A third button that I’d refuse to push, were it available, is one that would immediately eliminate the Federal Reserve. I’m convinced that we Americans would be far better off had we never had a central bank. But history isn’t optional. The Fed has been around for 110 years; it and its practices have long been thoroughly woven into the fabric of the American (and global) economy. Abruptly abolishing the Fed would rip enormous gashes into the complex fabric of financial-market relationships and expectations upon which the entire economy depends.
I’m certain that the economy can – and should – be fully extricated from the Fed, but such extrication must be done gradually to ensure that the process does little damage to financial markets. For practical proposals along these lines, I’d rely on such scholars as my George Mason University economics colleague Larry White, my long-time friend and banking scholar George Selgin, and other serious students of money and banking (which I am not).
There are, undoubtedly, still other unwise government interventions that I would wish to eliminate, but that I would also not willingly push a button to eliminate immediately.
But there are buttons I would push.
I would immediately eliminate all minimum-wage legislation. This legislation does, of course, result in some workers being paid wages higher than they’d be paid absent a minimum wage, but it also results in some other workers being involuntarily unemployed or, if employed, working at jobs that are excessively demanding and unpleasant. Even if minimum-wage jobs were evenly ‘distributed’ across age groups, the drop in the wages of some workers as a consequence of immediate minimum-wage abolition would cause only slight hardship compared to the almost-immediate benefits that would arrive in the form of new job opportunities for low-skilled workers.
Yet, in fact, minimum-wage workers are disproportionately young; fully 44 percent are younger than 25, meaning that these workers are less likely than are older workers to be heads of households. Further, only 1.4 percent of all American workers who are paid by the hour earn wages no higher than the federally mandated hourly minimum of $7.25. Moreover, a mere four percent of all employed 16-19 year olds earn wages as low as the federal minimum. These realities seal the case in favor of immediate elimination of this vile policy that prices many low-skilled workers out of jobs.
The fact that several states and locales have minimum wages higher than the federal minimum wage does nothing, in my view, to change this calculus: all minimum wages should be eliminated, as the gains to workers who would finally be able to earn income and to get valuable job experience would almost certainly swamp the slight fall in the earnings of some other workers.