Should we have a minimum wage?

Here’s my attempt at the using the Costco Connections Yes/No format to answer this question. I’d like to mention, this post was in the works before President Obama’s State of the Union address this week.

Yes

Otherwise, employers would seek to exploit workers by paying them as little as possible.

Workers need to make enough to live on. Employers have more power than low-skilled workers in the market, so the minimum wage helps offset that power.

No

The minimum wage may set a price floor for wages above what some people are willing to work for and some people are willing to pay. If so, this reduces job opportunities and increases unemployment for low-skilled workers, depriving them of chances to gain work experience that would make them more productive and able to earn a higher income in the future.

If the minimum wage is successful at allowing some people to earn more than they otherwise would, it may also cause other negative trade-offs for these people. For example, their employers can treat their low-skill staff worse because there are folks lined up to take their job and they don’t have as many opportunities to find work elsewhere. This might mean that low-skilled workers have less flexibility in work schedules or have to put up with mean bosses.

Many workers do not need to make enough to live on. Many folks are want to make some extra money and get job experience. Some of these folks include teenagers, college students, spouses of full-time workers, and sometimes folks with full-time jobs looking to make extra money for Christmas gifts and vacations. Not all jobs have to provide a living wage.

If an employee and employer come to a voluntary agreement on wages, why should ‘we’ care what the amount of the wage is? Everybody’s situation is different, so why should we impose our preferences on others?

The minimum wage is a largely a do-gooder’s ruse. It feels good to support it, but in reality many folks work for less than minimum wage. They just happen to be off-the-books in the gray and black markets.

My opinions:

When I was younger, I voluntarily took on jobs below the minimum wage. For example, I delivered papers and assembled bikes for a bike shop owner (I think some child labor laws were broken as well).

But, I was glad to have these opportunities (my parents were also more than happy to get me out from in front of TV to do something productive) and didn’t feel I was exploited. The reason these jobs didn’t pay much is because they weren’t worth much.

If my employers had stuck to the letter of the law, I may not have had those opportunities. By the way, the bike shop job was a pure black market job, to my last “No” point.

I should note, my ’employers’ in my paper-throwing job were my delivery customers. Judging how hard it was to collect $2 a month from them, they didn’t place much value on getting that paper twice a week.

I should also note, the biggest reason I gave it up was scheduling, not pay. I disliked waking up at 5 AM on Saturday to fold and deliver papers. I’ve never been a morning person.

I soon discovered that I could make well more than minimum wage and — more importantly at the time — could set my work schedule, by pushing a mower. I also learned some good sales techniques as I developed my customer base.

It turns out that the thing many homeowners dislike even more than paying their paperboy is mowing their lawns, which is why the very same people (employers) who had such a difficult time coughing up a quarter per paper were more than happy to pay me $80 a month to save them from lawn-mowing dread.

It’s easy for us to advocate the minimum wage when it applies to faceless people. But, so rarely do folks examine their own behavior and try to draw parallels.

We all value things a differently. Think of some of the things that you willingly pay for now. Do you pay someone to mow your lawn, clean your house, babysit, kennel your dogs when you’re on vacation, make coffee for you or coach your kids in soccer?

What if someone else came along and judged that you have been paying too little for these services, that you have been exploiting these powerless folks and you must now pay them 20% to 50% more for the same service?  You and your service providers would probably tell them to butt-out and mind their own business because you both are perfectly fine with your existing relationship. If you’re forced to pay more, you too may cut back.

When you advocate a minimum wage, you’re butting into to the business of others’. In my opinion, that’s the strongest argument against the minimum wage, because if we feel we have the right to butt into this voluntary arrangement between two people, then there is likely no end to what other meddling we’ll entitle ourselves to.

12 thoughts on “Should we have a minimum wage?

  1. Excellent. I would only add one point. Or should I say highlight it in a different way than you made it?

    As a human being, I have an absolute right to make arrangements between myself and another so long as it does not infringe on the rights of others. As in everything, there are exceptions but they are not worth mentioning in the scope of this exercise.

    Whether this right is codified, or respected by other groups of people – governments or unions for example – is a different question. Rights exist even when they are violated. And minimum wage laws are violations of this fundamental right.

    I consider this point to be the main issue, and all others, however correct, are merely in addition.

    That’s my opinion.

    • I agree. And I generally find many people agree with that, until they are presented with a plausible-sounding utilitarian argument that meddling is for the greater good and then I am amazed out how quickly they abandon liberty.

    • If they raise the minimum wage from $7.25 to $9.00 per hour, doesn’t that mean that raise everyone’s cos of living? We can keep raising the minimum wage, but it’s a viscous cycle – the more the minimum wage is raised, the more it must be raised again to keep up with the increased cost of paying for the higher labor costs.

  2. Should we have a maximum wage? Are price caps in the sports world working? How have they changed the industries since being instituted?

    Do sports stars and CEOs getting paid huge amounts of money do anything to our perception of money, wages and work?

    • Hi Wally — I don’t believe we should. Price caps in the sporting world are a good natural experiment for those who might be interested in testing their hypotheses — and hopefully the only folks interested in doing that are managers of other sporting organizations.

      As with everything, there are trade-offs. There also seem to be a number of ways that have evolved to get around them. But, the price cap is well within the rights of the sporting leagues to decide. Government shouldn’t be involved.

      I’m sure highly paid individuals do something to our perception of money, but I’d much rather them have that than have to deal with autocratic kings or corrupt commissars.

  3. Pingback: Oh yeah…liberty | Our Dinner Table

  4. I’ve seen the studies that show by raising the minimum wage it does nothing to decrease poverty. I know that some small business people trying to compete with giant corporations have got to watch every penny. So, I guess it sounds like I’m against raising the min wage. But, I’m not happy with that. I suppose my gripe is that too many jobs are considered entry level min wage jobs. From my recollections (which could be wrong), 30 years ago it didn’t seem like there were as many min wage jobs as compared to today. Anyone know where the stats on that could be found?

    • The higher the minimum wage, the higher the percentage of jobs that are minimum wage. That said, raising the minimum wage may not really raise the minimum wage workers “wage”, i.e. employers may elect to cut other non-monetary benefits that their employees previously enjoyed.

  5. Here’s a thought.

    Most (if not all) minimum wage workers support a progressive income tax and enjoy the earned income tax credit (EITC). That is, they support a system that collects income tax from less than 50% of its citizens and redistributes the hard earned money of those productive citizens to citizens who are less productive (for whatever reason).

    Now, from economics, we now that whatever we tax, we get less of and whatever we subsidize, we get more of – we tax productivity and this we get less of it (even Presidential economic advisors have admitted this, but justify it in the name of helping the poor) and we subsidize (welfare/entitlement programs) non-productivity and we get more of it.

    Instead of arbitrarily raising the minimum wage, which does nothing in terms of our productivity as a nation and thus does not truly raise our nation’s well being (it merely redistributes it, at best, and at worst serves as a disincentive which, in the long run, makes us all poorer), let’s flatten the tax curve and get rid of the non-productivity subsidies.

    The problem is that too many minimum wage workers want more money despite the fact that they are not producing more output. Understandably, they don’t recognize any connection between productivity and wages. To them, the employer is just some money machine who hands them a check every week for their attendance. We have developed a nation on unskilled and unmotivated morons who have a disconnect between the reality of productivity being tied to prosperity and instead view a paycheck as their birthright for having made it to adulthood.

    It’s a shame – but no surprise – that our elected officials pander to such vulgar instincts, but then again, when one recognizes the many financial benefits of being an elected official, perhaps it’s not so hard to understand.

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