Minimum Wage - John's Views

Sign that says We Demand $15/hr Minimum Wage Now! with a urban scene in the background.

My first summer job as a teenager in high school paid 50 cents an hour. The federal minimum wage at that time was 75 cents an hour. My job involved helping to convert an old house into efficiency apartments, and I learned many skills – carpentry, plumbing, electrical, painting, laying tile, cement, and lots of cleaning. Some of my high school buddies worked for the highway department at 75 cents an hour painting highway guardrails. My pay was fine with me, because I was learning a lot of skills that have proved very useful as an adult, and besides, I didn’t want to work painting in the blazing sun. Was anything wrong with all that?

What Is a Minimum Wage?

In this context, a minimum wage is the legally-enforced minimum wage an employer must pay an employee.

Stated differently and more accurately, it is the government forcing two consenting adults, namely an employer and an employee, to conform to its notion of an employment relationship, even though the two parties involved might disagree with the government’s notion. In this instance, the notion is how much a person should be paid by a company.

Some Brief History of the Federal Minimum Wage

The federal minimum wage, currently $7.25 an hour for covered employees at the time of this post, is part of the Fair Labor Standards Act (FLSA) originally enacted in 1938.

Early attempts by labor unions to create a mandatory minimum wage were ruled unconstitutional by the U.S. Supreme Court on the grounds that they “restricted the worker’s right to set the price for his own labor”.

Extracts from a Wall Street Journal article (1998: A22) by Burton W. Folsom Jr. titled The Minimum Wage’s Disreputable Origins.

“If we are to evaluate yet another increase in the minimum wage, we need to know why we have a minimum wage law and what its historical effects have been.

“In June 1938 President Franklin Roosevelt signed into law America’s first minimum wage: 25 cents an hour, rising to 40 cents an hour over the next seven years. The driving force behind the legislation was NOT the working poor, who were struggling to eke out a living, but the highly paid textile workers of New England, who were eager to protect their jobs.

“During the 1920s and ‘30s, the American textile industry had begun to shift from New England to the South, where the cost of living was lower and where Southern workers produced a high quality product for lower wages. Politicians in Massachusetts battled in Congress for a law that would force Southern textile mills to raise wages and thereby lose their competitive edge. Democratic Gov. Charles Hurley demanded that Congress pass a law to hike Southern wages so that ‘Massachusetts would have equal competition with other sections of the country, thus affording labor and industry of Massachusetts some degree of assurance that our present industries will not move out of the state.’

“Southern congressmen joined those economists who argued that Congress couldn’t make a man worth a certain amount by making it illegal to pay him any less. They said that people whose skills and experience were less than whatever Congress decreed as the minimum wage would be priced out of the labor market. The Great Depression, they said, would get worse by Congress telling workers, in effect, ‘If you can’t find a job that pays at least the minimum, then you’re not allowed to work.’

“Predictions that the law would most harm workers who had limited skills and were desperately trying to secure a foothold on the first step of the job ladder have been prophetic. Like magic, the steady hikes in the minimum wage have made jobs disappear. The most vulnerable workers, especially blacks, teenagers, and women with limited skills, have often been the first to be laid off and the last to be hired because their labor is not yet worth what the law says they must be paid.”

The bottom line is that the minimum wage was originally, and still is, nothing other than protectionist legislation for higher level jobs whose occupants do not want competition. The minimum wage actually harms most those who, according to the collectivist rhetoric supporting it, it is ostensibly intended to help.

“Labor unions have their own imperatives and constraints. For them, the minimum wage law presents the same kind of opportunity that a tariff presents to a business firm. It is a way to price competitors out of the market. That this is accompanied by humanitarian statements may be a matter of rhetorical, or perhaps political, interest but it changes no economic fact.” – Thomas Sowell

Economic Affects of a Minimum Wage on People

One has to be blind to the economic realities of a government-forced minimum wage. Those who advocate it rely on emotional appeals, such as “people deserve a living wage,” but refuse to acknowledge that forcing employers to violate free market principles of supply and demand and prohibiting employees from setting their own wage rates is actually detrimental to the people they claim they want to help. See my post on Living Wage.

Businesses lay off employees, automation takes the place of human workers, and retailers decide to not build in places where they can’t afford to operate.

Study after study and article after article show the deleterious effect of a minimum wage. Here is a very small sample.

By making it illegal to pay workers below an arbitrary minimum wage, it relegates workers without adequate skills to unemployment.

Moral Issues of a Minimum Wage

Missing from the discussion of the minimum wage is any mention of the moral issues and principles involved and whether there should be a minimum wage in the first place. And that is tragic, because the minimum wage violates the rights of both employers and employees.

If an employer and an employee voluntarily agree to the terms and conditions of a business relationship, and there is no force or fraud involved, then nothing else matters. If a low-skilled worker wants to offer his or her services for a low wage and an employer wants to pay it, then to legally deny that arrangement means that the parties involved do not have the right to exercise their independent judgments in pursuit of their values, meaning they do not have the right to their own lives.

Just as an unskilled person has the moral right to offer his or her services at a low rate, so does an employer have the moral right to pay for those services at a low rate. For the government to dictate wage rates denies a worker’s right to set the price for his own labor and perhaps learn work skills that will enable him to earn more.

People must earn a living, and to do so they must be free to sell their labor as they choose.

For a discussion on rights, see my post What Are “Rights”?

Such a policy shows utter contempt for all individuals concerned. How is it that someone else (you, a group of neighbors, or a majority of Congress) thinks they know what is best for us? What is their moral justification other than power and control over our lives?

Unfortunately, if you agree on the premise that there should be a minimum wage as dictated by the government, it will continue to rise forever, as has been the history since 1938.

If enlightened employers thought that higher wages brought benefits such as increased productivity and competitiveness (as Henry Ford did with his assembly-line workers) they would do it on their own. But if that is not the case, they should not be forced to do so, for that would go against the judgments of the parties involved. The discussion, then, should be on whether there should be a minimum wage, and not how much it should be.

Who Likes a Minimum Wage

Politicians who think they know what’s best for us and like to tell us what to do.
Unions who want to stifle competition from people who are willing to work for wages lower than union wages.
Companies who want protection from their competitors who pay lower wages.
Government bureaucrats who administer the Fair Labor Standards Act.
Advocates of various forms of collectivism who want the government to deny individuals the right to make their own decisions.

Conclusion

The minimum wage is immoral in that it violates the rights of both the employee and the employer to exercise their independent judgments on a voluntary employment relationship.
The minimum wage hurts those most with low levels of skills, impacting blacks and young people disproportionally, by denying them jobs that are not worth the minimum wage.
Given the harmful economic impact of a minimum wage and the immorality of it, the minimum wage should be abolished, along with all associated laws and regulations.

Photo Credits:

Sign demanding $15/hr minimum wage: John Davis

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As you are probably aware, many discussions on this topic are sometimes unfriendly and contain logical fallacies. If you decide to leave a comment, or even outside of this post, if you decide to have a discussion, public or private, you might find it helpful to follow the suggestions on my post How to have a successful discussion.