[Congressional Record Volume 141, Number 29 (Tuesday, February 14, 1995)]
[House]
[Page H1693]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


             HIGHER MINIMUM WAGE EQUALS HIGHER UNEMPLOYMENT

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 4, 1995, the gentleman from New Jersey [Mr. Saxton] is 
recognized during morning business for 5 minutes.
  Mr. SAXTON. Mr. Speaker, during President Clinton's State of the 
Union Address, he purposed an increase in the minimum wage. The 
administration has asked for an increase of 90 cents over 2 years. This 
will raise the current wage from $4.25 and hour to $5.15 an hour.
  The President says that every person should receive a living wage for 
a good days work. I say three cheers to that, I cannot agree more with 
the President.
  I believe that every American should be paid a fair wage.
  However, the President and I disagree on how exactly we get there. 
President Clinton believes that the Government should mandate a wage.
  On the other hand, I believe that the businesses and workers should 
negotiate their own wages and allow the free market to work.
  Mr. Speaker, I think I can explain why the President and his 
administration have taken this flawed path.
  Their heart is in the right place, but they are stuck in the same rut 
they have been in for years. Jeff Joseph from the U.S. Chamber of 
Commerce explained it perfectly last week. Let me quote from him, when 
he talked about why the minimum wage mandate is bad:

       Primarily because it's a 60-year-old idea that doesn't fit 
     in the global world we live in today. We shouldn't be talking 
     about minimum wages and minimum skills. We should be figuring 
     out how our workers can have world-class skills so they can 
     earn world-class livings. You know, with the welfare debate 
     that's going on today, people can get in the welfare system 
     and earn about--the equivalent of $16,000 a year.

  So the debate should not be how do we get people from $8,000 to 
$9,000. The issue is how do we get people with the skills so they can 
go out and get off welfare and go out and earn $20,000 and $30,000 a 
year? ``And this 60-year-old idea that says there is an artificial 
minimum which gets put out there which only ratchets up the rest of the 
system with inflation and makes our valuable goods and services cost 
more in a world marketplace, it becomes a self defeating idea that 
hurts us economically.''
  The administration has a superficial and incomplete understanding of 
the way markets work.
  This is not surprising from an administration populated by so many 
who have never held real private sector jobs, owned a business, or met 
a payroll.
  Last year during the national health care debate, Americans were 
stunned to hear their President lecture the owner of Godfather's Pizza 
not to worry about the Clinton health insurance mandate on employers 
because Godfathers could just increase the price of its pizzas to 
offset the cost of the mandate.
  In other words, in the world of ``Clinton-Commerce,'' mom and pop 
businesses can make as much money as they need by just raising the 
prices of their products high enough. Never mind income taxes, never 
mind unemployment taxes, never mind unfunded mandates; just raise 
prices.
  Obviously the President does not have a firm grasp on the law of 
supply and demand.
  This same lack of understanding is exhibited with regard to 
Government taxation. In the President's mind, Uncle Sam can raise as 
much money as it desires just by increasing tax rates high enough.
  A perfect example was his enormous retroactive tax increase that hit 
the Americans taxpayers with 2 years ago. Even with this retroactive 
tax increase, there is already solid evidence that Uncle Sam will 
collect less than half of what was expected.
  Next year, I am sure, that after everyone has had a chance to fully 
adjust their behavior, virtually all of the expected revenue increase 
will evaporate.
  Now he wants to apply the same kind of ``quack-economics'' to the 
minimum wage.
  Mr. Speaker, let me take a few minutes to explain why I believe the 
free market is a better judge of what a fair wage should be.
  During the President's State of the Union address, he said the 
following: ``I believe the weight of the evidence is that a modest 
increase [in minimum wage] does not cost jobs and may even lure people 
back into the job market.''
  Well, he has it half right. If the Government artificially forces 
wages above the market wage, it will certainly entice more people into 
the job market. This is called the supply-side effect.
  But, what he seems to ignore is the demand-side effect. At these 
higher wages, who is going to hire all of these new job seekers? In 
fact, not only will employers have to pay more to hire new workers, 
they will have to pay their current workers even more if they are 
making under $5.15 an hour.
  As all serious economists recognize, the net effect of increasing the 
minimum wage will be to increase the supply of job seekers and decrease 
the number of job offers. In short, raising the minimum wage will 
actually kill jobs and increase the unemployment rate.
  Even liberal Democrats quickly learn the true effects of the Federal 
mandates they impose when they have to meet a payroll. For example, 
former Democrat Presidential candidate George McGovern learned this 
lesson first hand when he became an inn-keeper and restaurateur. A few 
years ago, in a Wall Street Journal, Senator McGovern lamented on how 
he too had to struggle with regulations, mandates and taxes imposed by 
the Federal Government on his small business.
  Mr. Speaker, compassionate politicians and well-meaning Government 
programs like the minimum wage cannot repeal the law of supply and 
demand any more effectively than they can repeal the law of gravity.
  In closing, I have here in my hand, more than 20 years of research, 
more than 100 studies completed by some of the most eminent economist 
from all over this country, that exhibit the destructive effects of the 
minimum wage. These studies show that an increase in the minimum wage 
will kill jobs and destroy opportunities for the same people 
``compassionate'' liberals say they want to help.
  Mr. Speaker, later today I will place this list of studies in the 
Congressional Record so all Americans can see for themselves how a 
minimum wage increase hurts the very people it is suppose to help.


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