It absolutely amazes me that there are still people who defend a government-mandated minimum wage. It is truly a testament to the long-lasting effect of indoctrination and propaganda to which students are subjected in public (i.e. government) schools and state-supported colleges and universities.
The latest example of this phenomenon is the editorial board at the Los Angeles Times. In an editorial yesterday, the Times called for an increase in the federal minimum wage of $7.25 per hour. The Times says that such an increase would help ensure that “working people earn a decent living.”
I’ll bet that if the members of the Times’s editorial board were asked if they favor America’s “free-enterprise system,” they would all respond, “You bet we do. As Americans, we are all advocates of free enterprise.”
But free enterprise means enterprise that is free of government control, regulation, planning, and management. How can enterprise be free if government is dictating how much businesses must pay workers?
The idea of actually freeing economic enterprise from government control is anathema to statists because they are convinced that disaster would ensue, especially for workers. If the government doesn’t set a minimum wage, they believe, workers would receive a wage of $1 dollar per hour or even less.
That mindset, of course, fails to take into consideration the economic law of supply and demand. If labor is scarce and demand for labor is high, greedy, profit-seeking employers will not be able to find workers who are willing to work for $1 per hour. That’s because other employers will be hiring them for $5 or $10 or $20 or $30 an hour. If an employer isn’t willing to match what his competitor is offering, then that employer doesn’t get the workers. It is the law of supply and demand, not the whims of individual employers, that determine how much workers are going to be paid.
As the Times’s editorial board points out, the states have enacted their own minimum-wage laws, some of which set the minimum wage at $15 per hour. But the fact is that many businesses pay their workers more than $15 per hour. How is that possible? If employers would pay only $1 per hour if there was no minimum wage, as statists maintain, then why are there employers who pay more than $15 per hour, given that it would be in their interest to pay no more than the mandated $15?
The answer is the law of supply and demand. They are paying more than the state-mandated minimum because labor is relatively scarce and demand for labor is high. That’s what drives up the wages that are paid to employees.
In actuality, the minimum wage is a disaster for some workers — specifically those workers whose labor is valued by employers at less than the state-mandated minimum. For example, there is a chronic high employment rate among black teenagers, something that I’m sure that that Times’s editorial board would lament. But the problem is that the Times’s editorial board is unable to see that it is the minimum wage that is responsible for that phenomenon. That’s because employers subjectively place a value on the labor of black teenagers that is lower than the state-mandated minimum wage.
In other words, employers would be willing to play black teenagers, say, $5 per hour, and many black teenagers would be willing to accept $5 per hour as a way to get their foot on the first rung of the economic ladder. But the minimum-wage law prohibits this exchange from taking place. That means the black teenager goes unemployed, which oftentimes means going into the drug trade, given the enormous black-market profits that come with the government’s war on drugs, getting busted, and spending the next 10 or 20 years in prison.
What’s amazing is that there are still people that honestly believe that the state can improve the overall standard of living through economic control, regulation, planning, and management of economic enterprise. If that were the case, every nation on earth would be awash in economic prosperity and rising standards of living. Indeed, why don’t regimes in the poorest nations simply raise their minimum-wage rates to $100 per hour? Surely government officials in impoverished nations have heard about the minimum wage.
Throughout history, governments have managed, directed, regulated, planned, and controlled economic activity. What statists don’t realize is that that is the reason why the vast majority of people have lived lives of poverty throughout the ages. The key to rising standards of living lies in separating economy and the state — that is, prohibiting government from interfering with economic activity. A great place to start would be the repeal of minimum-wage laws at both the federal and state levels.