When talk of minimum wage comes around, I think of a conversation I had with a friend once. I wrote about it in 2011 in a post titled “I support it, but it doesn’t apply to me.” My friend supported the minimum wage and used all the stock arguments for it. He also happened to own a small business and had found a way around paying minimum wage to his workers. Well, they weren’t workers. They were “independent contractors”.
Mark Perry, on his blog, Carpe Diem has a couple of posts on the minimum wage worth reading:
1. An New York Times editorial to get rid of the minimum wage?!? It’s from 1987. Amazing how much of shift there has been since then.
2. Perry also points to these wise words from Henry Hazlitt, author of the highly recommended Economics in One Lesson (and available for free .pdf download for any of your reading devices):
Thinking has become so emotional and so politically biased on the subject of wages that in most discussions of them the plainest principles are ignored. People who would be among the first to deny that prosperity could be brought about by artificially boosting prices, people who would be among the first to point out that minimum price laws might be most harmful to the very industries they were designed to help, will nevertheless advocate minimum wage laws, and denounce opponents of them, without misgivings.
The first thing that happens, for example, when a law is passed that no one shall be paid less than $9.00 per hour [updated) is that no one who is not worth $9 per hour to an employer will be employed at all. You cannot make a man worth a given amount by making it illegal for anyone to offer him anything less. You merely deprive him of the right to earn the amount that his abilities and situation would permit him to earn, while you deprive the community even of the moderate services that he is capable of rendering. In brief, for a low wage you substitute unemployment. You do harm all around, with no comparable compensation.
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.
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.
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 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.
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.
It’s good to see you all here.
We kept you relatively safe for another year. Regrettably, bad things happened. We’re not perfect. I wish we were.
But, let’s give a warm round of applause to the brave members of our military forces who kept the vast majority of us safe.
Now, go forth and enjoy your life, liberty and pursuit of happiness.
If I’m not doing something that you think I should, please consult with the Constitution and point me to where I’m empowered to do that.
See you next year.
I went to Grant Davies’ blog, What We Think and Why, and watched all of the nearly 28 minute Dr. Carson speech. I recommend watching it. I just had to re-post it here:
Here are some of his major themes:
1. Political correctness keeps us from saying what we really think and that keeps us from talking about important things.
2. But, we should be respectful with those who we disagree. That’s a major theme of this blog. Hostility just tends to entrench people in their beliefs.
3. Carson’s Mom taught him to use his brain to solve problems, which resulted in him thinking his way out of poverty by not accepting excuses for his poverty status, taking advantage of education, educating himself and thinking himself out of poverty.
4. He and his wife put their money and talents where their mouths are to help others to the same. They started the Carson Scholarship Fund.
5. Why is education so important? He encourages us to learn from ancient Rome, which died from within.
6. He mentions we have a fourth branch of government: Special Interests.
7. Everyone should pay some tax, we shouldn’t punish the guy who puts a billion dollars into the pot and with health care we should empower individuals.
8. He closes with a great story about the origination of our National Anthem and a very nice imagery of the bald eagle as the nation’s symbol.
An enterprising reporter ought to ask President Obama what he thought of Dr. Carson’s speech. However, I think I can predict the answer. My guess is he’d say he liked it and agreed with it, and then say that’s why Federal government needs to help do those things.
I know this isn’t original, but the thought occurred to me the other day that so much of our attention in on bad news, that it might help to call out some good news items.
I thought a good place to start doing that would be this blog.
Good news item 1: Dr. Ben Carson. I think it’s good news that he can express his position — which opposes the President’s — in the President’s company. I also think it’s good news that he’s expressing his opinion.
Good news item 2: I’ve become a fan of good design. I love seeing what a good designer can do on shows like Restaurant Impossible where the designer is given a shoestring budget to transform a space.
However, I’m an inept designer, so I think it’s good news that along with this space to write-in, WordPress also provides some beautifully designed blog themes. The theme I use is called Twenty Eleven and I’m very happy that to give my blog this professional, well-designed look all I had to do is click my mouse buttons a few times. I could have spent days on the blog design and it would have never looked this good.
Johns Hopkins neurosurgeon, Ben Carson, made a couple of interesting points at a White House prayer breakfast this week. Here’s one point about taxation (emphasis mine):
What we need to do is come up with something simple. And when I pick up my Bible, you know what I see? I see the fairest individual in the universe, God, and he’s given us a system. It’s called a tithe.
“We don’t necessarily have to do 10% but it’s the principle. He didn’t say if your crops fail, don’t give me any tithe or if you have a bumper crop, give me triple tithe. So there must be something inherently fair about proportionality. You make $10 billion, you put in a billion. You make $10 you put in one. Of course you’ve got to get rid of the loopholes. Some people say, ‘Well that’s not fair because it doesn’t hurt the guy who made $10 billion as much as the guy who made 10.’ Where does it say you’ve got to hurt the guy? He just put a billion dollars in the pot. We don’t need to hurt him. It’s that kind of thinking that has resulted in 602 banks in the Cayman Islands. That money needs to be back here building our infrastructure and creating jobs.”
Update: Grant Davies has posted the video of Carson’s speech on his blog, in case you are interested in watching it. Carson talks about much more than taxes. Thanks Grant!
And I highly recommend that you watch it. I’ll have more to post from it.