What’s Important about the Minimum Wage

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In the last few days I’ve participated in several threads on social media about the minimum wage and there some misconceptions I wish to address.

There’s a couple of mechanisms to ensure a fair wage that isn’t reliant on government law.  For specialists, the demand is typically high enough that they usually have enough power to negotiate on their own behalf to arrive at an equitable wage.  Non-specialists though often have trouble if the supply of workers is enough to bring down the costs of labor below the value of the service.  In this case workers often band together to form collective bargaining units to redress the shift in negotiating power.  If these two avenues beyond simple supply and demand for increasing wages fail, then workers need a third option to help correct distortions in the labor market.

Labor of any kind produces value for the company.  The company financially compensates employees or contractors for this increase in value.  However, the market can bid the price for your labor below the cost to you as an individual.  The power disparity between employee and employer shifts to something coercive and dysfunctional.  To put it plainly, employers can steal the value produced by the workers.  I say coercive because workers need wages to live regardless of the difference in value between output and compensation.  “I agree to have the bulk of my value stolen because the alternative is starving to death on the streets”.  Highly paid specialists who have the resources to do so can easily withhold their services until the demand increases to the point where the value of their labor is equal to their compensation, but this can only happen if there is no power disparity between the employer and the employee.  The working poor don’t have the leverage to negotiate on that level.  In so much as we have laws that prevent a burglar from coming into your home and taking your things, we have laws that prevent employers from taking value from their employees.  This is the minimum wage law.  It demands a fair trade in labor for financial compensation.

Some things that do NOT matter.

The wealth or profitability of the business.
Opponents of increasing minimum wages often argue that this will drive under-performing companies out of business.  Supporters argue that many businesses can afford to pay workers more.  Often much more.  Both are null points.  The only consideration is the value of the labor.  If you are paying your workers so little that they must obtain public assistance to survive, it’s not enough.  The state is now subsidizing your business.  This anti-capitalist and anti-democratic, and economically unhealthy in the long run.

Who is doing the work
What really grinds my gears is when I hear arguments about how the working poor don’t deserve to be compensated for their labor because the labor is not particularly skilled.  What the hell guys?  It doesn’t matter if it’s a father of 10 or a high school teenager.  It doesn’t matter if he’s upwardly mobile or economically stagnant.  By the way, these are exactly the people supporting the bulk of the economy through spending.  If you want to grow the economy pay the workers enough to be judicious consumers.  Admittedly this is a value judgment on my part and it’s not really 100% relevant.  What is 100% is that the who the worker is or wants has no bearing on what I should pay him.  Think of it another way.  If a Doctor wanted to be a ditch digger for a year should I pay him what a doctor makes?  Of course not.  I pay him for the value of the ditch that he is digging.  If it’s someone from the working poor do I pay him less because ditch digging is an entry level position?  No, you pay for the ditch.  It doesn’t matter if it’s a ditch or hamburgers you pay your labor costs.

Increase in consumer goods
Whether or not an increase in the minimum wage will increase the price of goods is controversial.  I could bring out my economics paper that says any increase is trivial and that the increase in wages would spur demand offsetting any increase in costs.  You bring out your economics paper that says the cost of everything will skyrocket ultimately bringing down our civilization.   Neither is important.  If your hamburger goes from 1 dollar to 5 because that reflects a fair wage for workers than it’s time to start paying 5 dollars a hamburger.  If no one wants to pay that much for a hamburger then the hamburger store will close.  This is fine with me.  The free market will determine the success of a businesses, not the state.  I remind you that if you can’t pay your workers enough to support themselves then your business is being subsidized by the government.  Who’s a fan of corporate subsidies?  I am! I am!  The alternative is to increase taxes to greatly expand the social safety net.  You can see how you can get an nasty cycle of taxes going to support labor costs.

Word of advice.
You want the government out of the lives of businesses, you’ll have to do a couple of things.  Roll back restrictions on unions and union busting and support government plans for training and education.  This will increase specialists who can negotiate the bids for their labor and help the working class work together for their own interests without government assistance.  The other thing you can do is increase spending on infrastructure, research and development, education, and healthcare.  All these things support the middle class like nothing else.  Finally, if you want increase the middle class and thus the key economic engine in this country, help the poor with everything they need and then some.  Get rid of punitive drug laws and instead fund treatment programs, support food, housing, child care, health care (including and especially mental health), education from pre-k through graduate school, transportation, and fair wages.  This country is at it’s best when it’s focused on helping others both individually and collectively.


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