by marketfreedomalliance1 | Feb 19, 2014 | In The News
February 19, 2014
Wealth Daily
Geoffrey Pike
There is debate stirring about a possible minimum wage increase.
Obama and the Democrats in DC are advocating a proposal to raise the minimum wage from $7.25 per hour to $10.10 per hour.
This would actually be an increase in the minimum wage of 39%, which is extraordinarily high, especially given the already high unemployment rate, particularly among less skilled workers.
Overall, the American people are in a state of naivety about the minimum wage, thinking there is such a thing as a free lunch. The majority of Americans, who support not only a minimum wage, but also an increase in the minimum wage, do not understand that there will be negative consequences, or they don’t think they will be affected.
Some Republicans will speak out against raising the minimum wage. You will find fewer who will advocate an elimination of minimum wage laws. We also have to remember that the last time minimum wage legislation was enacted to raise the amount, it was under George W. Bush.
Neither side is consistent, with the occasional exceptions. If the Republicans say that raising the minimum wage will cause higher unemployment, then why wouldn’t they advocate getting rid of it? There are a few who do say that, but not nearly enough.
And if the Democrats think that raising the minimum wage is great and virtually cost free, then why not raise it to $15 per hour or $50 per hour?
The minimum wage simply prevents employment between consenting parties. It doesn’t mandate that someone be hired or that someone can’t be fired. It just means that some transactions won’t take place that otherwise would have.
If someone wants to pay another person $6 per hour to do some manual labor and the other person is willing to do the job at that price, then the government is telling them they are not allowed to enter into such an agreement. If the person willing to pay $6 is not willing to pay $7.25 (maybe soon to be higher), then the transaction will never take place.
Like so many laws, it hurts the people most who it is purported to help. In this case, it tends to be younger people and those with fewer skills. These are the people most likely to lose a job or have more difficulty in finding one.
Ironically, it is legal to hire an unpaid intern in many circumstances. The intern would be willing to work for no pay just to gain experience. But if the company offered to pay the intern $5 an hour, then the transaction all of a sudden becomes illegal.
There was a CBO report just released saying that raising the minimum wage would lead to the loss of half a million jobs by late 2016. But the report also said that it would lift 900,000 people out of poverty, meaning it would push them above the designated poverty line.
Of course, these numbers are meaningless. The CBO has no idea what’s going to happen. They can plug their numbers into graphs, charts, and various computer-modeling programs, but it can’t actually tell you how humans will react.
A 39% increase in the minimum wage could easily lead to greater poverty. If there are that many more people unable to find work, we really have no idea how bad the effects could be.
The estimate of 500,000 lost jobs could easily end up much higher than that, too.
Think of a small business with about 20 employees. Half of the workers are making around the minimum wage and the other half are making more, maybe even significantly more.
If the employer simply can’t make a big enough profit paying an extra $2.85 per hour per worker, then the employer might just shut his doors for business. The extra expense might be around $5,000 per month. And if any of the other workers were making around $10 per hour, how would they feel making the same amount as the other people who have less experience or fewer skills?
If the employer shuts down his business, then it would mean all 20 people would be out of a job, not just the minimum wage workers.
It’s also important to point out that there are a lot of other hidden effects from minimum wage laws. An increase in the minimum wage may not lead to some people being fired, but it could lead to jobs not being filled or jobs never being created in the first place.
The bottom line is that minimum wage laws are bad economic policy. It will cause higher unemployment, assuming that the mandated wage is not lower than what workers would be paid anyway. It will also cause lower overall productivity and it distorts market activity.
The politicians who push for a higher minimum wage are playing on the economic ignorance of the voting population. Meanwhile, it is only hurting the people it’s supposed to help.
The minimum wage should be abolished and people should be allowed to freely associate.
by marketfreedomalliance1 | Mar 27, 2013 | In The News
March 27, 2013
Forbes
Don Watkins
A few years ago, I was in need of some extra cash so I decided to sell my laptop on eBay. A few days later, I got an offer. It wasn’t great, but then neither was my laptop. But before the payment went through, I got a call from the government.
“We have decided that the offer you got was too low. We’re not going to let you sell your laptop for anything less than three hundred dollars.”
“But no one is willing to pay me three hundred dollars,” I said. “I’d rather have two hundred bucks than nothing.”
“Oh, no, you can’t do that,” I was told. “That would be unfair to you.”
Far fetched? Maybe—it didn’t actually happen to me. But the fact is it happens to defenseless victims every single day, albeit in a somewhat different form: through enforcement of the minimum wage.
Right now there is a campaign underway to raise the federal minimum wage from $7.25 to $9 or more, and polls indicate that Americans overwhelmingly support it. And who wouldn’t? Who could object to making sure that everyone can earn a living? Who would oppose guaranteeing that every American is paid fairly?
Well, the problem is that the minimum wage doesn’t ensure everyone can earn a living—it ensures that many of us can’t earn anything. And it doesn’t guarantee that everyone is paid “fairly”—it unfairly denies us the freedom to decide for ourselves what pay to offer or accept.
I remember when I got my first job. I had just turned seventeen and after a bit of a search—I think I submitted three applications at the local mall—I got a call to interview for an entry-level position as a ticket taker at the mall theater. I sat down with Michelle, the theater’s hiring manager, and after going over my work experience—“I once helped my dad wash his car”—Michelle offered me a starting position at $5.35, just above the minimum wage at that time. I remember thinking: it’s not much, but it’s better than anyone else is offering me, and it’s certainly better than being out of work.
And that’s how employment should work. Employment is a contract—an arrangement between a person who wants to work and someone who wants to hire him. But under minimum wage laws, Michelle and I weren’t the only ones who had a seat at that negotiating table.
Had Michelle only offered me $5 an hour and had I wanted to accept it, Mr. Minimum Wage Enforcement Goon—I picture him as Bluto from Popeye—would have crossed his arms, sat back in his chair, and shook his head. And had he tried to enforce today’s minimum wage of $7.25, well, then, it’s very likely I would have never gotten the job to begin with.
The question is: Who invited him? Why was my employment agreement anyone’s business but mine and Michelle’s?
Here’s one answer: “But it’s not voluntary! You needed the money, while the movie theater could have afforded not to hire you.”
But the fact that someone badly wants or even needs something doesn’t imply that his efforts to get it aren’t voluntary. I may have needed a job, but it’s not like Michelle could have zapped me with a cattle prod to stop me from going to work at Subway.
Michelle’s only power was the power to offer me a better deal than any of her competitors. We sometimes forget that companies have to compete for employees the same way they have to compete for customers. When I interviewed with Michelle, I was no more powerless than a consumer shopping for condiments: Heinz is free to charge a thousand bucks for a pint of mustard, but it’s not free to keep you from buying a jar of Grey Poupon instead.
Did I wish I could have gotten more than $5.35 an hour? Sure, but no one was offering me that, and as an ambitious but inexperienced worker eager to get my start, I understood why: I wasn’t worth more yet. I wasn’t just getting the paycheck—I was building the skills and resume that would make it possible for me to make a whole lot more than $5.35 some day.
That’s the logic behind internships, which few people object to. Young people regularly work for low and even no pay in order to build their resume, learn useful skills, and make networking connections. If you forced companies to pay interns significantly higher wages, you would achieve only one result: you would prevent young people from realizing those benefits. By the same token, if the government had stepped in and forced the movie theater to pay a wage higher than what my ability justified, it wouldn’t have magically made me more productive—it would have made me unemployable.
Those who don’t think the world owes them a living understand that they can’t expect to get paid more than the worth of their value to an employer, and that to earn more they have to become worth more. Such people know that a low-paying job can be the best path to a high-paying job. Contra the minimum wage cheerleaders, it isn’t low pay that’s unfair—it’s preventing people from offering and accepting jobs that’s unfair.
Then again, maybe it’s not those who believe in individual responsibility that the supporters of the minimum wage are trying to appeal to.
Recent Comments