Wage setting not part of Congress’ responsibilities

Why can’t Washington keep it simple? It seems every time Congress passes a law that meddles in areas where government shouldn’t be, lawmakers add some kind of so-called incentives to make its intrusions more palatable to voters. Take the federal minimum wage hike being debated by Congress.

The proposal passed the House last month as a plain old wage hike, with no strings attached. In the Senate, however, lawmakers tossed in a few tax breaks for some small businesses to help them offset the cost of the hike. That brings up several issues.

Democratic leaders in the House have said they don’t want any tax relief, just a minimum wage hike. Someone, possibly a low-level staffer unaccustomed to Washington’s disdain for the Constitution, pointed out that tax breaks should rightly originate in the House, not the Senate. In recent days, however, Rep. Charles Rangel of New York, chairman of the House Ways and Means Committee, has softened his stand somewhat. He’s now willing to accept some tax breaks in the bill, but nowhere near the $8.3 billion over 10 years in the Senate bill.

Rangel’s committee on Monday approved a measure that amounts to about $1.3 billion in tax breaks over 10 years. They say they’ll make up for the revenue loss by fiddling with the inheritance tax. Simple, right?

Although we generally are supportive of lower taxes, these breaks actually increase government rather than shrink it. They add to our already unwieldy tax code and probably won’t be as helpful as advertised. The measures provide a bit of relief for a few narrowly defined small businesses that, while struggling to pay a higher minimum wage, also are expanding or remodeling their property. Apparently, the entrepreneur who can’t afford to expand isn’t as important in the eyes of the Senate.

Besides helping pick winners and losers in the economy, tax breaks to offset the costs of higher minimum wages hide the costs of the hike. It’s heartening that some senators realize their actions have real-world consequences, but it would be more honest of Congress to pass an unadorned minimum wage hike. Then Americans could see that such mandates do not happen in a vacuum and, regardless of their intent, can send some workers to the unemployment line when their employers can’t afford to keep them on.

Proponents of a higher federal wage claim that minimum-wage workers haven’t had a raise since 1997. In most cases that’s not exactly true. While the minimum wage hasn’t gone up in that time, individual workers have been moving up the wage scale and improving their value to the market. Very few workers making minimum wage stay at that rate for long, so the claim lacks substance.

Of more concern, however, is that minimum wage laws are a government intrusion into private relationships between employer and employee. Employers offer jobs, especially entry-level jobs, at a wage their businesses can sustain. Potential employees are free to accept that wage or look elsewhere for work. There is no coercion involved. As employees develop new skills, they become more valuable. If an employer will not pay what the employee believes he is worth, the employee is free to offer his services and experience to other employers. If someone hires him at a higher wage, he moves up the ladder a rung or two, and has done so without government’s help.

Government has a few clearly defined roles in a free society; setting wages and prices are not among them. Any wage or price government sets is arbitrary, a figure pulled out of the air by someone who believes he or she knows better than entrepreneurs who have a vested interest in the market. A quick review of the success of planned economies will show the fallacy of that approach.

House leaders arguing that the tax measures must originate in the House should continue to read the Constitution closely; they’ll find our founding document doesn’t give Congress the power to set wages. It’s too bad so few in Washington seem to know what’s in their job descriptions.