Minimum Wage Madness

February 18, 2015

During the 1st third of the 20th century, the Minimum Wage was held to be Unconstitutional, since it violated the Due Process guarantee under the 14th Amendment. In 1937, during the Roosevelt Administration, the Supreme Court overturned their earlier, long-standing ruling, and the Minimum Wage was declared to be Constitutional.

An important consideration is that, in February 1937, FDR had legislation introduced which would “pack” the Supreme Court – potentially increasing the voting number to 15 Justices. FDR supported the Minimum Wage, and his attacks on the then current makeup of the high court likely influenced members’ votes.

With the passing in 1938 of the Fair Labor Standards Act, a federal Minimum Wage was set at $0.25 per hour, which was proclaimed as a decent living wage. Labor unions and other liberals supported it, and business groups generally opposed it.

According to the “official” government reported measure of cost of living increases, the CPI, prices are about 16 times as high today as they were in 1938. The original $0.25 in 1938 would be equivalent to about $4.20 today.

Of course, the CPI is a laughably manipulated number, which under-reports the actual effects of Inflation. Recalculating the CPI using the methodology that the Bureau of Labor Statistics used to use a generation and a half ago, as ‘s John Williams does, the CPI would stand about 4½ times as high as today’s reported number, making the 1938 Minimum Wage value of $0.25 more equivalent to $19.00 an hour in today’s Dollars.

The current federal Minimum Wage is $7.25 an hour. Compared to the official CPI, that $7.25 is good money compared to the inflation adjusted $4.20. Of course, using the more realistic $19.00 calculation, $7.25 is lousy.

If you were to suggest to liberals that the CPI calculation today is bogus, they likely would shout you down as being a conspiracy theorist or anti-American or something similar. However, once they say that $7.25 is too little to live on, they are admitting that the BLS is lying in their calculation of the CPI.

Then again, liberals also will swear up and down that the Minimum Wage is good for the country, and they will deny that very few jobs are lost – or never created – by raising the Minimum Wage. But, to do this, they have to ignore completely the official record.

The unemployment rate officially stands at 5.7% of all Americans. Let’s look at the unemployment rate for those Americans most affected by the Minimum Wage.

  • All Youth (16-24 Years Old) 14.3%
  • Black Youth (16- 24 Years) 24.8%

These are the Americans just starting out, with no or low skill levels, and with little on their resumes to qualify them for their first jobs. Even at today’s $7.25 Minimum Wage, their unemployment numbers are at Great Recession/Great Depression levels! These Americans want – and need – that first job, to build their skills and to build their resumes so that they can get on the ladder toward higher pay rates.

Liberals, like my home state US Senator, Elizabeth Warren, want to raise the Minimum Wage to $15.00! Their ideology has completely separated them from reality, and that reality is that, when the Minimum Wage goes up, even more of these vulnerable Americans will be made destitute.

Some of them will be “Mad As Hell” – for good reason – and ready to “Not Gonna Take It Anymore!” So, the liberals will move to put more people on The Dole. Food Stamps, already at a national disgrace level of 50 Million Americans, will be boosted further. Welfare, Medicaid, and many other “Entitlement” programs will be expanded. That’s the way liberals buy votes – by making Americans dependent on handouts.

So, what should our elected officials – and the appointed herd of bureaucrats – do? They should recognize that Economics 101 is true. If you raise the price (in this case of hiring) then the demand will go down. We can lower unemployment by doing just the opposite – let’s eliminate the Minimum Wage, both at the National and State levels.

And, while we’re at it, we can recognize that government regulation, regardless of intentions, has a cost. Part of that cost is that it increases unemployment. Let’s adopt the methodology of many successful business – Zero Base Budgeting. Let’s get rid of all regulation, and then one by one, consider re-enacting regulations which pass the cost benefit analysis.

Action Item:

  • Prevent the liberals from raising the Minimum Wage
  • Eliminate the existing federal and state Minimum Wage restrictions
  • Deregulate, deregulate, deregulate, so that we stop destroying the private, productive sector of our Economy, and the jobs it creates

Robert (Bob)  Shapiro is self-taught in Austrian Economics and has consulted briefly for the governments of Mexico, Greece, Portugal and Spain. He has traded Gold & Silver and their stocks since 1970. Bob Shapiro’s blog is

US silver mining began on a large scale with the discovery of the Comstock Lode in Nevada in 1858.