by Jim Davies, 11/9/2010
It's been well said that government is really good at one thing: breaking your legs, then handing you a crutch paid for by someone else. A neat example of this principle appeared last weekend across the ocean in Britain.
The minimum wage there is £5.95, equivalent to about $9.60 and so is somewhat higher than in the US. Like all min-wag laws, it prohibits the hiring of labor for less than that rate, and therefore makes it illegal for a low-skilled youngster to place his foot on the lowest rung of the success ladder. That disgraceful bigotry is acknowledged in the UK by having a lower minimum for people aged 16 to 17; then, it's £3.64, about $5.80 or lower than the single US Federal figure. But still, bigotry remains; it has the effect (intended or not) of keeping the poor, poor - and having put them out of work, the government then pays them to stay there.
The new news is that if someone subsists on such unemployment benefits for what the UK government considers "too long", he will be forced to work for nothing. In plain English, that's slavery; something the Brits abolished peacefully three decades before the USA did.
Wait, though, before waxing indignant about this re-introduction of forced labor, this beginning of an imitation of the Nazi work camps of the 1940s or the Soviet "gulags." When we pause to notice what's going on, it's not that Parliament is about to operate a slave plantation, but that Parliament, like Congress, is preventing a labor market operating freely. It creates unemployment, there as here, then says "Oops" and fixes unemployment by attaching the slave ankles. I suppose the political Left may squeal and holler about the forced labor (the fix) but its protests all these many years about the min-wag (its primary cause) have been very muted; not improbably because it is funded so handsomely by labor unions whose whole raison d'Ítre is to raise wages for their members above their fair market rate.
A free market in labor would suffer no unemployment at all, above the temporary case of people seeking a new job after leaving a previous one - a period normally counted in days or a few weeks. Absent government interference, such a market will clear; that is, rates will reach levels that equally satisfy buyer and seller, both. That, and that alone, is what can be justly called a "fair wage."
You offer a premium price for something, you stimulate a strong supply. On both sides of the Atlantic, governments pay well for unemployment - so, surprise! - they get plenty. There is no rational alternative to a zero government society.