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Arguing Against the Minimum Wage
The Democrat’s insane proposal to include raising the minimum wage in the most recent COVID stimulus bill has brought the Fight for $15 debate back into the national spotlight. On Monday, the Congressional Budget Office released a study on the effects of raising the minimum wage to $15 an hour.
There are many arguments against the minimum wage and few for it. The majority of arguments for the minimum wage revolve around the word should. “We should raise the minimum wage because it’s the moral thing to do”. “Businesses should pay a living wage.” “Employers that can’t afford to pay their employees shouldn’t be in business”. The problem with this is that should isn’t an argument, it’s a statement presented as an argument. It’s the conclusion without the premises.
Most of the arguments you hear against the minimum wage are focused on its negative consequences. To me, these should be reason enough to be against the minimum wage. Sadly, for many it’s not. Part of the problem is that the effects of the minimum wage fall under Frederic Bastiat’s “That Which is Seen, and That Which is Not Seen” formulation. Everybody sees the fast-food worker that got the wage increase. Stories are written about him. It’s harder to see the fringe benefits that were lost, the hours that were cut, the job that wasn’t filled, or the impact on family pocketbooks from increased prices. Nobody is writing stories about the teen that chose the streets to survive when all the entry-level jobs vanished because of a piece of paper that passed through the capitol.
As persuasive as the negative effects are against the minimum wage, they’re not the most persuasive. The strongest case is the one of freedom. It’s a simple argument: Governments do not get to arbitrarily tell property owners what they do with their property and conversely, labor what they sell their labor for. The minimum wage violates two of our most important rights: property rights and the freedom of association.
An employer’s money is their property. They use it to pay employees. Owning property means you have control over that property. Is the control unlimited? Of course not. There can be negative externalities and government has a limited role in regulating those. Ask yourself this: Are there negative externalities to voluntary wage agreements? Maybe. There can always be a bad deal. The keyword however is voluntary. The minimum wage is not voluntary. In fact, it removes “voluntary” from the equation. That’s where freedom of association comes into play. Freedom of association means we get to enter into voluntary contracts, associations, and groups. We get to choose who we associate with. If I want to do 5 hours of work for you for $5, why should that be illegal?
They say “time is money”. We have a limited amount of time in this life. The government arbitrarily dictating the price of our time is a form of slavery. If the minimum wage is $15 an hour, from $0.01 to $14.99 an hour we are no longer in control of our life, and unfortunately, finding a buyer is going to get harder.
They say raising the minimum wage is the moral thing to do, I think it’s immoral.
Published in General
The original minimum wage laws were put in place to prevent poor blacks from undercutting white wages.
Minimum wage laws are systemic racism.
Some on the left like to state (wrongfully) that institutions such as the police or Electoral College were founded in racism and therefore should be abolished. Jonah Goldberg points out that the proponents of the earliest minimum wage laws were literally supported because of their perceived racist effects. While proponents don’t argue for minimum wage laws because of racism today, some of their negative effects are still disproportionately race based. Using the “abolish the Electoral College because it’s racist logic”, the minimum wage appears to be much more of a candidate for woke abolition.
When I was a child in the the late 40s and early 50s our black and white TV would often lose its horizontal control. It had a knob you could mess with or we learned that if you gave the set a good slap you could fix the flipping. I think this crowd in DC needs a good slap on the head. Of course that slap is figuratively .
I’m in favor of a minimum wage of $15 because it requires employers to increase productivity to stay in business and productivity is the basis of increased prosperity. It should be accompanied by low immigration and tax laws promoting productivity.
As for Jonah Goldberg’s argument (as with all of his arguments): so what?
Yes, raising labor costs is a foolproof way to get businesses to increase productivity! Especially in labor intensive industries. Why haven’t we thought of that before? Pushing on a rope will always get you far.
Your argument is literally the “if businesses can’t afford to pay their employees $x, then they shouldn’t be in business” I mentioned in my piece. It’s tyrannical.
Was it Walter Williams or Thomas Sowell who said that the real minimum wage is $0?
Great point. Let’s raise the minimum wage to $100. (Yes, that was sarcasm.)
The real world is complex. A significant increase in the minimum wage could benefit those with higher skill, while harming those with lower skill. Lower skill workers — who will typically have lower wages — may be competitive with those with higher skill, as long as their wage is low enough to compensate for their lower productivity.
I do agree with you about lowering immigration. The empirical evidence on this is somewhat mixed, as I understand it, but the basic law of supply and demand suggests that high levels of low-skill immigration will tend to drive down wages for low-skill jobs.
For those who are in power now there are no effective arguments. TPTB are doing all that they can do to cause as much unemployment as possible among our least capable people.
Your post brings the question to mind – What if there were no minimum wage laws? Would there be chaos, economic collapse, starving children in the streets, and high suicide rates? Or would we find entry-level positions open for the unskilled to learn skills and ramp up to something better? Is there something corresponding to the Laffer curve for taxes where we find a theoretical optimum rate?
“optimum rate” implies choices and tradeoffs. Choice’s require someone making them. In this case it’s the government choosing between the level of employment and….politics?
With the Laffer Curve, it’s the optimum tax rate for the optimum amount of tax revenue. The minimum wage isn’t a curve, it’s a straight line because it’s a price floor. If you’re choosing optimum employment, the optimum minimum wage would be below the equilibrium wage price. If the floor is above, it creates a surplus, with the minimum wage it’s a surplus of labor (unemployment).
I don’t think there would be chaos. People wouldn’t work for nothing and general laws of supply and demand would dictate so-called minimum acceptable wages.
Regardless, do we want Government making these choices?
If it could be $100/hour, I’d be all for it. The entire point is to produce labor market conditions that make $15/hour irrelevant while simultaneously being seen politically to be in favor of hourly wage earners. It’s not complex politically. The basically libertarian arguments are appealing to a very tiny slice of the population and is a real loser.
Yours is argument of race to the bottom. Why not just pay everyone 3rd world wages? $1/day would be great for the oligopoly.
Way back in the Republican debates for President in 2016 they were all asked about the federal minimum wage. I waited in vain for any of them to say, “There shouldn’t be a federal minimum wage at all. Let the States do it if they want, but it’s not a federal issue.”
But when are Congresscritters going to give up something they have control over, and can use to outbid their opponents?
One of the arguments I make against the minimum wage law is this. Let’s say you have a company that has a starting pay of $12/hour for a new employee with no experience in the business. People who have worked there longer, gained skills, and proven themselves are paid a range of wages from $14-20, depending on how valuable they are judged to be. Now the law requires that $15 is the minimum. That may sound good for the person who just got in, but what about the person who has been there a few years and is at $17? He had every reason to believe that next year he would be getting a raise to $18 or $18.50. But now the company is spending several thousand dollars a year more for the entry-level employees and there’s no money left to give anyone a raise. So the guy with a fair amount of experience and skill is making only $2 more than the guy who started yesterday, and will not get a raise for years.
There’s another issue, and an interesting political angle to the minimum wage.
Wages vary pretty widely from place to place, as does cost of living, so a nationwide minimum wage doesn’t make much sense. As a practical matter, it will have little effect if set at a low level.
This is why it is not an election issue until it is proposed at a level where it will increase unemployment significantly.
There are cost-of-living indices for different locations. The amount could be adjusted accordingly to a national average.
The entire argument against this is an economic argument to what is ultimately political. Conservatives always argue this on an economic basis and they get clobbered. You’d think they would learn.
The point of my post was that the economic argument isn’t the best one (even if it should be enough). I argue that the best argument against the minimum wage is one of freedom.
Did you read it or just comment?
The political objective of legally required minimum wage is to insure unemployment in the marginally employable. In this way, they become slaves to the progressives who claim to be their benefactors.
Don’t forget the “benefit” of inflation pressure caused by minimum wage laws. As wages increase, prices are bid up. Thus the government can pay back its debts with devalued money. Hello, retirees!
That’s not a bug. Because the logical extension of that argument is the socialist’s dream, i.e. even the most private of companies should be made to open their books to some outside “authority,” be that the government or a union or a committee that would decide whether or not business owners are making a profit, how much profit should be allowed and even if that business should exist.
I guess my feelings are mixed since its tough to study empirically. Overall I don’t think raising the minimum wage is on its face insane, but I’m concerned about jumping to $15. Additionally, the minimum wage isn’t well targeted to help the working poor and would probably hurt the marginal (poor) employee, again, especially at $15.
Putting the talk about elasticities of supply/demand curves and income and substitution effects aside (important to be sure), I just don’t think raising the minimum wage helps the people it is supposed to help and that $15 is too much. There are other barriers to work and advancement embedded in the tax code (crazy welfare phaseouts/limits) that should be dealt with before we mess with the minimum wage.
It might be tough to study empirically but as a recent study of the studies since 1992 shows, there’s a “clear preponderance of negative estimates”.
https://www.nationalreview.com/corner/the-evidence-on-minimum-wages-and-jobs/
The “Living Wage” argument is, I think, the most clearly broken.
There are many, many cases where the employee is not working to cover living expenses. Perhaps a teenager, a retiree, someone with a partner who takes care of them, anyone who has their living situation handled and just wants to earn a little recreational money on the side.
And there are many cases where the employee is receiving benefits other than a salary. Perhaps interning, learning a trade, getting experience, networking, getting to ride in a cool car, walking a dog to pick up girls, whatever.
The Living Wage argument extends one particular case to all the others, with a side effect of crushing the others.
I’d give my right arm (and, you know, my vote) for a candidate who said that in response to every debate question.
(I’m left-handed, but still. I’d really love to hear a politician say it.)
I never worked for minimum wage because I had my own business. I paid myself less than that.I might have made the same weekly wage but it took me 80 hours instead of 40.
Here’s to us lefties!
Businesses hire employees and develop a work force because that is the most efficient way of making their product or service, not because they think people have a right to some job.
If the government policy suddenly makes one of their materials double in price, they will start making their product out of something else, or stop making them and go out of business, depriving their employees of an income and their customers of that product. They don’t just absorb the cost and keep going.
Labor is a cost, worth it when labor cost in in balance with all the other manufacturing costs. You can’t just arbitrarily double the cost of labor, and not destroy this balance. They will start making their product a different way, or go out of business, depriving again their employees and customers.
You use people to make your stuff because a machine or robot or whatever is too expensive, too much of an investment. But, just like with the Laffer Curve, there comes a point where the robot method becomes actually cheaper. (And no HR problems, wahoo!)
There’s nothing in McDonalds that can’t be cranked out by a robotic line. It’s just never been cost effective. Until now.
Lotsa luck, Small Business . . . .
Part of the progressive plan… there are two types in the lowest earning category… the progressives’ objective is to make the least capable unemployable so they become slaves to the government largesse. They get a better outcome if they can destroy religion and the family as well.
Or so they will uncomplainedly agree to work in the infamous Amazon warehouse sweatshops.