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Dobbs-O-Nomics: Minimum Wage Hikes and Lettuce Patch Fascism

CNN anchor Lou Dobbs‘ major raison d’tre these days is the issue of “illegal” immigration, as well as that of self-appointed champion of America’s shrinking middle class. While I may not support every one of his opinions (and indeed, I have a few of my own on immigration), I will give him credit for placing such issues – and the government’s lame response – squarely in the face of the public. He has grown a very focused and loyal viewer base, and from the sound of their comments, they intend to be a thorn in the sides of their elected representatives this year. That is always a good thing, and again, I’ll give Dobbs the props he deserves for getting voters mobilized.

But there are some places where I feel he glosses over a topic in exchange for a good sound bite. The two cases in point regard his views on a proposed minimum wage increase and the overall economics of illegal immigration.

In a recent op-ed, Dobbs claimed that an increase of the minimum wage to $7.15 an hour is long overdue, will help bring people out of poverty, and will not hurt overall unemployment statistics:

“The myth that raising the minimum wage will lead to job cuts is just that: a myth. In fact, research suggests just the opposite. According to the Fiscal Policy Institute, since 1998, states with higher minimum wages experienced better job growth than states paying only the federal minimum wage. Among small retail businesses in those higher minimum-wage states, job growth was double the rest of the country.”

What does one have to do with the other?? The vast majority of jobs in this country already pay more than the minimum wage. We need to look at the general economic picture of those states before we jump to any conclusions. What kind of jobs are they talking about, and who is doing them? A hot local job market will demand higher wages across the board, regardless of what the mandated minimum wages are.

Here are some other pesky facts that Dobbs failed to mention in his op-ed:

  • According to the Bureau of Labor Statistics 2002 report, of the 72.7 million hourly-wage workers in the US, only 2.2 million, a mere 3%, received minimum wages. While that’s bad for them, it’s not a national crisis.
  • Only 5.3% of minimum-wage workers come from families below the poverty line.
  • The highest proportion of minimum wage workers were in the retail trade (8%), whereas agriculture only claimed 2%.
  • The vast majority of minimum wage workers either have second jobs or live with other family members and are not sole-source providers of income.
  • Minimum wages provide artificial barriers to those seeking their first job experience. Unemployment among 16–19-year-olds was 17.3% in 2005, as opposed to 5.6% overall. When split out by ethnicity, Hispanic and black teens had unemployment rates of 25% and 40% respectively. Analysts have been railing for decades about the social effects of youth unemployment, without even considering as a potential causative factor the ever-increasing minimum wage during all that time.

While the idea of raising minimum wages may provide a feel-good sound bite, it does nothing to address economic issues in specific sectors of our population that are affected most by unemployment. A productive employee won’t be getting minimum wage for long, as it’s in the employer’s best interest to retain productive talent, and they know have to pay more for it or lose it to the competition. And, as many have argued at Mises.org, Cato, and elsewhere, if minimum wages were an economic panacea, why stop at $7.15? Why not $12, $20, or $100?

A Dime-A-Head Increase for $16/hr?

It also appears that the minimum wage issue doesn’t affect illegal immigrants, either.

“Amnesty” proponents often proclaim that the so-called “undocumenteds” do work that American citizens either (a) won’t do, period, or (b) won’t do for the kind of wages and benefits offered by employers, particularly when it comes to harvesting produce.

Again, according to Lou Dobbs, “undocumented” lettuce pickers in California earn an average of $9 an hour. This is significantly higher than the minimum wage, however, which suggests there is actual competition for those jobs even among so-called undocumenteds. Nevertheless, the message is that US citizens fail to show up, and there is an abundance of illegals willing to work. So the farmers do what they have to in order to get the crop in – nudge-nudge-wink-wink – and of course conveniently save a lot of money in wages and benefits while they’re at it.

But what Dobbs recommends as a remedy is something out of Engels. He claimed that if growers raised the price of a head of lettuce by only ten cents, they could afford to pay the harvesters Dobbs’ idea of a “living wage” of $16 per hour. This sea change, combined with tough enforcement of laws banning the hiring of illegals, would somehow attract heretofore recalcitrant US workers. Seeing the opportunities dry up in the face of newly inspired domestic competition, the undocumented Mexicans would drift back over the border of their own accord, and that would be that.

There are several problems with this idea:

  • In the first place, I can see them trying to jack up the price a dime a head and even forcing employers to pay more – but they’ll never combine that with strict enforcement of labor laws, which would leave the US more attractive to undocumented workers than ever. Think it’s bad now? Try doubling the wages and watch the Mexican flood come in.
  • According to Safeway, the price this week for a head of iceberg lettuce is $1.49. So raising it a dime makes it 1.59. If you eat two heads a week, that’s a $10.40/annum increase. Now multiply that times all the other fruits and veggies you and your family would like to consume in a year – it adds up quickly. If you are at the low end of the economic scale, the pinch is even tighter, and you may end up being unable to purchase all the nourishing food you require, settling for either reduced quality, or alternatives that aren’t as nutritious, which could impact your long term health.
  • The last time I checked, there wasn’t a veggie-grower cartel in this country, involved in uniform price-fixing. Perhaps if there were, Dobbs’ plan could be carried out via some sort of egregious federal legislation – and you could count on the Congress to do it, if it would placate enough voters. There are still – albeit subsidized – independent growers of produce in this country, who remain at least nominally in competition. Even if some growers were convinced to raise their prices and pay their workers more, they would be under increased economic pressure and risk losing significant market share, as others would not see the need for change. Ergo, unless everyone agreed, or were forced to by law, it simply will not happen.
  • If such a plan was legislated by Congress, we would all pay a high price for it. The agricultural lobby is powerful, their clients having received subsidies for seven decades or longer. You can bet such a bill wouldn’t be passed unless those subsidies were increased, as well. Of course, as it costs the government thirty cents or so to deliver every dime’s worth of “benefit”, the increased costs to taxpayers for that “living wage” head of lettuce could really add up.
  • But wait, the nightmare isn’t over. Now we have lettuce growers being forced by government fiat (and increased subsidies) to pay $16/hr and “hire American”. Where will they find the workers they need if they can’t hire illegals? I can visualize this flood of unemployed youth from South Central L.A. spreading out into the central California countryside and trying to harvest vegetables for the first time in their lives. A sudden, dramatic increase in wages might indeed attract more homegrown workers, but are they the workers the farmers need? Will they actually bring some coordination and a good work ethic to the job? Presumably not. So the farmers, despite their subsidies, now have to contend with a bunch of overpriced, inexperienced, attitude-challenged workers to bring in their crops. Expect reduced productivity and a lot more waste – and I would also expect the cost of a head of lettuce to go up a lot higher than a dime. Say what you will about “living wages”, but those new-hire’s skills would not be worth $16/hr. They’re probably not worth $9. It will be an economic disaster for all involved, and the growers (and their customers) will be pining for the “illegal” Mexicans to return and restore stability.

One could not pass legislation enforcing this without violating the rights of farmers, farm workers, taxpayers, and Americans of more modest means who can’t afford higher grocery bills.

Conclusion

The minimum wage pseudo-debate is a typical election-year red herring, and Lou Dobbs should have known better than to fall for it. Our present immigration situation is the price Americans are willing to accept, whether they’ll admit it or not, to have low-cost, plentiful and nourishing food on their tables, not to mention a lot of other services they don’t want to pay a king’s ransom to obtain. Dobbs’ economic notions in both these debates are simply unsupported by political and economic reality, and would engender a social and economic nightmare to implement, but with no discernible long-term benefit.

June 23, 2006