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Minimum wage

Policy areas: 
Social welfare
Rick's thoughts: 

​Minimum wage - the political football everyone loves to kick around. 

Given the abuse this pigskin has taken the real question is - why isn't it deflated?

Oh that's right - politicians need some votes, and voters aren't paying attention. What is that called - de rigueur? The rigor of thinking ... overly strenuous for many.

It isn't a very difficult topic, in spite of economists' supreme efforts to make it so. You don't get your PhD in economics by writing a simple explanation of reality, however, you have to have a lot of statistical analysis (regressions! run regressions! run more of them! don't stop until you discover a statistical anomaly big enough to hang your hat on!) and, most importantly, your conclusion has to call for 'more investigation' into the topic. Another word for this is 'tenure.'

The basics are this. Fat cat bosses hire grunts when they can make money from their labor. Let's say you can make $10 worth of widgets every hour. Boss man will be glad to pay you less than that, since he comes out ahead (never say this word in public, but that's called 'profit'). Boss man's wife, who really runs the business, will never let him pay you more than $9.99 per hour. This isn't hard to understand, is it? You get a job when your labor creates value for somebody else. You can claim they are exploiting you if you wish, but that's not really the minimum wage issue, so let's not talk about it here.

Mrs. Bossy doesn't actually want to pay you $9.99, of course, because a penny won't buy her very many friends. She would prefer to pay you the penny, and keep the $9.99 for herself. So why doesn't she?

Because, being a highly educated reader on this website, you are smart enough to know the burger joint down the street will pay you $5.00 an hour for flipping them off. The grill. Onto a bun.

Nobody, and certainly not you, is going to work for a penny an hour when the alternative is $5.00 an hour. When the lady in charge hears this, she offers you $5.01. The burger joint goes to $5.02. Back and forth and back and forth you eventually end up making widgets for, let's say, $5.25 an hour. Apparently you can only flip off $5.24 worth of burgers per hour, so the FF joint won't pay you any more than that, and your new boss doesn't have to. She is quite happy.

So are you, because you have a job. Of course you'd like to get the entire $9.99, and in fact you would prefer $99.99, but the labor market prevents you from getting paid the first, and the fact you are unqualified for any job that generates the boss $100.00 per hour prevents you from getting the second. You go to work and earn $5.25, just like the rest of us chumps.

Now suppose a politician comes along and says he will raise the minimum wage to $10.10. Oh wait - that's already happened, so let's think about what's going to happen next. Burger joint either raises the price of burgers, or goes out of business. Widget factory either raises the price of widgets, or goes out of business. What's that called when prices on burgers and widgets are skyrocketing? Inflation.

Pretty soon you notice that $10.10 is buying you just about as much as your $5.25 used to. You are back to where you started. But, it took a few years, and you aren't paying attention, so when a politician comes along and says the minimum wage should be increased to $15.50 per hour ... you fall for it. You really aren't as smart as I thought you were. That slimy little politician fooled you and your friends again. And again. And again. It's de rigueur.

Well, to be totally honest, I don't exactly care about your dilemma. If you are so slow you can get fooled repeatedly by the same trick, maybe that's just your lot in life. A harsh reality, but chin up - compared with the group of people I actually care about, you are living on easy street.

The group of people I actually care about consists of people who aren't worth the minimum wage. Of course, as people, they are worth just as much as you and I are. Life is infinitely precious and we don't measure the value of one human life against the value of another human life to decide who comes out on top. When it comes to work, however, we do measure people - we measure their 'economic worth.' We measure their output - what they are able to produce. And we pay them less than that. We've already talked about the concept.

Imagine people whose output - their economic worth - is less than minimum wage. I'm thinking of my sister, but you should think of someone you know who just doesn't have the ability to create a lot of output while working. That's a joke about my sister, by the way, but she'll never read it so I won't have the satisfaction of hearing her reaction. In all seriousness I do know people who fall into that category. I'm not going to name them, because they don't need to be labeled by me in public, but there are more than a few of them. They are both my friends, and the people I care about helping. I want them to participate fully in the society I live in, as equals to myself. Going to work, working hard, coming home on Friday night with a paycheck big enough to enable them to pay their bills. Just like me. Just like you.

A minimum wage prevents this from happening. A minimum wage stops these people from ever getting a job.  A minimum wage excludes them from society; it tells them they aren't good enough to be one of us, they have to be one of them. The other people. The people who aren't normal, who aren't accepted, who aren't in the same group of humans as the rest of us. Somebody different.

Is this the message you really want to send to my friends? I doubt it.

Before continuing I just want to relate one incident. A few weeks ago I was in a supermarket in a small Iowa town. There was someone stocking the shelves. It was my first time in the store and I was looking for something and so I asked the stocker. I won't reveal the details of the story, because they could reveal his identity, but I quickly identified him as one of the people I am talking about. I was absolutely delighted to give him the opportunity to help me, which he did. It made me feel very proud to be a member of the human race, and to be in a store that gave this fellow a job, and to be the beneficiary of his work (because that's what it was - it was his work, his job, his daily grind).

[This is not a photo of his work, by the way, this is a photo of the work of a bunch of college students, which gives you some idea of the economic worth of a college degree.]

It showed me that some private employers (the supermarket) are willing to step up to the plate and hire people with low economic worth, and lose money in the process (full confession - I don't know the exact details of the arrangement, but I am aware there are some programs designed to facilitate this, and those programs probably receive government money). But are there enough such employers?

In countries without minimum wages, or perhaps more accurately in countries where minimum wage laws can be safely ignored, everybody gets a job. Not necessarily paying enough to survive on, but a job nevertheless. I see this every day in Guatemala, where I spend a lot of time volunteering for a local NGO as a volcano guide, and in every other relatively poor country I travel to. The economies of these countries generally stink, and I'm not recommending we copy any of their other economic choices, but I do ask you to contemplate the good that comes to their societies when everyone is allowed to work, regardless of their economic worth. Work binds us together - we are all doing the best we can, no matter our talents.

Circling back - that's my biggest actual objection to minimum wages. They exclude people I do not want to exclude. They divide us. They make us different, and I don't want to be different from my neighbors. I want to be the same, because I believe we all do share a common humanity.

But - you didn't think I'd let you off the hook with just a short emotional appeal to your humanity, did you? - that still leaves us with the problem some people, in an open market for labor allowing everyone to participate regardless of their economic worth, will not earn enough to meet their basic needs. And since a higher minimum wage won't solve that problem, we need something that will.

I have a proposal. It's called a Smart Bonus and a Smart Tax. It is written about elsewhere on this website, and if you care about people whose economic worth does not earn them enough in an open labor market to allow them to buy the basic necessities of life, you should read what I have to say. 

Thanks for listening, and if I have insulted your economic worth please forgive me. I was trying to be informative, without stepping on your toes. It is absolutely true many of us produce much more value than what we are paid for, someone else captures that value, and it can feel very unfair when they do. Don't let it get you down - a Smart Bonus/Smart Tax system will tilt the playing field in your direction and create a bit more income equality for all of us.

A tiny amount of video might say all of this much more rapidly.

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