Monday, January 15, 2007

The American Samoa Exemption

The new legislation to increase the minimum wage reportedly will maintain the "American Samoa Exemption", a policy that has permitted employers on the U.S. island chain to pay workers far below the U.S. mainland minimum wage.

The Exemption reveals the immorality and impracticality of the minimum wage.

The exemption of American Samoa from the minimum wage is an acknowledgement that the minimum wage forces some people to endure a wage of zero, i.e., far below the "minimum". No one can legislate productivity, and if productivity means some worker's labor is worth less than a minimum wage, that worker will not be hired. His job will essentially be outlawed.

Productivity in that part of the world is much lower than in the mainland United States, and therefore prevailing wages are much lower. If the U.S. minimum were enforced there, it would cause not just a little unemployment, like it does in the mainland U.S., but widespread unemployment. In fact, it would be completely unenforceable.

The existence of the American Samoa exemption is an unpleasant reminder to everyone who votes for the minimum wage -- Democrats, Republicans and President Bush -- that it destroys jobs, and that the higher it is set, the more jobs it destroys. Furthermore, the people who suffer the most from the minimum wage are those who are young and beginning their working years, and those with the least education and skills. These are precisely the people the Democrats pontificate about wanting to help.

The wider issue is that the Democrats don't want to help the poor; they want the poor. In fact, they want as many people as possible to be poor, because it creates a dependent class of modern-day serfs who believe that the Democrats are their salvation. By keeping a large class of people poor, unemployed and dependent on government hand-outs, Democrats corral their votes. It is an ugly form of "vote-buying" that trades on human misery. The minimum wage is part of that.

As for the hapless Republicans who vote for the minimum wage, they "just don't get it". They think that by placating their opposition, the Democrats, they will somehow keep their grip on political power. In fact, their policy does nothing but strengthen the opposition by endorsing their moral premises, and enacting their laws.

UPDATE 1/16/07: A cruel experiment in economics may be about to happen. The Democrats have agreed to extend the mainland minimum wage to American Samoa and the Marianas Islands. Tuna workers are now paid an average of $3.60 there. Workers in nearby tuna-processing countries such as Thailand and the Philippines are paid $0.67 per hour.

With the new minimum wage slated to rise to $7.25 per hour in two years, it is highly likely that many of the U.S. island workers will lose their jobs, and the industries they work in will contract. A rump group of workers will get paid the higher wage. Watch some economist cite those workers in a future study when he claims the minimum wage is working in American Samoa.

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