Minimum Wages

The only relevant minimum is the total minimum, that is, all the costs an employer must bear to secure the ser vices of a worker. If the costs exceed his or her productive contribution, they inflict losses. It does not matter whether the losses result from a higher minimum mandate or a boost in Social Security taxes or workmen's compensation. A worker who inflicts losses on his employer is likely to be disemployed. In the United States, minimum wage legislation does grievous harm to mil lions of unskilled laborers, especially among the racial and ethnic minorities - blacks, Puerto Ricans, Chicanos, Mexicans, and American Indians. About one-third of these workers are teenagers, almost one-half are twenty-five to sixty-five years old, and some 17 percent are seniors, sixty-five years old or older. Two-thirds of this unskilled labor are female. Although they comprise only ten percent of American labor, the harm done to them and society is greater by far than their numbers seem to indicate.

It is an unfortunate fact that many minority youths possess lower levels of education, training, and experience than white youths and, therefore, are less competitive in the labor market. Without the strictures of labor law, they would not be able to earn as high a wage as their more productive co-workers but would find ready employment at lower rates. If the mini mum wage is set above their productive ability, they are likely to be dismissed or not hired at all. This explains why the unemployment rate of black youth in recent years has ranged between 40 per cent and 50 percent, which is double the rate of white teenagers. If we add those individuals who in frustration and des peration have given up their search for employment, the unemployment rate among black youth, in our estimate, exceeds 60 percent. No matter how tragic the economic effects may be on certain groups of vic tims/ we must not overlook the psycho logical harm done and the moral wrong inflicted on them. Condemned to idle ness and uselessness in a highly produc tive society, and barred from making their own contributions, many, in des peration/ turn to vice and crime. The inordinate national crime rate attests to much despair in the centers of unem ployment and public assistance.

Moreover, let us not forget the prod uc tive members of American society who not only must forgo the valuable services which the unemployed could render, but also are forced to support them. In return, they are compelled to live in con stant fear of crimes against their persons and property. Every well-known economist has voiced his concern about minimum wage legislation, and yet, it survives sober rea soning and cogent arguments, living on in the sphere of politics. Few politicians actually believe that minimum wage leg islation is truly in the workers' interest, that it increases their purchasing power and reduces poverty; and yet, many sup port it for political reasons. It is clever politics, yet so cruel and insincere, to promise higher wages by law, but, unable to deliver on the promise, instead raise the height of the hurdle to employ ment. Itis politics at its worst. The politicians are urged on by labor unions and their members who benefit significantly from legal boosts in mini mum wages. Boosts obviously hurt industries using unskilled labor in com petition with union labor. They may force marginal enterprises to curtail pro duction or even shut down, which would benefit union shops. To benefit their members at the expense of non members is a primary function of all unions. They call this "self-interest"; it is injury and malice to their victims.

Most of the support for minimum wage legislation comes from people who are fully aware of its unemployment effects. Many Americans in the industri al states of the North and Northeast use the law knowingly as a barrier to the industrial migration from the states to the South. Since World War 11/ many companies have left the North to take advantage of lower labor costs and other advantages in the South. To impede this industrial migration and to stifle Southern competition, the Northern politicians usually clamor for higher minimum wages. Other advocates who are aware of the harm done to unskilled workers are con vinced that the beneficial effects/as they see them, tend to outweigh the evil effects. Their blind faith in political action leads them to believe that evil consequences can be alleviated by new governmental efforts, such as neighbor hood youth corps, job corps, public works programs, retraining programs, more aid to education, etc. To them, minimum wage legislation is a conve nient path to ever bigger government and bureaucratic control.

If minimum wage legislation could actually lift wage rates and standards of living, the poverty of the world could be eradicated forthwith. The governments of Bangladesh, Sri Lanka, and Tanzania would merely have to walk in the foot steps of the U.S. government and lift wage rates by mandate. Unfortunately, what is foolish and absurd in Dhaka, Colombo, and Dar-es-Salaam is the same in Washington, D.C. -~ Hans F. Sennholz Newfrom FEE! LEVIATHAN AT WAR Edited by Edmund A. Opitz "Peace on earth and good will to men" is one of humanity's older and more enduring aspirations. It accords with the sentiments of the great religious tra ditions, and it is in harmony with a substantial bundle of the drives which move the individual person. History, however, is not composed of aspirations alone, else it would be quite different from what it has, in fact, been. History, as it has actually been lived and recorded, provides ample justification for the pessimist who concludes that peace is only that short interval between battles when nations are recovering from the last war and preparing for the next.

Things might not be this bad, in reality, but they are bad enough to draw forth our best and most earnest efforts to understand the causes of war, in the hope of finding, if not a cure, then at least an alleviation for militaristic ills. T he twenty-two chapters in this book examine the causes and economics of war, the conscription idea, war and individualism in American histor~ . the importance of free trade, and the prospects for peace. Contributors include among others, Ayn Rand, Ludwig von Mises, Hans F. Sennholz, Leonard E. Read, Wesley Allen Riddle, and Edmund A. Opitz. LeviathanAt War also includes classic essays by Daniel Webster and H. B. Liddell Hart-and Mark Twain's powerful/lWar Prayer." 186 pages + index $14.95 paperback Spring Round Tables R eserve these days for our spring 1995 series of Round Table events! We've set up an exciting lineup of speakers for your enlightenment that includes Joe Sobran, George Reisman and Dr. Mark Skousen. Don't miss these stimulating evenings, which begin at 5:00 with a reception and dinner, and then go on to a lively discussion session. Charge: $40 per person per event; certain discounts are available.

April 1 with Joe Sobran May 6 with George Reisman June 3 with Mark Skousen Coming Seminars at FEE Undergraduate seminar April 6-8 Austrian Seminar (by invitation) July 9-14 First Summer Seminar July 23-28 Second Summer Seminar August 13-18 Call or write: Dr. Barbara Dodsworth, 30 South Broadway, Irvington-on-Hudson, NY 10533; (914) 591-7230.

1995 Summer Seminars At FEE P or the 33rd consecutive summer, FEE will conduct its noted seminars in the freedom philosophy and the eco nomics of a free society. Here, in the com pany of like-minded individuals, with experienced discussion leaders, and in a setting ideal for the calm exchange of ideas, is an opportunity for those wh.o believe that the proper approach to economic problems is through the study of individual human action. These seminars continue to attract individuals from all walks of life who seek a better under standing of the principles of a free society and are interested in exploring ways of presenting the case more convincingly. Each seminar will consist of 40 hours of classroom lectures and discussions in economics and government. In addition to the regu lar FEE staff, there will be a number of distinguished visiting lec turers. The FEE charge for a seminar-tuition, supplies, room and board-is $400. A limited number of fellowships are available. We especially encourage the application of high school and college teachers or administrators, but all are invited.

Individuals, companies, and foundations interested in furthering this educational enterprise are invited to sponsor students and assist with the financing of the fellowship program. The formal announcement giving details of the seminars will be sent immediately on request. First session: July 23-28, 1995 Second session: August 13-18, 1995 Write: Seminars, The Foundation for Economic Education, 30 South Broadway, Irvington-on-Hudson, NY 10533; or Fax: (914) 591-8910.

tion. In England, clubs own the right to fish along some rivers and they protect their "beats" from pollution. In 1948, several fishing club members joined to form the Anglers' Cooperative Association (ACA). The association won a major case soon thereafter, known as the Pride of Derby case. Upstream polluters were required to stop polluting, and pay damages and legal costs, since their pollution threatened the fishery. The ACA has helped fishing clubs pursue injunctions against upstream pollu tion ever since. To date, the ACA has been involved in over 1,500cases, including sev eral against municipal water authorities. 8 This ability of private parties to restrain upstream polluters is rarely available in the United States. Historically, some com munities and individuals did obtain tradi tional common law remedies for water pol lution. However, many such actions have since been preempted by the federal Clean Water Act.9 Under the Clean Water Act, politically preferred polluters are treated more favorably than others. Municipal pol luters face cleanup goals that are often less stringent than those of industrial polluters, and their cleanup schedules are far more lenient. Yet, to the rivers and fish, pollution is pollution.

This problem of unequal treatment is compounded by the prevalence of citizen suit provisions in the Clean Water Act and other environmental laws. Although it may sound good to allow any citizen or citizen group to force the government to enforce pollution laws (and to allow the citizen or group to recoup legal costs), what it means is that special interest groups can effectively determine the enforcement priorities of gov ernment agencies. Many of the environmen tal organizations that engage in citizen suits have an anti-business bias. As a result, private industry is subject to more legal actionsthan either agriculturalactivitiesor governmental facilities, even though both of the latter are greater sources of water pollution. Indeed, between 1984 and 1988, environmentalist citizen suits against pri vate industry were more than six times as common than suits against governmental MAKING THE POLLUTER PAY 169 facilities.10 "There are no environmental reasons why environmental groups would display such a pronounced preference for proceeding against corporate polluters,"

notes Michael Greve of the Center for In dividual Rights.11 Many environmental groups have found that citizen suits can be a lucrative source of revenue. 12 There is something profoundly unjust about limiting the legal recourse of persons harmed by polluting activities, as the politicization of pollution control has done, while at the same time encouraging the use of citizen suits by organizations with no stake in the resources they claim to be protecting. Another example of failure to make pol luters pay is the case of air pollution. It is well established that a small fraction of automobiles are responsible for the vast preponderance of auto-related emissions. Indeed, over half of all auto emissions are generated by only ten percent of the cars on the road. 13 This means that for every ten cars, the dirtiest one pollutes as much as the other nine. But federal officialsinsist upon imposing significant costs on the owners of all cars through "clean fuel"

requirements, periodic emissions inspec tions, and the like, in order to meet federal air quality standards. If emission reductions are necessary in some regions to protect human health (an arguable proposition), targeting the dirtiest portion of the automo bile fleet would reduce pollution more effi ciently and more equitably. Indeed, if air sheds were managed privately, one would expect this sort of approach to emissions reductions. The broad approaches (which I call' 'drift net" approaches) achieve pollution reduc tions more through their scope than their efficiency and tend to produce environmen tal improvements at the expense of innocent individuals who have not contributed to environmental harm. Environmental pro tection and simple justice are better served when pollution reduction efforts focus on the true sources of pollution, and ensure that it is the polluters that pay for the damages caused.

170 THE FREEMAN • MARCH 1995 Do Pollution Taxes Work? There is one other approach that appears to embody the "polluter pays" principle: the imposition of emission taxes. This idea is generally associated with the economist A.C. Pigou, who argued that pollution taxes would force offending industries to "inter nalize" the costs they were imposing on others. But there are several problems with this approach. First, such taxes would be used to enrich government coffers, not to com pensate those who were harmed by the pollution. It is one thing for the state to decide disputes and ensure that polluters make restitution to those whom they have harmed. It is another thing for the state to identify polluting activities and use pollution taxes as a source of general revenue. The former is in accord with common law prin ciples of justice; the latter encourages the continued growth of the regulatory state.

The second problem is that the state is in no position to assess the actual costs im posed by pollution. Pollution taxes enacted through the political process are likely to reflect political priorities rather than envi ronmental ones. The federal gasoline tax, for example, is often defended as a "polluter pays" approach because oil exploration, refining, and use all have environmental impacts. However, a tax on gasoline is a poor proxy for taxing environmental im pacts-the same gallon of gasoline will pro duce different levels of emissions in different vehicles. And special-interest pleading en sures that certain types of fuels and fuel additives receive special exemptions from the tax. In fact, pollution tax schemes almost inevitably rely upon some proxy for pollu tion that can be taxed. It is far easier to levy a tax on an easily measurable factor, such as use of a resource or aggregate emissions, than it is to try and measure the impact on people-yet it is the impact on people and the environments that they are concerned about that should matter. Using tax mechanisms in place of common law principles, no matter how well intentioned the policy, is a "polluter pays" approach that is destined to fail.

In sum, making the polluter pay should not entail trying to eliminate the generation of wastes and other byproducts of a modern industrial society. Nor does it mean regu lating every emission, every industrial pro cess, indeed every aspect of economic life. It means focusing environmental protection efforts on the greatest sources of harm and ensuring that polluters pay for the costs of the harms they inflict upon others. This goal can be best accomplished through a decen tralization of environmental policy and a greater reliance upon common law reme dies. Central government dictates are not up to the task. D 1. See, for example, Sydney Howe, "Making the Polluters Pay," The Washington Post, January 30,1977, C8. 2. U.S. Environmental Protection Agency, The Nation's Hazardous Waste Management Program at a Crossroads: The RCRA Implementation Study (Washington, D.C.: U.S. EPA, July 1990), p. 36.

3. Figure cited in Marianne Lavelle, "Environmental Vise: Law, Compliance," National Law Journal, August 30, 1993, p. S1. 4. Jeff Berliner, "Exxon Pleads Guilty, Judge Accepts $1 Billion Settlement," United Press International, October 8, 1991. 5. "Oil Spill Money Creates New Alaska Park," Associ ated Press, May 27, 1994. 6. However, it should be noted that the jury awards to the fisherman were more likely the product of outrage over the spill than actual demonstrated damage (see Jeff Wheelwright, "Exxon Was Right, Alas," The New York Times, July 31,1994, p. 15). This is another product of focusing on "public" harms rather than harms inflicted on particular parties. 7. This point is elaborated upon in Robert J. Smith, "Resolving the Tragedy of the Commons by Creating Private Property Rights in Wildlife," Cato Journal, Fall 1981, pp. 439-468. 8. This history is recounted in Kent Jeffreys, Who Should Own the Ocean? (Washington, D.C.: Competitive Enterprise Institute, Fall 1991), pp. 17-18.

9. See Roger E. Meiners and Bruce Yandle, "Clean Water Legislation: Reauthorize or Repeal?" in Taking the Environ ment Seriously, Meiners and Yandle, eds. (Lanham, Md.: Rowman and Littlefield, 1993), pp. 88-94. 10. Michael Greve, "Private Enforcement, Private Re wards," in Environmental Politics: Public Costs, Private Rewards, M. Greve and F. Smith, eds. (New York: Praeger, 1992), p. 111. 11. Ibid. 12. Ibid., pp. 109-110. 13. J.G. Calvert, et al., "Achieving Acceptable Air Quality: Some Reflections on Controlling Vehicle Emissions," Science, July 2, 1993, p. 40; and, Donald Stedman, et aI., On-Road Remote Sensing olCO and HC Emissions in California, Final Report Contract No. A032-093 (Sacramento: California Air Resources Board, February 1994), p. 13.