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Liberal Minimum-Wage Nonsense Hurts the Poor

by

The liberals are at it again. They’re calling for another increase in the minimum wage in their purported attempt to help the poor. Two new minimum-wage articles have recently been posted on the liberal websites Counterpunch and Common Dreams. One is entitled “The Bogus Case Against the Minimum Wage Hike” by Dean Baker and John Schmitt and the other is “America’s Skimpy Minimum Wage” by Savatore Babones.

Before I get to the fundamental flaw in both articles, I can’t help but initially wonder whether these authors actually hate the poor.

Why do I say that?

Because all three of them are such pikers! They would like to see the minimum wage raised from the current $7.25 per hour to somewhere between $10 and $27 an hour.

Imagine that! I thought liberals loved the poor. Why stop at $10 or even $27? Why not a really large increase in the minimum wage, like, say, $100 per hour or even $1,000 per hour?

Let’s do it this way. Let’s figure out how much the members of Congress receive on an hourly basis and then let’s make that the minimum wage. Congressmen receive an annual salary of $174,000. That’s comes out to $3,346 per week. With a 40-hour work week, that means that the members of Congress are receiving $83.00 per hour.

Why not set the minimum wage at $83? Why should ordinary people get less than what the members of Congress get paid? Don’t liberals believe in equality? Do they think that the members of Congress are better than the rest of us?

If you examine the reasoning in both of those articles, all the arguments for raising the minimum wage to $10 to $27 an hour would apply three or four times as much to an increase in the minimum wage to $83 per hour. Workers would become more excited about their jobs, causing them to produce more. There would be more income equality.

I can only hope that those three authors would immediately recognize how ridiculous such a notion really is. If not, then how about if I propose that the minimum wage be raised to $1,000 an hour? Would they be able to recognize how ridiculous that would be? I sure hope so.

Obviously, there is a fundamental problem with minimum wage laws, one that liberals rarely confront directly. The problem is this: the value of labor, like anything else is subjective. That is, when an employer is evaluating whether to hire someone or to retain an employee, he places a value on that person’s work. That value is entirely subjective. The worker, on the other hand, does the same thing. He places a value on the money and other benefits that are being offered to him. That value is entirely subjective.

Let’s assume that an employer is considering hiring a person. He subjectively places a value of $10 per hour on the person’s labor services. Let’s say that the worker offers to work at $12 per hour.

Will the person be hired? No. The most the employer is willing to pay is $10 per hour because that’s the value that he has subjectively placed on the value of the person’s labor services.

So, if the employee wants the job, he has to drop down to $10 per hour. If he does so, then there is a meeting of the minds. The employer values the work more than he does the $10. The employee values the $10 more than he values what he could otherwise do with his time and labor.

What happens if the government establishes by law a minimum wage of $12? Well, we know that the minimum-wage law doesn’t force the employer to hire the worker. It simply says that if the employer does hire someone, he is required to pay $12 an hour.

In our example, the employer will simply not hire the worker, given that he places a subjective value of only $10 on his services. And the employee will not be able to lower the amount he’d be willing to accept to $10 because the law prohibits him from doing so.

Theoretically, it’s possible that the minimum wage could be set so long that it’s irrelevant. For example, suppose every employer in the country places a minimum value on workers of $5 an hour. If the minimum wage is set at $3 an hour, obviously it becomes irrelevant because it doesn’t prevent anyone from getting employed. Even though the minimum wage is set at $3, everyone will be getting paid at least $5 because that’s the value that employers place on everyone’s labor.

In fact, think about all the businesses that pay workers more than the legally established minimum. The reason they do that is because the value that they place on their workers is higher than the legally established minimum. In such cases, the minimum wage is irrelevant. It’s not causing harm in the sense of locking people out of the labor market.

The problem with unemployment arises when some people’s labor is valued by employers at an amount that is lower than the legally established minimum.

Consider, for example, if the minimum wage was established at $1,000 per hour. Isn’t it easy to see that many employers would not place a value of $1,000 per hour on their workers? What would happen to such workers? They would be without jobs, most likely permanently.

As one moves down the range of minimum-wage figures, the problem becomes less aggravated. At $100, less would be unemployed. At $10 an hour, even less.

The problem is that the minimum wage is inevitably set at a level at which at least some people are going to be locked out simply because their labor is not valued by employers at that price.

What happens to those people? They’re prevented by law from entering the workplace, where they could have learned skills and a work ethic that would make them more marketable in the future.

Rather than advocating an elimination of the minimum wage to enable those people to work at a lower wage, liberals advocate that they go on welfare, where some of them stay the rest of their lives.

And guess where the welfare comes from. You guessed it — from taxes that are imposed on the business that would have been willing to hire the worker at a lower wage and which the worker would have been willing to accept.

In other words, in the mind of the liberal, a person is better off sitting at home on government welfare rather than working at a business at a lower wage.

And there’s another factor to consider here. The minimum-wage law also prevents the poor from opening businesses in which they hire friends and relatives at low wages in order to compete against the rich, well-established businesses.

Minimum-wage laws show that when it comes to government policy, good intentions are irrelevant. While liberals purport to love the poor, their minimum-wage laws are among the worst things that could ever do to the poor.

This post was written by:

Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.