The minimum wage as a political issue has long been a dangerous one to oppose. Recent trends have included phrases such as “living wage” in addition to a minimum, though the sentiments are much the same as they were when the minimum wage was first enacted back in 1933 (a law the Supreme Court later found unconstitutional). Proponents of wage controls generally make moral arguments, primarily that wages should reflect some correlation to the cost of living at some level of affluence, and that failing to pay such a wage was an immoral act. Opponents, however, tend to focus on practical arguments, noting that minimum wage laws create unemployment among low-skilled and young workers. These arguments do not meet each other very well, for moral arguments require moral rebuttals, and vice versa.
I. Employer and Employee: An Amoral Relationship
Let’s break down the moral arguments for wage controls, whether you choose to define them as “living wages” or “minimum wages.”
Argument: People require a certain amount of money or income to live. As such, denying to any person the level of income necessary to live victimizes them; it is immoral. Therefore, companies that pay low wages are acting immorally.
Rebuttal: This argument makes an assumption that individuals and corporations that employ others for productive purposes have a moral obligation toward some preferable condition. This is not true, for several reasons. Whenever an employer and employee work together it is toward some end of production, either a good or a service that is sold to a third party. Their relationship is voluntary; either party may exit the relationship when they choose. The worker is not a slave of the company, so the company has no moral obligation (in a biblical sense) to see to his end needs.
Businesses pay workers based on the amount of production they bring to the end goal, not based on the needs of the worker. Indeed, it would be very difficult to even determine what the end needs of all the employees are attempt to meet them. The goal is to produce a product for consumers at a particular price point. This is a thoroughly amoral condition.
Attempting to prescribe wages based on the many consequences and costs of life is also a consequentialist endeavor. The act of paying a worker a low wage is argued as immoral not because of some universality of preference in wage, but because the consequence is not a preferable condition. This bad condition is also not universal; minimum wage may be a boon to one person, who has low living expenses, and be a very low wage to another who has high living expenses. It’s not quite future crime, but fairly close to it.
Not addressed in the argument is the option to not hire somebody at all, which is the result of wage controls. If a company refuses to hire somebody at all, are they acting immorally by denying the person a living wage by denying them a job?
Argument: If employers are unwilling to do what is right, the government must step in and force them to pay their employees a living wage.
Rebuttal: The most important moral argument against minimum wage is the means by which it is achieved, justified in the above argument by the fact that companies do not voluntarily pay their workers what they are entitled to. Minimum wage laws make the government a silent third party in any agreement between two individuals, with the threat of force (death) the consequence for acting outside of the wage control. If somebody wants to work for less than the minimum wage, they are legally prohibited from doing so (if you are wondering why anyone would want to work for less than minimum wage, remember that philosophically wants are always part of a realm of possibilities, not part of imagination; an individual with no skills might prefer to work for a low wage rather than be unemployed). In essence, enforcing minimum wage is an act of violence against the worker and employer.
II. “Right to Life”
Behind both arguments above is the concept of entitlement, which can be called a “positive right.” As a matter of philosophy and semantics, I consider all authentic rights to be negative, in other words, “freedom from” things like theft, murder, or interference in your personal affairs. Entitlements, which are sometimes called rights by proponents of such, are usually expressed as a “right to,” such as a right to healthcare, security, etc. Sometimes, as was the case when Franklin Roosevelt was promoting the “worker’s bill of rights,” these entitlements are expressed as reflexively negative, such as the “right to be free from unfair completion,” or the right to be “free from hunger,” and so on. Of course, freedom from hunger really means entitlement to food, not freedom to buy food, as freedom requires no special condition; it is the default.
This concept is important when understanding the moral claim for a “living wage.” Some argue that it is an extension of the “right to life,” in so much as you must be able to eat and find shelter to live. However, an authentic “right to life” really means a freedom from being murdered by others, and if it is extended beyond such, the argument becomes self-defeating; you must threaten murder in order to use state power to tax in order to provide entitlement.
Even ignoring the double-think involved with such a position, in order for something to be provided, someone must do the providing. Wage controls place this blame on companies, organizations whose collective purpose is a good or service, not the welfare of people everywhere, as stated above. This extension of the right is also difficult to determine, or make universal (also stated above), because of the variance of needs across geographic lines and across the myriad of individuals’ choices. Contrast this to a negative right, in which somebody’s right not to be murdered is very easily determined. You have either been murdered or not; there is no grey area.
If the minimum wage were some cure for poverty, then seventy years’ worth of experimentation in that department should have yielded some claim to that effect. Instead, poverty continues as it always has, though the people who are considered poor today are substantially better off than the middle class when the law was enacted. If it were really possible to help people out by controlling wages, we could just all make 100,000 dollars a year and be perfectly happy. Even those who are proponents of such programs would not go that far, for they know that wage controls cannot have such an effect. That is why minimum wage rates have hovered at or slightly below the market equilibrium base rate for unskilled labor for the past 20 years or so.
The truth is that the minimum wage does not have a great effect at the moment, positive or negative, because inflation has made it mostly irrelevant. Even large “evil” companies like Walmart employ only a small percentage of their workforce at the minimum rate. If wages were actually raised above the market equilibrium, the effects would be mostly negative, such as they are. For those near the bottom, some might see a slight raise. Others, above that wage, would likely see no change whatsoever. The middle and upper classes would not see their wages go up, for setting a market minimum for wages does not cause all wages to go up.
The negative is that those who have low skills, or who are young (these are usually the same group) will find a tougher job market waiting for them. Employers are less likely to hire an employee when his or her productive output will not match his wage for some time while he acquires skills. They may take a chance on an investment of human capital, but they will need convincing.
IV. You Hate the Poor!
First, I can only feel emotions toward individuals, not whole classes of people. Second, if I did hate the poor, I’d be pretty self-hating, as I’ve made far below what the US government considers the poverty line for the last few years (and I’ve never collected a dime in entitlements, in case you are wondering, though I would have if it were possible, given how much I still pay in taxes as a self-employed person). I don’t hate anyone, which is why I am an advocate for freedom. Yet this is one of the arguments given against proponents of freedom, the ad-hominem that we “hate the poor.”
Minimum wage is actually very bad for the poor and the young, who are usually the same category. It makes entry into the job market harder, because when you set a minimum wage, you also set a minimum of production. Workers who do not meet that minimum of production, usually because they lack skills, have a harder time finding work. This is the way in which price controls on labor create unemployment.
A worker can gain skills two ways: through education, or through work experience. The latter must be paid for in advance, or else financed as debt, making the worker start behind when he enters the workforce. Of course, if he can gain training and experience through work itself, he can increase his human capital while making money. Once he has skills, he can demand higher wages from his employer, of find another who will pay him according to his value. The minimum wage, therefore, would only serve him for a limited time while he increases his human capital.
Minimum wage laws are also of note because, unlike things like direct entitlements, they act violently against both the poor person and the rich person, buy preventing the poor person from working for a wage he might find agreeable, at least for a time.
V. Just Like Peter Schiff, You Think the Intellectually Disabled are Worthless
I’m referencing, of course, a horribly dishonest Daily Show feature of an interview of Peter Schiff (an economist and CEO, as well as radio host and advocate for freedom), in which a four hour interview is reduced to a ninety second heavily edited interchange that makes Peter sound like he said “mentally retarded” people are worth two dollars an hour. I could explore the moral problems of the presentation, such as the fact that before that answer Peter Schiff pondered how anyone could have such little value, or how the daily show keeps on interns that are unpaid, but since it is from a comedy show and subject to its own farce I shall make just a single point.
Of the two people sitting in that room, only Peter Schiff sees any value with individuals who have intellectual disabilities. If a company must hire a person with Down syndrome, with its cognitive impairment component present, at some sort of “living wage,” then that person will essentially become unemployable, since he or she may not have the productive capacities to produce that equivalent wage. Schiff, on the other hand, sees them as valuable to the degree that they can produce, even if it is limited by their disability. A free market means that every individual, whether disabled mentally or physically, has the capacity to contribute to society.
With a living wage, many disabled people may become effectively worthless to society, which they aren’t. Allowing disabled individuals to work is good for society, even if production is not great, because it frees up other human capital and also provides a meaningful service to consumers. It is good for the individuals who are hired, who may have the opportunity to develop skills, get paid and have financial goals of their own, and make social connections when they would otherwise be marginalized in society because of their disability. The disabled don’t have to be a charity case; they can contribute meaningfully to society, if only they are permitted.
VI. Walmart as Welfare Queen
I’d like to address another point that is often thrown around by advocates of things like “living wages,” and that is the notion that companies who hire unskilled labor for relatively low wages are somehow gaming the system because their employees consume entitlements. If you hunt you can probably find the practical data in support or rejection of the notion, but as a principled argument, you cannot pin upon McDonalds or Walmart the cost of entitlement spending.
Even if they benefit somehow from programs such as food stamps, companies that hire low-skill workers did not create the law, or carry it out using violence. The fact remains that employees are paid based on their ability to produce; external factors are not relevant. If there were no entitlements, would workers be able to demand more? The answer is no, because their pay is determined by how they contribute to earnings.
When making the argument for a living wage, the question must be also be begged: why should cost of charity (for that is what paying a worker more than he produces really is) be placed wholly on those who choose to employ others in productive activities? We as individuals have the capacity to help the poor directly, no violent state intervention necessary. If violence is somehow justified (for those of you willing to sacrifice the means of violence to the end of egalitarianism), why should it be upon the people who are employers, and not everyone? We could just as easily (perhaps more so) accomplish the same thing using a negative income tax, which does not cast into the role of robber-baron those who wish to employ others.
I hope my points have made you think, however you may value the minimum wage and its role in society. One thing to consider when thinking about the raising of the minimum wage is how much it has been raised in the past, and how much inflation has lowered it over the years, and how much economic efficiency has in turn prevented the devaluing of labor. In 1963 the minimum wage was $1.25, but was payable in $25 worth of today’s dollars in silver (I will provide a useful link to some organized data on the subject at the bottom). It may seem like we are being quite stingy with today’s money, but in the past fifty years the economy has become exponentially more efficient, and that $25 worth of silver will by more goods and services of a higher quality than existed in the past. The free market, with its ability to produce more and more for less and less, has been the saving grace of the poor, not the government regulators, who only have the ability enact violence, even between two people who have already agreed on a price for labor.
(I'm not linking to the Daily Show, or the Huffington Post. They don't deserve the traffic.)