Minimum Wage Laws

Minimum and living wage laws are immoral, because they deprive individuals of the freedom to make their own decisions. They are also counter-productive for society as a whole because they raise unemployment and foster dependency among the poor.

Such laws hurt the poor, while – strangely – helping comfortable progressives feel better about themselves. Somehow, the latter have convinced themselves that by giving away other people’s money, they have performed a noble deed, but they have not. Quite the contrary, in fact.

Few minimum wage law advocates pause to consider the effect of such laws on those who don’t have work but would be willing to work for less than the laws require.

If I am willing to employ another for $10 an hour to perform a particular task, and he is willing to perform that task for $10 an hour, who are you to say that I must pay $15, or not employ him? The same folks who argue that all sexual matters between consenting adults should be legal – a position with which I agree – all too often twist themselves into knots to simultaneously assert that one person may not pay $10 an hour to another to do a job.

The usual counter argument to the natural rights position that people should be at liberty to agree among themselves on compensation for work is that we need to protect the poor worker from being exploited; this viewpoint is based on the patronizing premise that we know better than the poor man what choices he should or should not be allowed to make for himself.

A prospective employer only makes a prospective employee better off by offering him $10. The offeree doesn’t have to take it – but now he has a choice that was previously unavailable. He can do whatever he was going to do – or not do – before the offer was made, or he can take the offer. He is free to choose, unless the law gets in the way.

Now let’s look at the same situation from the other side: minimum wage laws make it more expensive – and therefore less attractive – to employ people. Perhaps, instead, of hiring somebody for $10, the would-be employer will look for a more automated way to get the task done, or simply leave marginal tasks undone. These calculations become even more problematic when the prospective employer considers the paperwork, “payroll taxes”, and possible Obamacare obligations attendant on setting up a new employment relationship. All of a sudden, the true cost of getting that job done might well look to the prospective employer like $14 instead of the $10 he thought he could afford; so the job for which he would otherwise offer $10 might be simply unavailable.

Apart from liberties lost, what is the cost to society of the jobs that are not offered or taken as a result of minimum wage laws (and heavy “payroll taxes”, government paperwork, etc.)? Higher unemployment among the young and the poor, of course; but beyond that, missed opportunities for skills to be developed and noticed, and good habits – and even values – to be learned. We are cutting off the lower rungs from the ladder to a life of work and contribution to society, and fewer and fewer of the poor can jump up and grab hold.

So who favors minimum or living wage laws, and for what reasons?

Two distinct groups – those who are already employed at the low end of the wage scale and those who think that by advocating or voting for such laws they are doing something good (at others’ expense, natch) for the underprivileged.

Those who are already employed in lower end or entry-level jobs may see higher minimum wages as a way to get raises through legislation, or to prevent others from competing with them for jobs on the basis of a willingness to work for less. Looking for a legislated raise probably doesn’t describe many people, though – minimum wage workers tend to either be intentionally short term – like summer employees – or to see themselves as being at the start of a long term relationship with their employers where the real upside is in advancement; and besides, the reality is that such people, i.e., the young and the poor, do not have the money or the numbers to drive the political process. There about 1.6m minimum wage employees in the US, about half of whom are under 23.

The second common justification – protecting lowest-wage workers by preventing others from competing for work on the basis of even lower wages, which is put forth by innumerable well-meaning progressives, and pushed by unions whose members generally make much more than minimum wage, but want no competition based on lower-cost labor, is conceptually identical to protectionism. Why should we legislatively favor the person who works for $18 an hour (or maybe much more) over the one who wants to work for $10? Is the poorer one any less human?

But wait, advocates will say: we need to provide some stability of employment at the lower end in the face of vicious market forces. To many, this is a persuasive argument.

First of all, “we” are doing no such thing – the willing-to-work unemployed, and employers who pay higher than market prices or forego marginal jobs, are bearing the costs of these laws. More to the point, in all but utterly unskilled labor environments, employers have an enormous interest in building and maintaining a stable and knowledgeable workforce, so few are likely to lower wages for existing employees, or fire them, in the hope of achieving small savings. By doing so, an employer would destroy company morale and lose all the skills the departing employees had learned. Finally, minimum wage laws won’t protect lowest-wage workers from having their employers bankrupted by changes in the markets for their products, or from low-cost foreign imports, so the protection theoretically provided by such laws is almost completely illusory.

Millions and millions of people who desperately need to find jobs are effectively prevented from doing so by our current laws. We are growing a permanently unemployed and unemployable underclass, whose best options at present are relying on government handouts and illegal or off the books activities. This is a travesty.

Hope and change will not come to the poor from more Obamaphones, food stamps, free healthcare and living wage laws that foolishly and immorally limit employment opportunities; all of these policies foster dependency. Hope and change will come instead from giving people back the freedom to make their own decisions and rebuilding a context where what works best for them is … work.

 

– M.H. Johnston 8/23/13

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