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Transcription of interview with Walter Williams on August 19, 2013.
Douglas Goldstein, CFPÆ, Financial Planner & Investment Advisor
Walter Williams is an economist, commentator and a professor of economics at George Mason
University.
Douglas Goldstein, financial planner & investment advisor, interviewed Williams on Arutz Sheva
Radio.
Douglas Goldstein: In light of kind of a difficult economic situation regardless of whatís going
on in the stock market, there are a lot of people on the ground who are still having
a tough time.
Do you think maybe itís time to consider a minimum wage as an opportunity to help them
out?
Walter Williams: It all depends who you want to help out.
The minimum wage law has the effect of discriminating against the employment of lower skilled people.
I think many people support the minimum wage because they care about their fellow men and
they want to make things better, but I think you see the effect of the minimum wage law
if you put yourself in a place of an employer.
If you ask the question, letís say in the case of the United States the minimum wage
is $7.25 now, ìIf I must pay $7.25 an hour to no matter which employee higher, does it
make sense for me to hire the employee who is so unfortunate so as to have skills that
can only add $4 or $5 an hour to my operation?î Most employers would view that as a losing
economic proposition and not hire that person.
Thatís what I mean when I say that the minimum wage law tends to discriminate against the
least skilled people and if you look at the labor force almost anywhere including United
States, the least skilled people are teenagers, young people and theyíd like to experience
and matured in other attributes of an adult.
If you look at the unemployment statistics almost everywhere, you see that the teenagers
are the most unemployed particularly during these hard times.
Douglas Goldstein: Letís look at a slightly different population for example women who
could certainly benefit from an increase in salary a little bit.
Iím not talking about young women but women but women who now have to support often times
single parent households.
When President Obama made sort of an ambitious agenda to increase the minimum wage, he spoke
about it as decreasing the inequality that has really become more rampant in the economy.
Is he completely off base?
Walter Williams: I think that having a job that pays say $6 or $7 an hour is preferable
to not having a job that pays $7 or $9 an hour.
If youíre earning $5 an hour, you can buy more food than if youíre earning zero an
hour.
Again the intentions behind the minimum wage law are for the most part very noble but effects
I think are big and as a matter of fact, sometimes the intentions arenít very good.
I wrote a book some years ago and the title of it was South Africaís War against Capitalism.
I did a study of South African labor market and this is during the apartheid era and the
major supporters of minimum wages were white racist union that would never have a black
member.
That is the [inaudible 0:04:23] they want a minimum wage laws for blacks that actually
stated, ìWe want minimum wage law for blacks.î The reason why is that to get rid of their
lower price competition and then also in terms of raising the minimum wage or raising the
cost of labor, entrepreneurs were not stupid, when you raise the cost of something, people
try to find substitutes and one way of finding substitute is automate, to send or to export
jobs overseas to cheaper areas.
So the minimum wage law has a net effect but reducing employment opportunities.
Douglas Goldstein: There was sort of the famous study that was done by Alan Krueger when he
looked at the minimum wage increase, he said ìThere was no evidence that they cause the
fall in employment.î Subsequent to his study, there have been many studies on this topic.
Is this just a political issue?
Walter Williams: The study to which you referred to is Cart and Krueger and that has been thoroughly
discredited by the economic profession.
Many people just really promoted the study because they wanted to raise minimum wage
law particularly labor unions.
They were just so happy with the study.
The only debate about the minimum wage law is the magnitude of the effect that is different
economist will say, ìA 10% increase in minimum wage law will cause a 2% reduction in employment.î
In other studies theyíll say it causes 1% or 3%.
The primary debate is over the magnitude of the unemployment effects.
As a matter of fact, if you read economic textbook, theyíll say that the minimum wage
law reduces the employment for low-skilled people.
Douglas Goldstein: One of the other arguments that people make is that
if you donít have people working, they end up on unemployment and youíre giving them
money so at least by giving them a job at some level, itís more cost effective and
just putting people on a dole.
Walter Williams: I think raising the wage and making the wage higher than the value
of what person can produce will cause unemployment.
If you look back, you sound like a much younger person.
Iím 77 years old, but when I was a kid, when you pulled into a gas lane station, there
was a young person to fill your tank with gas, wash your windows and check the air or
oil in your car.
Now, you see self- service stations.
How can we explain that?
Is it because Americans of the day like the smell of gas lane fumes while they fill their
cars up?
Another example, when I was a younger person, you go into a movie theatre.
There were two or three ushers, young people, to show you to your seat.
You donít find ushers in the theaters today and thatís not because Americans of the day
like to stumble down the aisle in the dark to find their seat.
The minimum wage law has destroyed those kinds of jobs and you can see many, many examples
of self-serve or throwaway dishes because restaurants canít afford to hire people to
wash dishes anymore.
So there are many examples of how people substitute capital for labor when the price of labor
rises.
Douglas Goldstein: How do you relate this to the immigration reform that the government
is trying to do to allow more workers into the fray?
Isnít that going to simply hurt the low price workers even more?
Walter Williams: Of course, theyíll have to compete more.
I think one of the problems with low-wage workers at least in the United States is that
the welfare state or high unemployment compensation, it encourages people to remain unemployed
for a longer period and they otherwise would be.
In 1948, the duration of unemployment has doubled since 1948.
That is people say, thereís a McDonald job at $7 an hour, ìIím not going to take that
job.
Iíll look around for something else because Iím getting unemployment compensation and
itís not taxable.î
I
would say that the least humane thing to do is to have a set of circumstances in Greece
that has created 15% or more unemployment particularly among these young people.
That is to let the state of affairs get to a certain circumstances where you have so
many people into hardship.
It wasnít an act of God that deliver the conditions in Greece, it was an active parliament
reactive to people.
Douglas Goldstein: Your article spoke about whether itís possible even for Egypt to achieve
true Democracy.
Whatís your take on that now?
Walter Williams: I think that what people have to recognize is that the problems on
many countries around the world and most notably Egypt and other countries in the Middle East
is that people do not have economic liberty and in turns that Egyptís rank is very low
in terms of economic liberty.
If you look at the countries that are wealthy where the people do will, they have a large
measure of economic liberty and they have a high ranking on the index of economic freedom.
Now what needs to be done I think in Egypt is stop worrying about democracy and pay more
attention to economic liberty because once you have economic liberty then I think it
puts pressure on the political system to have democracy.
Weíve seen it with Chile with the Pinochet regime, it was a coup and they just forced
economic liberty and ultimately the people got political liberty.
Itís the same thing in Taiwan.
There was economic liberty and now thereís a large measure of political liberty.
So if youíre in countries around the world where people are better off, they are the
countries where thereís a large measure of economic liberty and also when thereís a
large measure of economic liberty, thereís other kinds of liberty that is in terms of
if you look at the rankings of international amnesty, amnesty international or the freedom
house, those countries with a lot of economic liberty, they have a whole lot of personal
liberty as well.
Douglas Goldstein: Do you think itís possible that youíre simply projecting a Western view
point on a very Middle Eastern country where these customs of liberty just are not part
of their day to day operations?
Walter Williams: If itís not a part of the day to day operations, well just let them
be poor.
Thereís not a lot of respect for personal liberty in the Middle East, as a matter of
fact in most places in the world and there wasnít a respect for personal liberty in
the west either.
The westernizations in Europe, there were barbarians but we had the Magna Carta emerged
in 1215 and the philosophers such as John Locke, Girder, Humboldt etcetera that preached
personal liberty, but you donít have this kind of cultural movement away from barbarianism
in many places of the world and where the people are most barbaric, theyíre also the
poorest and least free.
Douglas Goldstein: Is it possible or realistic for the United States to try and teach these
values but as the other countries would say to be imperialistic and enforced some of these
western values?
Walter Williams: I think that people have to emerge on their own.
I think that the worst thing that United States can do for people around the world is to interfere
with the way that they do things.
I think the best that we can do to help our fellowmen around the world is to have economic
freedom in our own country and have free trade.
Douglas Goldstein: How can people best follow your work?
Walter Williams: I have a website and itís called www.walterewilliams.com and I have
my publications and books and a lot of educational material there.
Douglas Goldstein, CFPÆ, is the director of Profile Investment Services and the host
of the Goldstein on Gelt radio show (Monday nights at 7:00 PM on www.israelnationalradio.com.
He is a licensed financial professional both in the U.S. and Israel.
Securities offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, NFA,
SIFMA.
Accounts carried by National Financial Services LLC.
Member NYSE/SIPC, a Fidelity Investments company.
His book Building Wealth in Israel is available in bookstores, on the web, or can be ordered
at: www.profile-financial.com (02) 624-2788 or (03) 524-0942.
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