Bad Economics & Bad Theology: the Christian case for the minimum wage

Posted on January 31, 2014 by

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This is the gift that keeps on giving for blogging Bereans; Dr. Wheeler has ably commented in his post today on the minimum wage but no sooner did he publish it than I found a piece by Elizabeth Stocker making the “Christian” case for the minimum wage.  Please read her article and provide your response to her argument–what points do you find persuasive and what do you find weak, both theologically and economically?  On Monday I will provide an extended edit to this post to give my thoughts–addressing both Ms. Stocker and any of your comments below.

Show us your best, fellow Bereans!

EDIT 3 FEB 2014

Lot’s of good discussion, and an excellent additional blog post by Prof Wheeler.   I’ll just add some thoughts to the mix.

First, Ms. Stocker purportedly studied the empirical data to show that there is no effect of the minimum wage, but this is wrong on several fronts.  First, as others have mentioned, the vast number of empirical studies do show a negative effect–only a small minority show no effect.  And even there, there are confounding factors (such as the phase in of minimum wage increases over several years, so that employment may not drop if entrepreneurs have already adjusted to the future reality).  Yet notice in the precision of her words, a minimum wage hike would result in a “net reduction in poverty.”  This says nothing about the individuals involved.  Is it moral if we can make four workers better off with a minimum wage hike while making two workers worse off?  Can we really apply utilitarian calculus as the basis of our Christian ethics?  I think not.  And Prof Wheeler’s point is surely true that the benefits of a minimum wage increase do not go to the poorest of the poor, but usually the children of the middle and upper class.  As Arthur Brooks states:

So minimum-wage laws create both winners and losers. The winners tend to be secondary earners in middle-class households, and the losers tend to be the least-educated workers with the most tenuous grip on jobs to begin with. For short, imagine a public policy that reduces opportunity among urban minority youth in order to provide pay raises for my teenage children.

Once we understand there are losers that we are deliberately going to harm (those with the least skills and prospects), I ask the question, why are we going to support a public policy that harms another?  Ms. Stocker argues that workers have a right to jobs.  But do they only have a right to jobs that she believes pay enough?  If their skills are not worth the higher minimum wage, what right does anyone have to make it illegal for them to work for less?

Second is Ms. Stocker’s claim that “there is an imperative to raise wages for those who don’t earn enough to provide for themselves or their families.”  Now this certainly sounds good, but this is rife with subjectivity.  Who decides how much is enough?  Virtually all Americans are “rich” compared to many in the world today.  Further, we are certainly rich compared to Americans 100 years ago.  I’ll leave it to the reader to peruse some online resources on real wage growth over the last 150 years–whatever the debate is over the last 30 years, it is undeniable that we are far better off today than 150 years ago when Pope Leo wrote Rerum Novarum.  Let’s be very clear–minimum wage jobs are entry-level positions.  These are not positions intended to support a family of four.  In years past, young people were discouraged from marriage until they had sufficient income to support a family, and this provided impetus to work hard and get ahead.  Now the demand is to have a sufficient income at the lowest rung of the ladder.  This seems misplaced on multiple dimensions.  But we should just ask this–what is Ms. Stocker’s proof that we should all get on board the minimum wage train?  Where is the imperative she speaks of?  And more importantly, where is the biblical imperative?

Third, and something we’ve harped on before, is that suggesting the minimum wage won’t lead to bad results for at least some portion of workers is to deny that there is a science of economics.  Demand curves slope downward; studies that claim no effect are disputing the theoretical fundamental foundations of economics–the Law of Demand and Marginal Utility theory.  There are a lot of economic “truths” that I likewise reject–especially Keynesian macroeconomic thinking.  But to reject macro leaves the science of economics more firmly grounded, not less.  To reject the Law of Demand is to reject economics altogether.

So what is our alternative?  The only way to increase wages of the poor (or anyone else) is to increase their productivity–make them worth more in the market place.  That means reforming our failed public schools.  That means stop subsidizing poor choices that lead to social breakdown.  That means encouraging entrepreneurship and growth in our economy.  A rising tide does lift all boats.  Let’s bring the water in.

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