The Politics of Unemployment; J. Chamberlain

Walter Williams has thoroughly exposed the effects of the minimum wage on young people, particularly black teenagers. But this, ac cording to Sennholz, is just the tip of the ice berg. Recent research, he says, confirms that "only about one-third of low-wage earners are teenagers; almost one-half are twenty-five to sixty-four years of age; two-thirds of the low wage population are believed to be female; and some ten per cent are individuals sixty-five years old or older." Taken together, low-wage earners comprise some ten per cent of the American labor force. Any further rise in the minimum wage would make it uneconomic for an employer to hire people who can't earn their keep. Sennholz is concerned that the unemploy ment rate of black youth in recent years has ranged between forty and fifty per cent, which is double the rate for white teenagers. But he is equally concerned for unskilled women, and especially unskilled workers in hotels, restau rants, hospitals, laundries, and automotive ser vice stations. These workers must live contin uously with the danger of being fired when the minimum wage is raised.

Toward the end of his book Sennholz zeroes in on Puerto Rico. Puerto Ricans, being U.S. citizens, can quit their tropical island if better opportunities beckon on the mainland. Some 1.5 million have gone to the continental U.S., leaving 3.5 million at home, where they wel come remittances from their departed kin. Sennholz says the fact that the unemploy ment rate in Puerto Rico often greatly exceeds the U.S. national average is puzzling. The fed eral government levies no taxes on Puerto Rico save for Social Security, workers' compensa tion, and other labor benefits. Puerto Rican res idents pay no taxes on income earned from local sources. And the U.S. government em ploys thousands of Puerto Ricans at the Naval Station at Roosevelt Roads and other Federal facilities. But none of this keeps the island from being what Sennholz calls "an over crowded poorhouse" where "many people 482 THE FREEMAN. DECEMBER 1987 subsist on minimum incomes" supported by alms and transfer payments.

Having described the Puerto Rican situation as puzzling, Sennholz proceeds to take the puz zlement out of it. Puerto Rico, he says, "is probably the world's most vivid example of the asininity and absurdity of labor legislation. It demonstrates so cogently and convincingly that minimum wage laws, and other labor legisla tion that raise the cost of labor, do not improve economic conditions, but instead make them immeasurably worse. " Puerto Rico is poor in natural resources. But in a free economy, unconstrained by labor leg islation' economic production that is laborin tensive would gravitate to the island. With his attention to detail Sennholz mentions table and household linens, embroidered and drawn-work by hand, clothing embellished with fancy stitching and hand-rolled edges, applique work on towels, bridge sets, scarves, doilies, and pillow cases. These could be produced on the island and sold on the mainland. "The Amer ican people, as consumers," says Sennholz, "would be greatly enriched by the productive efforts of some two million adult Puerto Ricans. " As things stand now, however, American consumers of scarves, doilies, and whatnot buy from Hong Kong and South Korea.

On the V. S. mainland the minimum wage may amount to one-half the average industrial wage rate and may affect some ten per cent of the working population. In Puerto Rico, the same minimum approaches the full industrial wage and hits a vast majority of the working people. "The aggregate effect of the V.S. min imum wage on Puerto Rico," says Sennholz, "is one of incredible devastation and humilia tion. Some 25 per cent of the working popula tion are presently unemployed, 10 to 15 per cent are under-employed, some 10 per cent are subsisting in self-employment or primitive farming, 18 per cent no longer participate in the labor market, and 5 per cent subsist on public assistance. ' , Sennholz calls this·" gruesome. " On the mainland the figure for incomes lost through interventionism comes to $196 billion as esti mated by Morgan O. Reynolds in his Making America Poorer: The Cost of Labor Law (Cato Institute, 224 Second Street S.E., Washington, DC 20003, 218 pp., $21.95 cloth, $9.95 paper). This is gruesome, too. Luckily, how ever, human beings find ways of getting around the gruesome statistics.

Sennholz does not advocate breaking the laws. He would prefer to see Congress repeal them. But it is his duty as a commentator to take human nature as he finds it. Many Amer icans, he says, enter the labor market via the underground. They learn as kids that pocket money earned through odd jobs doesn't get into their parents' income tax reports. The under ground economy tempts young people who are budding entrepreneurs to take off-the-book jobs which may be irregular but profitable. These young entrepreneurs, says Sennholz, "are everywhere, in towns and in the country, and are numbering hundreds of thousands. ' , So the situation, as described by Sennholz, is not as "gruesome" as one might suppose. Sooner or later our legislators will learn that stupid laws cannot be enforced. The tougher the labor legislation, the more the underground will tend to grow. D The Politics of Unemployment by Hans F. Sennholz 356 pages, $19.95 hardcover Order from: The Foundation for Economic Education, Inc.

Irvington-on-Hudson,New York 10533 483 INDEX THE FREEMAN VOLUME 37 JANUARY-DECEMBER 1987 DAVID: from beggar to entrepreneur (BAJohnson) 11:404-408 DAVIDSON, Nicholas. The ancient suicide of the West. 12:452-462 DEFENDING the rich (WHPeterson) 6:229-230 DEFICIT financing. See Government spending DEMOCRACY and majoritarianism Rousseau's "Social Contract": a critical response (Taylor) 1:28-29 DEN UYL, Douglas J. & Machan, Tibor R. Should cigarette advertising be banned? 12:447-451 DENNIS, William C. The pursuit of happiness. 7:252-258 Wilderness cathedrals and the public good. 5:168-174 DETROIT News. The minimum wage. 9:323 DIAGNOSIS related groups (DRGs) & medical care One complaint per customer, please (Orient) 8:284-285 D CHARITY, voluntary vs government aid Irish potato famine (TRJohnson) 1:30-34 True charity (McDonald) 6:218-219 CHINA'S "free enterprise" experiment (Senese) 7:265-269 CIGARETTE advertising, should it be banned? (Den Uyl & Machan) 12:447-451 CITYflocal government Face of a bureaucrat (Hochderffer) 6:204-205 Impracticality of zoning (Gillis) 10:372-376 Socialized stadiums (Baade & Bast) 9:327-328 CIVIL rights Reincarnation of Jim Crow (Bolick) 12:463-467 COLLECTIVES, communities, and the individual (Williams) 3:91-95 COLLECTIVISM Ancient suicide of the west (Davidson) 12:452-462 More collectivist cliches (Smith) 10:370-371 COMMON law "Insider trading": the moral issue (Foley) 11:409-414 COMMUNISM. See Collectivism; Marxism; Socialism COMPUTERS Goodbye, Mr. Chips: U.S. creates a high-tech OPEC (Becker) 2:44-45 Lessons from computers and helium (Shaw) 9:357-358 CONSTITUTIONAL restraints on power (Opitz) 9:336-339 CORPORATIONS and mergers Rhetoric of antitrust (DiLorenzo) 3:110-114 CORRUPTION Scandals (Fulda) 12:444-446 COWEN, Tyler Which liberalism? 8:298-300 CROCKER, C. Brandon Planning threatens freedom. 6:210-211 CANADA Banking before the Federal Reserve: the U.S. and Canada compared. (Wells) 6:231-235 Controls raise prices (Walker) 6:203 Social theorists see groups, not people (McDonald) 2:55-56 CAPITALISM Freedom in the dock (Baetjer) 2:70-71 Human nature and the free society (Opitz) 10:385-391 Private property system and the decent society (Machan) 5:179-181 CAPITALISM at a crossroads: 1875-1900 (Phillips) 9:348-351 CARTELS, voluntary and coercive: the case of oil (Osterfeld) 11:415-425 CHAMBERLAIN, John. See Book reviews c In page references, the number preceding the colon designates the month, those following refer to pages. All articles have at least three entries-author, subject, and title-except in a few cases when title clearly indicates subject matter. The short "Perspective" items are indexed under that category only. Books reviewed are listed on the last page.