or department store, or being owned by a corporation. Some states prohibit dentists from using introductory specials to attract patients, prohibit funeral parlors and cemetaries from joining together to offer discount packages, and forbid optometrists to practice near commercial opticians (who sell but can't prescribe corrective lenses).
Consumers, not surprisingly, end up paying higher prices for these state-enforced business strategies. For example, the AARP found that optometrists in cities where chain stores and advertising are prohibited charge on average 33 percent more than those in cities without such restrictions. Consumers pay in non-monetary ways as well. Legal clinics, optometric outlets, and other services may be more accessible in malls or larger stores. In fact, the AARP found "evidence that retail dental practices attract patients who would not otherwise seek dental care."
(In a curious deviation from its own analysis, the AARP calls for more government regulation in the hearing-aid market. Even here, however, it says that "professional licensing is not the only way or necessarily the best way to protect consumers against abusive practices.")
The AARP concludes that "anticonsumer laws and regulations are resulting in millions of unnecessary dollars being spent for eyeglasses, dental services, and funeral arrangements." Neither the AARP nor the Cato study ventures a guess as to how much we're paying for similar restrictions in the 800 (yes, 800) other licensed professions, occupations, and trades. But both suggest that we reconsider the government's license to license.
Fairness Is Foul But Fowler Is Fair
Television news is different from newspapers because:
(a) The reporters are better-looking.
(b) It has no comics, only weathermen.
(c) It isn't protected by the First Amendment.
If you answered (c)—which we trust you didn't—you agree with conservative antifeminist Phyllis Schlafly, assorted liberal antinuke protestors, the National Rifle Association, the NAACP, and, of course, the federal government. But the feds, at least, may be changing their minds.
Since 1949, the Federal Communications Commission (FCC) has regulated broadcast content under the unfortunately named Fairness Doctrine. This rule requires stations to air public-affairs shows and cover controversial issues; if audience members don't like what they see or hear, they can complain to the FCC, which will make broadcasters report stories differently.
The Fairness Doctrine also forces broadcasters to give air time to people who disagree with editorials or even commercials. So accepting a paid political ad is likely to mean giving away valuable ad time to those who disagree with it.
Not surprisingly, the Fairness Doctrine has encouraged broadcasters to reduce or water down their news coverage and to refuse to air controversial ads.
We at REASON aren't the first to notice the deleterious effects of the rule. When an antinuclear group complained to the FCC about a Syracuse, New York, TV station's airing of positive commercials about a nuclear plant, the station didn't get evenhanded—it got mad. WTHV's owners challenged the Fairness Doctrine on constitutional grounds, eventually dragging the issue to court. Recently, the influential federal appeals court for the District of Columbia ruled that the FCC was wrong in refusing to consider the station's constitutional arguments. While the court itself declined to rule on the doctrine's constitutionality, it asked the FCC to consider the issue.
And the FCC is now soliciting public comment on whether continuing to enforce the doctrine would be unconstitutional and against the public interest—conclusions the agency actually reached in a 1985 study. Another recent appeals court decision declared the doctrine a regulation, not a law, despite mention of it in a 1959 statute. (The Supreme Court hasn't decided whether to consider an appeal.) This esoteric-sounding decision opens the way for the FCC to restore freedom of the electronic press without Congress's consent.
That's what Mark Fowler, the free-market-oriented head of the FCC, would like to see. He has called the Fairness Doctrine "constitutionally suspect" and voiced "grave reservations that it is good public policy." Fowler plans to resign soon, and he apparently would like to see the Fairness Doctrine disappear before he does. Stay tuned.
Letting Them Eat Quiche
What do you do with 260 pounds of leftover cheesecake? Nine dozen separately wrapped and garnished mortadella and provolone sandwiches? Or 12 ham-and-cheese quiches—when the chef forgot the ham?
Instead of tossing out such expensive goodies, more and more restaurants, gourmet food stores, caterers, and company cafeterias are giving them away—to privately run food banks that supply soup kitchens and shelters. Some donors want the tax deduction. But more often the motivation is a combination of sympathy for the poor and distaste for waste.
Food banks, as REASON reported in its August 1983 issue, are among the most promising private-sector alternatives to government welfare programs. These nonprofit organizations tend to be lean and responsive to market demands—including chefs' desire not to see their creations go to waste. As consumers eat out more often or pick up pasta salad at the corner yuppie grocery, the supply of leftovers has risen. For food banks, "the greatest area of expansion is the prepared-food area," Marcia Mellitz, executive director of Operation Food Search in St. Louis, told the Wall Street Journal recently.
One trendy source of prepared foods is the catered business lunch. City Harvest, a New York City food bank, collects more than 3,000 pounds of food a week from such Wall Street giants as Chase Manhattan and Merrill Lynch. But City Harvest will also collect donations as small as five pounds from such fancy-food purveyors as Let Them Eat Cake, a bakery that sells to top restaurants. "The worst thing for a person in my position is to feel that something is thrown away," Let Them Eat Cake owner Gloria Tariago told the Journal. "There's too much time and creativity involved."
Not surprisingly, shelter residents and soup-kitchen patrons are happy for the change of pace. Regular shelter food is institutional food, like they use powdered eggs," a young mother told the Journal. "Maybe the people at City Harvest don't make the food themselves, but it tastes fresh." And it sure beats government cheese.
? Let it flow. Liquor and milk prices in New York are likely to tumble, thanks to the recent demise of price and entry restrictions. The Supreme Court struck down a state regulation that required liquor retailers to charge a markup over wholesale of at least 12 percent. Meanwhile, a federal judge overturned a state law allowing authorities to restrict the entry of new competitors into the milk market. The ruling is a victory for Farmland Dairies, a New Jersey dealer prepared to undercut wholesale milk prices in New York City by 40 cents a gallon.
? Supreme Court overruled. Can the government close an adult bookstore because patrons were found engaging in sex on its premises? Although the Supreme Court said the shut-down didn't violate the First Amendment, it sent the case back to the New York courts for a ruling on state constitutional issues. And under the New York constitution's guarantee of free speech, ruled the state court of appeals, the bookstore could not be closed. "The language in some state constitutions is much more specific than the First Amendment," observed a lawyer for the American Booksellers Association.
And on the Seventh Day He Arrested Shop Owners
TORONTO—An 11-year controversy over Canada's Sunday closing laws has moved from back burner to front and center. The Ontario Retail Business Holidays Act, passed in 1975, aimed "to provide for common days of rest on which retailing will be kept to a minimum and leisure time activity encouraged." The law forces retail business establishments to close every Sunday, as well as eight holidays. If a person or firm is convicted of selling goods or admitting customers on any of these days, he can be fined up to $10,000.
Small-business owners are now rustling their sabres in opposition to the act. They are joined by the 64 percent of the public that opinion polls reveal support Sunday shopping. Several challenges were mounted to the act using Canada's 1982 Bill of Rights, but a December 1986 Supreme Court of Canada ruling upheld the closing laws in provinces that have them.
Alongside legal challenges to the law are acts of protest and civil disobedience. In late 1985, Toronto's Beaches Libertarian Association, headed by Shannon Vale, began petitioning in grocery, jewelry, furniture, clothing, and book stores in the east end of Toronto. They gathered 9,000 signatures for repeal of Sunday closing laws, culminating in a press conference held on a Sunday in an illegally open store.
The politicians, of course, did nothing. They waited for the Supreme Court decision, and when it upheld the laws they thought they were off the hook. But they hadn't reckoned on a single individual of immense courage—Paul Magder.
A furrier who owns a small shop in downtown Toronto, Madger has so far received over 250 police summonses for refusing to close his store on Sundays. He calls the law "an abuse of power," adding that he has "been fighting unions and churches for some time, and now has to fight the government as well."
Just before December's court ruling, all the major department stores in Toronto announced that they would remain open Sundays in defiance of the law. They didn't, and when the ruling was handed down they abandoned plans for disobedience. Not Magder, however. Cryptically, he asks, "If politicians can work on Sunday, why can't I?"
There is a certain irony in this matter. Magder's wife is the recipient of a federal government certificate congratulating her and her husband for serving American tourists—most of whom shop on Sunday! A recent TV interview with Magder brought him to the attention of Americans in border towns like Buffalo and Detroit. He needs their patronage—his fines get stiffer as he steadfastly refuses to kowtow to the government.
? Go, Sato, Go. Tokyo gasoline retailer Taiji Sato became our May 1986 Spotlight subject for battling his government's restrictions on oil imports. Now Sato has diversified his opposition and is protesting Japan's ban on imported rice. Sato made news recently when he dispensed free samples of California rice to Tokyo passers-by and pointed out to the media that the import's price was only a fraction of the domestic price of $7.90 a pound.
? Making waves in the air. The Nicaraguan contras have set up a 50,000-watt shortwave radio station powerful enough to be heard throughout the country. Radio Liberación, the contra version of Radio Martí, is directed by the former editor of the banned La Prensa newspaper.