Friday, December 25, 2009

Minimum Wage Casualties

When I reviewed this 20/20 segment about the unintended consequences of the minimum wage for this post -- the final post for today -- I was reminded of a marvelous op-ed piece one of my former students at Hope College published in the Detroit News. Here's Adam Folsom's sad August 31, 2006 tale of being a minimum-wage casualty, in its entirety:

I am one of the first casualties of Michigan's new minimum wage law.

I am a 21-year-old economics major at Hope College who last year worked part-time at the college's Office of Career Services for $6 an hour. On Oct. 1, however, it will be illegal for the school to pay me an hourly wage less than $6.95 an hour. So my boss called me last week and told me that her budget was tight and, because of the wage increase, my job would be cut.

I would have liked to continue working at $6 per hour, and Hope College was willing to pay me that. But the state of Michigan says I do not have the right to work for that amount of money. Hope College and I are not allowed to negotiate a contract that is satisfactory to both of us.

In my study of minimum wages, I have concluded that minimum wage laws always cause unemployment among the very groups they are supposedly trying to protect.

Our nation’s first federal minimum wage law was passed in 1918 and applied only to women. Employers had to pay women in Washington, D.C., at least $71.50 per month for their labor. What happened next is that many women found themselves out of jobs.

One of the casualties of that minimum wage law was Willie Lyons who, like me, was 21 years old. She worked happily as an elevator operator at the Congress Hall Hotel. She had been paid $35 a month plus two meals a day.

When the minimum wage law passed, however, the Congress Hotel could no longer afford to keep her. She wanted to work at the old wage, just as I do, but the new law made that illegal. Instead, the Congress Hotel hired a man at $35 a day plus meals. Like me, Willie Lyons became unemployed by a "compassionate bill" supposedly designed to protect her.

The good news is that Willie Lyons regained her liberty of contract. She testified before the U.S. Supreme Court in Adkins v. Children’s Hospital (1923) and pointed out that she liked her job, her employers liked her, and she resented being ousted from her job by the new minimum wage law.

The Supreme Court agreed and struck down the federal minimum wage law (although a later court let such laws stand). In writing for the majority in the case, Justice George Sutherland wrote, "freedom of contract is the general rule and restraint the exception, and the exercise of legislative authority to abridge it can be justified only by the existence of exceptional circumstances."

Sutherland graduated from the University of Michigan Law School. I wish our Michigan legislators had studied Justice Sutherland before they passed a law that took my job.


  1. I loved this. I also think that all legislators should have a refresher macro. course once they step into office. I don't think they offer a course in common-sense yet, but that would also be beneficial.

  2. Thanks, Erica. Sometimes it takes a first-hand account of the potential damage that can be done despite the best intentions to really ring true.

    As far as taking economics--well, plenty of legislators have, but that doesn't mean they always follow the best economic advice. After all, politicians have lots of things they try to maximize and, like it or not, the vote count is one of those things!