This is subject of a recent debate featuring Libertarian’s Russ Roberts and Jim Dorn as well as Progressive’s Jared Bernstein and Karen Kornbluh. Unfortunately, the audience voted with Mr. Bernstein that we should keep the minimum wage. If you take the time to listen to the debate, you’ll find some rather startling admissions by Mr. Bernstein. He (and Ms. Kornbluh) do not believe the Law of Demand holds–that is the if the price of something goes up (in this case labor) then the quantity demanded will fall. Oh yes, occasionally they concede (implicitly) that the Law of Demand holds, but the effects are “small.” I thought Russ Roberts did a particularly good job of illustrating why–even if you agree the effects are small–they are not unimportant.
I would like to repeat the moral argument that Russ makes here, and invite comment. For those supporters of the minimum wage, what right or moral basis do you have to use the power of the law to make it illegal for a low-skilled worker to get a job? It is undeniably true that if a potential employee does not have the skills to bring $7.25 of value to a company they will not be hired at the minimum wage. Is it not immoral to make work illegal? Yet for some “small” subset, that is what we do. And this small subset are the least skilled workers in our economy, disproportionately hitting young people and minorities. It is precisely young people and minorities that benefit most from the job training and skills development that come with employment.
Of course Mr. Bernstein denies this. Another fundamental tenet of economics which Mr. Bernstein scoffs at is that in a competitive market, the worker is paid according to his or her marginal product. If you only have a few moments, I encourage you to look at Mr. Bernstein’s comments about 1:14 and then Mr. Roberts response–Russ nails the issue.
If progressives really believe what they say, then I have one question for them: why are you so stingy to the poorest of the poor? If the minimum wage truly has no effect on employment, then why are you unwilling to raise it to $20/hr? Or better yet, why not $35? Obviously they don’t believe it.
So we have two competing moral arguments. The Bernstein argument is that if you eliminate the minimum wage, some workers currently making the minimum wage will see their incomes fall, and these folks are desperately poor already–how can you be so heartless? The Roberts argument is made above, how can you pass a law that in effect condemns low-skilled workers to a wage rate of zero–it is illegal for them to have a job for which they are qualified. So how do we answer? Both of these competing arguments are likely true to a degree–some workers would see a wage cut if minimum wage were eliminated, while other workers would finally be able to gain employment. What are the exact gains and losses are at best a thorny empirical question. But are we restricted to a utilitarian calculus to simply add up the social welfare?
I don’t think so. While its likely true that some will be hurt by the loss of the minimum wage, the benefit they currently receive is only due to a harm that government inflicts on others–a harm that has no moral basis other than an arguable utilitarian calculus. On the other hand, those that are harmed by the minimum wage are unjustly denied the opportunity to work. While Ms. Kornbluh insists the moral argument is all on her side, I have to ask–what morality allows you to make it illegal for a low skilled worker to gain employment? Does it really make it ok if you only hurt a few people, that the effects are “small”? I find that a strange morality.
What say you?
Steve Adams
May 10, 2013
One has only to look at the recent collapse of a building, killing exploited workers. With out a high degree of morality workers throughout history are exploited. Are we that moral in America?
Jeff Haymond
May 10, 2013
Steve–the beauty of the market as an institution is that in a fallen world, markets provide the mechanism to constrain the natural sinfulness of man. How so? To answer that, consider what prevents your employer (let’s assume you’re working) from exploiting you by offering you the minimum wage (since I know you make far higher). The answer is that you would stop working for them. But wouldn’t that make you starve? No, there are other employers that would love to have you for a wage rate in excess of the minimum wage. Competition is the workers friend, and it is the surest way to prohibit exploitation.
Jennifer Clauson
May 12, 2013
I heard a news story on NPR Saturday morning. Fast food workers in Detroit were striking for a higher wage (they wanted $17/hr). Their premise was that a $17/hr wage was the amount needed to for a person with a child to live independently in the city. Can you imagine what would happen if fast food workers had their wages raised to that level? Half the burger places would close, robots might take over the low skill jobs, other wages would have to rise so the more educated workers didn’t flock to work at Wendy’s for more money, and a Big Mac would cost $6. Sounds ludicrous to me. Is it that difficult to follow the logic? But there was no suggestion on the NPR reporter’s end of any dire consequences. All the reporter added was that the living wage calculator actually showed that a wage of $18/hr was necessary for a single mother and her child to live in the city.
Jeff Haymond
May 13, 2013
I think its important not to let the argument be over how much it costs to live. I think we lose the argument then. The question is what is the best way for us to help people achieve a living wage. The Earned Income Tax Credit is a better way to achieve this social objective. It’s interesting that progressives are at the forefront of claiming that helping people achieve a living wage is a legitimate social objective, but they don’t want to solve it socially–i.e., everyone pay through the tax system. They want to have employers solely pay this burden. And that’s where the economics kicks in…since in a competitive market system the employer cannot afford to be in the business of charity.
Anonymous
May 16, 2013
Dr. Haymond, I thoroughly enjoyed reading your argument. The one issue I have is talking about economics in moral terms – at least in the context of the government’s control of the economy. I fear opening the door to other “moral arguments.”
Jeff Haymond
May 17, 2013
Perhaps I failed in my initial post. A main thrust is that the public policy debates (to include economic issues) inevitably and necessarily involve competing moral claims. A major purpose of this blog is to bring the (often hidden) moral issues and presuppositions to light. We are unapologetic in bringing our understanding of a Christian worldview into the debate. And make no mistake, should we be silent, the other side will not be. Notice in this particular issue Ms Kornblugh insists the moral arguments are all on her side. There is no escape from what Thomas Sowell called Conflict of Visions (see his book of that title).