Ok, let’s get this thing going. The first topic in Conservatism 101 is Minimum Wage. Minimum wage is a law that says employers are not allowed to pay hourly workers less than whatever the current minimum wage figure is. It’s a floor on the dollar per hour wage an employer must pay. Currently in the US, the minimum wage is $6.55 per hour. It’s not hard to understand the pro’s of a minimum wage law. They are pretty intuitive. If you establish a base pay that employees must recieve, it acts as a protection against greedy employers that would underpay employees. It also acts as a means to make sure workers are not paid a wage that would put them under the poverty line. I think we’ve all come to see these things as obvious. So why write an article about it? Well, I’ll let Walter Williams answer that question:
Poor people are not poor because of low wages. For the most part, they’re poor because of low productivity, and wages are connected to productivity. The effect of minimum wages is that of causing unemployment among low-skilled workers. If an employer must pay $5.15 an hour, plus mandated fringes that might bring the employment cost of a worker to $7 an hour, does it pay him to hire a person who is so unfortunate as to have skills that permit him to produce only $4 worth of value per hour? Most employers would view hiring such a person as a losing economic proposition.
What is he saying? He’s drawing our intuition away from that of emotion and into the area of economic realities. It’s as much of an intuition we all share that what someone’s paid should be a measure of what he or she is “worth”. I don’t expect to be paid $80,000 to sack groceries at the supermarket, and I also don’t expect to be paid $18,000 to do complex legal work. Both rates of pay are obviously wrong because they are out of touch with the actual value of the thing being produced. Sacking groceries is a low-skilled job, and as such, might only bring $3-$4 per hour of value to a employer. But because of minimum wage law, the employer has to pay the sack-boy $6.55 per hour. Now, let’s consider that he’s part of the UFCW(United Food and Commercial Worker’s Union) as I was when I sacked groceries in high-school. His total compensation now approaches perhaps $9 per hour. So the employer is losing $4-$5 per hour on each bagger.
What’s the effect of this? The employer will hire fewer bag boys and make them hoof it from register to register sacking double-duty. Sound familiar? Or, he could just forget baggers and make the cashiers bag the groceries as they scan them. Again, sound familiar? Well, in the last few years we have even a newer option for this employer to avoid losing money. Now he can just forget the cashier and bagger altogether and install a few “self serve” checkout lanes. So what minimum wage did is cost baggers and cashiers their jobs. How many times on the way home from work have you stopped by Target and they had 40 lanes and only 3 open. Thankyou minimum wage. But wait! All this about business is great and all, but what we really care about is making sure we help the poor, and minimum wage does that right? Um, no. Take it away Walter:
Workers earning the minimum wage or less tend to be young, single workers between the ages of 16 and 25. Only about two percent of workers over 25 years of age earn minimum wages.
According to the U.S. Bureau of Labor Statistics: Sixty-three percent of minimum wage workers receive raises within one year of employment, and only 15 percent still earn the minimum wage after three years. Furthermore, only 5.3 percent of minimum wage earners are from households below the official poverty line; forty percent of minimum wage earners live in households with incomes $60,000 and higher; and, over 82 percent of minimum wage earners do not have dependents.
And this gets to the heart of the matter. Minimum wage is economic discrimination against the young and the low-skilled. For example, if you are a low-skilled worker or maybe a teenager just getting into the job market, you can’t compete with higher skilled workers in the area of productivity or experience. So how can you compete? Pay. You say, well I might not be as good as that guy but I’ll work for 30% less. That gives the employer a value proposition that makes sense. But minimum wage robs the young or low-skilled worker this most important bargaining tool. Instead employers just make due with fewer employees and in turn, these low-skilled workers have a hard time finding a job. But you won’t hear any of this solid argument in the popular media or education. Like I said before, liberalism has reduced all this to: “that’s mean and greedy.” But, playing games with the laws of economics produces real consequences. I’ll give some of the consequences of artificially produced labor competition in the next post.