How the "Living Wage" Becomes a Maximum Wage
A few years back the City of Santa Fe passed a living wage ordinance. Minimum wage here is now $9.85 per hour. Through the law of unintended consequences the minimum has also become the maximum for most jobs that pay by the hour. I've been applying for various positions around town, everything from teacher to tax accountant to taxi driver, and the wage is always the same: $9.85 per hour with no hope of a raise, ever.
The problem, you see, is that an inflated minimum wage means that aggressive, hard working employees find themselves subsidizing the slackers. If an employer could pay a wage based on production, say $7.50 per hour for his least productive workers, there would be money enough to pay his better workers something like $12.50 per hour. But the "living wage" has the effect of flattening wages across the board. The artificially high cost of labor is passed on to the consumer and is eventually reflected in razor thin margins for the employer who knows he can't raise prices without losing customers. The result is wage and profit stagnation for everyone involved.
The age of socialism has arrived in my part of the world. Government has ensured that everyone will make the same money regardless of ability. I could retrain, of course, for something more lucrative, but as Mark Steyn pointed out yesterday on Rush's show some 30% of jobs in this country now require a license. An advanced teaching degree or nursing certification would require thousands of hours of unpaid time at the local community college to earn the credentials. Given that I will likely retire in five years, the effort seems hardly worth it. Driving a taxi could turn out to be more lucrative when you add in tips and far less hassle than retraining for another career. I would be a tax cheat for not reporting the tip income, but that's a byproduct of socialism. Eventually the system makes lawbreakers of us all. Socialism erodes our civic foundations when citizens learn that it's in their best interest to game the system. And it's here, today, in Santa Fe.
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Dec '10
Re: How the "Living Wage" Becomes a Maximum Wage
The obvious consequence of a high minimum wage is abundant unemployment. I hadn't considered that it would be a de facto maximum, though in retrospect it seems obvious.
Great point.
Oct '10
Re: How the "Living Wage" Becomes a Maximum Wage
That's interesting.The traditional argument against minimum wage is that it reduces employment. If you are unskilled and your market wage is lower than the minimum wage, you are unemployed. If you are skilled and your market wage is higher than the minimum wage, then you are fine.
The argument also says that skilled workers are actually better off, because they have less competition from unskilled workers who might be willing to do the job for much less.
But you are saying that it brings wages down for skilled workers. So instead of benefiting skilled workers, it actually hurts them.
There's probably something to both stories.
Edited on Jun 2, 2011 at 7:58amMay '10
Re: How the "Living Wage" Becomes a Maximum Wage
Well, there's only one solution: we must mandate salary increases across the board. And since it would be too messy to enforce this on merit, we'll just do it by length of employment.
What do you think? 10% per year?
That wasn't so hard...
Dec '10
Re: How the "Living Wage" Becomes a Maximum Wage
This just makes me want to weep. You explained it so clearly and succinctly, ~Paules -- isn't there a job for a writer in Santa Fe? Let me guess. Only for leftists or union members, but I repeat myself.
Aug '10
Re: How the "Living Wage" Becomes a Maximum Wage
Great post - but worrisome. Crazed nuttery like you describe seems to inevitably float westward. (California is the apparent birthplace for much of this nonsense.) I wonder - how long will it take to blow into Tennessee?
Oct '10
Re: How the "Living Wage" Becomes a Maximum Wage
I will not speak the unspoken response to this post. Only to say that almost every one of us is asking the same question. How do I "work the system"? How do I get off the radar so I can pretend I still live in a free country?
Edited on Jun 2, 2011 at 2:34pmJun '10
Re: How the "Living Wage" Becomes a Maximum Wage
raycon: How do I "work the system"? How do I get off the radar so I can pretend I still live in a free country? · Jun 2 at 2:33pm
Edited on Jun 02 at 02:34 pm
Just look at how every socialist or communist system operates in practice. Intrusive government eventually results in a black market because capitalism is organic, natural, and unstoppable. This is the real danger because it leads to a total loss of faith in government, the rule of law, and the civil institutions that provide the foundation of a democratic state. Everybody is out to cheat the system because everyone understands it's the only way to get ahead. The state then reacts by bringing down the authoritarian boot on the neck of the populace. The loss of economic liberty will eventually mean the loss of all our civil liberties as well.
Oct '10
Re: How the "Living Wage" Becomes a Maximum Wage
To add... not only does it lead to a black market where everyone cheats the government, it breeds the same behavior towards the people around us. Since the Soviets fell, the Russian people still do not trust one another. Really sad to see.
Mar '11
Re: How the "Living Wage" Becomes a Maximum Wage
Minimum wage laws can only be one of two things: irrelevant or pernicious. When they are lower than what the market will pay in a given area, they are immaterial. When they are higher, they criminalize the employment of workers whose goods and services are worth less than the minimum compensation allowed by law. This discriminates against low-skilled and very young workers, depriving many of entry into the workforce.
My first three jobs were at sub-minimum wage. The only thing that saved me from the bureaucracy was its inefficiency.
Apr '11
Re: How the "Living Wage" Becomes a Maximum Wage
I'm a small business owner and this is exactly how I react to minimum wage increases in my country. I immediately cancel the pay rises to the one or two staff that are doing better or otherwise get the salaried staff to work a few more hours per week.
But I run my business with a target of labour as a percentage of turnover and I maintain it regardless of new laws, if I didn't I would eventually shut down.
Dec '10
Re: How the "Living Wage" Becomes a Maximum Wage
~Paules
raycon:
This is the real danger because it leads to a total loss of faith in government, the rule of law, and the civil institutions that provide the foundation of a democratic state.
I would say it isn't just a loss of faith -- it's a literal loss of the rule of law and functioning civil institutions. Just a small example of how over-regulation invites corruption, I have a follow-up to my story about registering my daughter for summer school. I managed to claim the last opening for her in "Hands-on Manipulative Math," but the very nice young woman who helped me actually said we were breaking protocol by taking the slot off the inventory before our registration had been completed in the overnight data upload. We actually had to finish the transaction by phone the next day, which was also against the rules.
Reagan understood the corruption which occurs with hyper-regulation. I'm still waiting for the 2012 candidate who gets it.