Now, let’s talk about Puerto Rico, and the effects that imposing a minimum wage had on this island.
Because the island is part of the United States, it was required to impose that same one-size-fits-all cookie-cutter minimum wage on its businesses that was imposed on the rest of the nation. When the minimum wage went into effect in the late 1930’s, the average hourly wage in the contiguous United States was 62.7 cents per hour, so the minimum wage of 25 cents per hour didn’t affect very many people, but only a handful (300,000 out of 54 million).
Puerto Rico was a different story entirely. Because the average wage before imposition of the minimum wage was only 12 cents per hour, the minimum wage law more than doubled that hourly wage. To put this into context, it’s roughly equivalent to the political left today wanting to more than double our minimum wage – it’s not entirely the same, because in this case we’re talking about minimum wage, not average wage.
If you listen to the rhetoric coming from the political left today, they seem to think that a doubling of the minimum wage would be a great thing for workers who are at the low end of the wage spectrum. The reason the political left, and such organizations as the Democratic Socialists of America, think such a plan will work is based on a flawed notion, that goes something like this: a) capitalist owners take most of the wealth and profits produced by their workers, and gives them back only a small portion of their profits; b) raising the minimum wage will require capitalist owners to give more of their wealth and profits to their workers, and they’ll still get to keep what’s left over, although it’ll be less than it was before, because the workers are getting more. To the political left, raising the minimum wage like this, by doubling it, doesn’t hurt anybody, but just improves the lives of the workers at the bottom rung of the pay scale.
Ok…Drumroll Please!
If anything about this logic were true, we would see that by looking at the island of Puerto Rico in the late 1930’s and then on into the 1940’s, after the imposition of the minimum wage, which more than doubled what businesses on the island had to pay their workers. If that kind of scheme, doubling the wages, benefitted the workers on the island of Puerto Rico, we would see it in an improvement in the island’s economy, decreased poverty, etc. So, what effects did we see on Puerto Rico at that time?
Because businesses could not afford that new wage amount, it forced them to lay off countless numbers of workers – 120,000 people lost their jobs almost immediately, but the effect all of this job loss had on the island’s economy caused a “snowball effect,” eventually causing the unemployment rate to reach upwards of 50 percent of the workforce, about half, which really is quite staggering. In the United States during the Great Depression, the highest our unemployment rate ever got was about 25 percent in 1933; throughout most of the Great Depression the unemployment rate hovered around 14 percent – that means that Puerto Rico’s unemployment rate ended up being twice as high as the worst Great Depression unemployment rate suffered in the mainland United States. Think about that!
Just a little side note here: it’s interesting to note that many Puerto Ricans today look back on the bleak times of that period, and claim that it had everything to do with “American colonialism and imperialism,” rather than chocking it up to what really caused it – imposition of the American minimum wage on the island.
Apparently, the political left has it all wrong. Doubling the minimum wage could, if we’re looking at history properly, not be beneficial to workers, but could be detrimental to their well-being, or even catastrophic to our nation’s powerful economy, causing a chain of events, a snowball effect, that leads to our economy collapsing, and a stopping of our nation’s positive influence in the world.
Lesson Learned: Forcibly doubling the average wage ends up having devastating effects on working people, and the economy in general, in whatever region or district goes this route. Although we’re talking about minimum wage and not average wage in this article series, doubling the minimum wage could still cause wide scale unemployment in economic sectors that employ minimum wage workers.
