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            JOBS FOR EVERYONE -- WITHOUT MINIMUM WAGE LAWS
                              by Mark Tier

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Recently, on a ferry crossing Hong Kong's harbor, I struck up a
conversation with a black musician from Seattle, who told me how much he
preferred Hong Kong to the States. What impressed him most about Hong
Kong was that ``everybody has a job!'' Each time he repeated this
comment his eyes would almost caress the Hong Kong skyline. He spoke as
if a place where everyone has a job was alien to this experience, as if
he thought of Hong Kong as a fantasy land, a place that simply could not
exist on Earth. Back h ome, he told me, unemployment, especially for
blacks, is high.

He was also puzzled at the widespread influence of the United States
here, and the evident esteem in which his country was held when his
personal experiences were quite at variance to this image. Something he
definitely did not miss, he said, was his treatment by the Seattle
police. Back home, most blacks were poor and therefore, treated badly by
the police.  Those who appeared to have money weren't much better off.
The police assumed they were drug dealers, and treated them badly too.

This man's sense of despair when discussing his life in Seattle led me
to reflect that one reason people turn to drugs is the hopelessness
engendered by the impossibility of finding a job. And that happens
whenever minimum wage laws bar the unskilled from ever finding a job.

A minimum-wage law is simply a form of price control: it prevents anyone
from selling his labor below a certain price. Whenever a minimum price
is established, some portion of the good or service involved will not
find a buyer. Just as the European Community's establishment of a
minimum price for butter has resulted in a huge surplus (the ''mountain
of butter'' that the E.C. buys from its dairy farmers), the
establishment of a minimum wage inevitably creates a surplus of labor,
called ``unemployment.''

Politicians and some economists claim that a minimum wage raises wages
for all workers at the lower end of the pay scale, but all the evidence
is to the contrary. Every country with minimum-wage laws also has high
and persistent levels of unemployment. Only in countries with no
minimum-wage laws is there little or no unemployment. The reason is
simple: an employer will only offer someone a job when the value of his
work exceeds the amount of his salary. When a minimum wage is set at,
say, $4 an hour, only t hose people whose value to a company is greater
than $4 an hour will find employment.


THE SECURITY OF THE FREE MARKET
But without minimum wage laws wouldn't the workers be ``exploited''?
Wouldn't they be at the employers' mercy? Not necessarily. In fact, when
there are no minimum-wage laws, employees actually have far greater job
security -- a security provided by the market. This is demonstrated by
the job market in Hong Kong, where there are no minimum wage laws and
where ``everybody has a job.''

Many years ago I employed a girl named May as a messenger and ``gofer.''
This was her first job: she was 16 years old, she had finished just four
years of high school, her English was poor, she had no job skills of any
kind, and she could not type, keep books, or anything else that might be
demanded in a business. Indeed, she only had one qualification: she was
eager to work.

She was hired to deliver messages, open the mail, make coffee, lick
stamps, put things in envelopes, go to the post office, and do other
menial tasks of this kind. I paid her the princely amount of HK$800 per
month, (about US$170 at the time -- or 95 cents per hour).


THE BEST KIND OF TRAINING
By the time she'd been working with me for 12 months, her salary had
doubled to HK$1,600 a month. Why? Because in that 12 months she'd
learned many job-specific skills that made her far more valuable to the
company than when she was fresh from high school. She was now keeping
some records, typing labels, managing the petty cash, and other things
she was unable to do before. Alone, none of these specific skills are of
great significance. Taken together, her 12 months' ``on-the-job
training'' had given her an education that she could receive nowhere
else.

She also learned other things in that year: how to look after herself,
how to manage her own time and money. She was also able to reward
herself with things that only money can buy. In a word, she was learning
independence -- she was becoming self-sufficient in the real world. She
learned a lesson the reverse of what she would have received on welfare,
which reinforces the dependence experienced as a child and teenager.


REINFORCING DEPENDENCE
By denying unskilled teenagers the opportunity to work at their market
value, however low, minimum- wage laws interrupt the essential
developmental process of gradually gaining independence from one's
parents -- and inevitably some people remain ``stuck'' in the
child/teenager state for the rest of their lives, with devastating
social consequences.

If there had been a minimum wage set at say, HK$1,600 a month, there
would have been no job for May in my company. May might never have
received that one year of on-the-job experience she needed to learn the
skills with which she could command that minimum wage of $1,600 per
month. Instead, twelve months out of school, May could have still been
unemployed and, worse, despairing of ever finding employment.

Perhaps she dropped out of school because her parents could not afford
to keep her any longer, as is often the case. For these people, no other
form of training is affordable. A minimum-wage law would have not only
denied her a job at her market value, but denied her the opportunity to
rise above it as well. Instead of being rewarded for her eagerness to
work and so increasing her market value by learning new skills, she
could have been consigned like so many poor Americans to a life of
never-ending, soul-d estroying unemployment, the psychological
experience of being told by society that you have no value, that you are
worthless.

One government intervention entails another. In countries with
minimum-wage laws, governments often try to alleviate the resultant
unemployment with all manner of training schemes. Such schemes have
serious drawbacks, aside from increasing the tax burden on those in
employment. Most importantly, they can never replace the experience of
simply having a job, however menial that job may be. Part of the
experience of your first few jobs is discovering what's possible, and
what kind of things you'd like to do, t hings you can only find out in
the real world, never in a classroom.

In Hong Kong most employees take night classes of one kind or another;
and from these courses they learn things that will increase their market
value in their current employment, or prepare them for their next. When
you are paying for your own education, your motivation is far higher,
and you choose something relevant to what you need or want. Being
employed enhances that ability.

An argument often used in support of minimum- wage legislation is that
wages under the selected level are ``too low,'' ``below the poverty
line,'' or in some other sense thought to be dehumanizing.

But the overwhelming majority of people who would be employed below any
minimum wage level are people like May, who quickly graduated from her
low pay. The turnover of workers at that wage level (in a free labor
market) is very high. There is a very big difference between someone who
is working for the first time -- who is probably living with his or her
parents, and whose income, however low, is almost entirely available for
discretionary spending -- and the ``average'' worker who has to support
2.2 (or is it 2.3?) children. A wage that would certainly spell poverty
to this ``average'' worker spells luxury to someone in May's position.

You might ask, why did I increase May's salary so that within 12 months
it had doubled? I can assure you it was certainly not out of the
goodness of my heart, though I do consider myself to be a good employer.
The reason was very simple: having discovered her increased worth, May
was now in a position to seek another job at a higher salary if I did
not raise hers.

This brings me to an amazing feature of the Hong Kong labor market, and
of any labor market where there are no restrictions on the employment of
labor: employees know their own worth -- their market value -- and if
you don't pay them what they are worth, they will find someone who will.

There's Security In Knowing Your Own Worth

A free labor market provides workers with far more job security than any
government-devised scheme. In Hong Kong, where ``everybody has a job,''
every worker knows he can find an alternative job within a few weeks.
And how do workers know what they are worth? They read the classified
ads in the newspapers.

It used to worry me that the classified section of the newspaper
appeared to be the most popular reading material in my office  until I
realized that my staff was not planning to resign en masse; they were
merely checking their market value and keeping themselves aware of the
alternatives available. In a free labor market, each employee is
responsible for his or her own welfare. The alternative to union- or
government- ``guaranteed'' job security is knowledge of one's value in
the marketplace, and that kno wledge is freely and continually available
from newspaper classifieds, employment agencies, and discussions with
friends and associates, where the state of the job market is a continual
topic of interest. And conversely, employers must also read the
classifieds to be sure the wages they are paying are in line with the
market -- otherwise they will lose their employees. The employer who
fails to fill a vacant position has no alternative but to increase his
offer to win over the potential employee.

For some people, other considerations are as important as wages, or even
more important, such as congenial working conditions, special benefits,
or security. A free labor market presents a smorgasbord of
possibilities, where government, by keeping out of the way, enables each
consenting adult to creatively and imaginatively achieve his or her own
potential.

It is no coincidence that countries with free labor markets have far
higher rates of economic growth than the U.S. or Europe. Slower economic
growth is the inevitable price of government intervention. Minimum-wage
laws are a prime example of such destructive interference.

Mark Tier is a founder of the original libertarian movement in Australia
and is currently a Hong Kong-based financial analyst.

Copyright (c) 1991 by Praxis Ltd. Condensed from an article by Mark Tier
first published in the World Money Analyst (February 1991 issue) 45
Lyndhurst Terrace, #3A, Central, Hong Kong.


                      RECOMMENDED READING

The Politics of Unemployment by Hans Sennholz...........  $19.95
Markets and Minorities by Thomas Sowell.................  $12.95
Economics In One Lesson by Henry Hazlitt................   $9.95
The Regulated Consumer by Mary B. Peterson..............   $2.95
For these and other books and tapes write: Freedom's Forum Books, 1800 Market Street, San Francisco, California 94102. Add $2.50 P & H for 1st book and $1.00 for each additional item.



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