Twittering About Minimum Wage

@yipeedog I guess since higher wages hurt the economy, you wouldn’t mind giving up most of your paycheck.”

This lovely note was on my Twitter feed this morning in reply to this article – A Higher Minimum Wage Harms the Economy I repost it here because it is absolutely representative of the devolution and conclusion of every recent discussion I have had regarding minimum wage laws (and the prospect of a Federal increase in the same).

Each of these exchanges follow a fairly similar track.

I note that jobs are created when an activity can generate value in excess of the cost of performing the activity. Seems pretty straight forward, an employer will hire if the employee produces net positive revenue after all expenses (wages, benefits, taxes, computer, desk, pens, etc.) are factored in. Thus, if you raise the cost of one of the expense elements you decrease the net revenue (the “marginal value”). It also seems totally reasonable to then conclude that SOME increases will cause the net calculation to turn negative on SOME jobs. Net negative revenue being unsustainable in the real world, employers will have to respond by adjusting their employment structure. This generally takes three forms when talking about minimum wage hikes:

1) Cuts to non-wage benefits. Employee gets a nominal hourly wage raise but they lose a sick day, education reimbursement, the cappuccino machine, etc.

2) Automation. Employers bring more technological capital to bear vs hiring people. This might be to make current employees more productive or introduce a new service that doesn’t require people.

3) Directly reducing employment. In low margin businesses, this cost increase could preclude hiring. Often due to relationships this luckily will not translate into firings but it will absolutely be factored in to future hiring decisions, reducing opportunities for those trying to enter the workforce.

I’m not sure where any of this is less than just common sense and a bare minimum knowledge of financial accounting, but it consistently elicits responses like the one I included above. Either I should have my money taken so I can live on an arbitrarily defined “minimum” wage or sometimes it’s that companies who can’t meet the arbitrary floor should go out of business. I guess because they’re not “good enough” or something… This further seems to be based on an underlying “logic” that zero (no job) is somehow better than more than zero (a job).

Now I agree that those who are blessed with resources beyond what they can use for themselves should not horde those valuables for no good use. Scrooge McDuck swimming in his pool of money is not a moral vision. But that’s also a fantastical, unreal vision, people DON’T pile up coins in which to do laps.

John Locke in chapter 5 of his 2nd Treatise, “Of Property”, lays out a moral vision for possessions and the final step is charity. We should make things as productive as possible (employ people, innovate, invent, produce, etc.), we should trade with others who are better specialized and can do more with less (by doing so we all become wealthier, more stuff from less expense), we should use currency to avoid spoilage of real goods and to ensure my wealth does not require me to horde real goods and services which could infringe on another’s ability to gather wealth. But finally he said, if you’ve done ALL of that and you STILL have no higher productive use to which to put your resources (a subjective matter for sure), charity is then not only available but it is morally REQUIRED.

Should some of my wages go to those who have fewer material blessings than I do? Yes.

But who is best at determining what of my resources is needed by me and being put to productive use by me, and what portion is available for gifts, charity and social service? I am.

Those that constantly demand my money in discussions of minimum wage laws seem to think government mandate is equivalent to charitable giving. I think they would assert that I have a moral duty to help those poorer than me, but then they proceed to claim an artificial wage floor somehow meets the requirements of that duty.

Well I DO have a moral duty to help those poorer than me, as Locke so eloquently explained several hundred years ago. But minimum wage laws HARM the least well off by automating and pricing them out of jobs, thus my real duty is to RESIST such prima facie nonsense not condone and support it.

I’m going to keep giving and finding real ways to actually help those in most need, I hope everyone else will do that too. But equally I hope we all start calling out those that want to slap their names on government economic manipulation that is wholly style over substance, intentions over outcomes, fantasy over reality.

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