Earlier this month I wrote a brief post explaining why raising the minimum wage is a dumb idea from an economic perspective and harms the very people it’s supposed to help. In a nutshell, setting an arbitrary minimum wage may make us feel good, but it shuts the young, the poorly educated, and the low-skilled out of the job market by ignoring the basic economic laws of supply and demand.
So raising the minimum wage allows us to smugly congratulate ourselves over the lucky few who still get jobs and are paid more, but we don’t see the many others who want to work but can’t because the value they can add to a good or service is less than the minimum wage an employer would have to pay them.
Actually we do see them. They’re on the street corners with cardboard signs. They’re using SNAP cards at the grocery store. And they’re standing in the unemployment line.
But what about the argument we often hear that employers have a responsibility to pay people more? Minimum wage advocates make a compelling case that it’s just “right” that every worker should earn enough to live on irrespective of their work’s actual monetary value. The problem with that argument is that it confuses social policy with economic policy, and turns on its head the idea of who’s responsible for which of those things.
As a civil society we’ve voluntarily – and correctly – accepted a responsibility to help those among us who need help. Nothing wrong with that. But why have we made it the employer’s responsibility to fulfill that commitment? Why should we, as a civil society, pawn off our duty to ensure some level of dignity and safety for our most vulnerable citizens to businesses whose job it is to sell stuff and provide a return on their owners’ investments?
The answer is we shouldn’t. It’s irresponsible and, by creating an inefficient bureaucracy to enforce that abdication of responsibility, it’s enormously wasteful.
If we agree as a civil society that Mr. Jones needs another $1,000 to raise his family, then we should simply write him a check for $1,000, not go to his employer and say “Pay Mr. Jones another $1,000 or we’ll throw you in jail.” That way we know why we wrote the check, we know who it went to, and we haven’t hidden the cost of our decision in the price of milk or hamburgers or anything else.
What do we do instead? We price Mr. Jones out of the job market, pay him unemployment, and then set up a bureaucracy that replicates Monster.com but with higher cost and lower results until he either drops out of the labor pool or becomes hirable by increasing his skills or education. Know what the best job training program in the world is? A job.
How about if we allow Mr. Jones to get a job at a wage that is commensurate with the value he’s able to add, provide him and his family a safety net if that’s required, and watch him climb up the ladder of success using his own talents, ambitions, skills, and even luck? Our economy would have a more productive contributor. Mr. Jones would enjoy the fulfillment and happiness that come with earned success and taking care of his family. And we’d have no need for a bureaucracy to write him a check for doing nothing, when in fact he’d love to be working if not for the barriers we’ve placed in front of him. We also wouldn’t be hiding the price of our social policy decisions in the price of milk, which amounts to a terribly regressive tax on those who are least able to afford it.
Hysterics and hyperbole to the contrary, the proportion of Americans earning the minimum wage is actually decreasing, and those who earn it are predominantly young, single, and poorly educated – all temporary or soluble conditions. Simply put, raising the minimum wage is a crude feel-good solution in search of a problem that abdicates our responsibility to take care of each other and harms the very people its supporters say they’re trying to help.