Friday, December 22, 2006

On the minimum wage

I'm sure I've commented on the minimum wage before, but I don't feel like looking for it. And since it's coming up in the media again, I thought it was worth a fresh look.

As part of their first legislative actions, the Democrats have pledged to raise the minimum wage. And, as seems to be getting more and more frequent, President Bush is just bending over and taking it. But that's another issue entirely.

As a free market conservative, I essentially have to be against minimum wage laws. Of course, this often gets me branded as a money-grubbing, greedy, evil, soulless shell of a human being. But, I'm able to ignore such labeling because I know I'm right nonetheless.

Conservatives in general have done an absolutely pathetic job of framing this debate, but it's not entirely our fault. Any time an emotional (i.e. liberal) argument is countered with an intellectual argument, it will always be a losing proposition for the intellectual.

In this case, liberals talk about wanting to help those less fortunate, and say how it's only a dollar or two, and how people need to be able to eat and feed their families, etc. And Americans get all misty-eyed and go along with it because we're naturally a compassionate people. So when conservatives start talking about economic principles, production possibilities frontiers, Laffer curves, etc., people just tune out.

But it's still a debate worth having on the off chance that someone might listen and be swayed.

First and foremost, it is not the government's concern as to the wages paid by private businesses to its private employees. Look at it from the other side. What if the government sought to impose a maximum wage? What if the government went to a section of the workforce and said 'Sorry, you're making too much money, so we're imposing a law to lower your salary.' There would be riots. Not to mention the fact that the vast majority of the American people would think the idea of a maximum wage is absolutely ridiculous. Which it is. But why is the idea of a minimum wage so widely accepted?

Also, wages should be based on the worth of the work. If the government raised the minimum wage by $2.00, is the work done by the people in those job going to be worth $2.00 more? Not likely.

From an economic standpoint, artificially raising wages actually loses jobs. Now, I know some of you are going to say 'But millions of jobs were created after the last raise in the minimum wage.' That's true, but it's likely that the job growth was actually stifled by the wage hike and more jobs would have been created without it.

For example, say there are five employees working for the current minimum wage. Working at $5.15 an hour, eight hour days and five day weeks, each employee makes $206 a week, costing the business a total of $1,030 per week. Now, say the wage is raised to $7.15 an hour. That raises the business' total cost to $1,430. So, where is the business going to get the $400 dollars to cover the salary gap? Raise prices? That hurts business and leads to less revenue. More likely, the business would just fire two of the employees. So, while three people have been helped marginally, two others have been hurt immensely.

More over, as employers are forced to artificially raise the wages they pay, they'll be less likely to hire lower quality workers. Why hire someone at $7.00 an hour when their work is only worth $4.00? What a minimum wage law essentially says is that anyone whose work isn't worth the minimum wage shouldn't be employed. That's asinine.

People also shouldn't kid themselves about how many people would benefit from such a wage hike. Only some five percent of the workforce makes less than $7.15 an hour. And, as I mentioned before, how many of those workers would end up losing their jobs due to the hike?

The bottom line is that minimum wage laws have no business in a free market economy. But beyond that, it's just bad policy in that it hurts many of the people it supposedly tries to help.

And, as always, if you don't want to work a minimum wage job, be a better employee. Read a book or two. Get that GED. Show up for work on time and actually work hard. It can't be that hard if 95 percent of the country manages to do it. Not to be a jerk or anything, but come on people.


Post a Comment

<< Home