Minimum Wage Law

If you make near the minimum wage, please know that I am not criticizing you or your work, the following story is meant to only criticize the minimum wage law. Also, if you favor this law, read the following, asking yourself “Is it moral to have a minimum wage law?”, even if you think that the law has a desirable outcome on society, think about its morality. Imagine this story took place in the past before minimum wage laws:

What if an artist wished to sell his artwork in order to make a profit and pay his bills? So, he starts his own business and it’s going well enough. Then the artist thinks to himself: ‘If I can save time by having someone else clean up and deliver the paintings to the purchasers, then I can spend more time producing paintings and can make some more money’. The artist knows Bob, who is homeless, unskilled, and looking for a job, and says to Bob, “If you wish, you can work for me by doing some very simple things, such as sweep the floors, clean my painting supplies, and delivering paintings.” Bob: “Great, I can do that. Can I have $8/hr?”. Artist: “No, these are very simple tasks and this type of work is not worth $8/hr to me.  It would only be worth it to me to hire you if I paid you $3/hr.” Bob: “Well, I don’t know if I want to do that. It’s boring, unfulfilling, and doesn’t pay much ”. Artist: “Ok, I’m not forcing you to work for me, you can reject the offer if you wish.” Bob: “Ok, I’ll accept. If you give me $3/hr, I’ll clean up and deliver stuff.” The two agreed, and the business went well for 5 years. Bob was a good, hard worker. Bob still couldn’t afford even a cheap apartment or car, so he lived nearby in a tent and walked to work. He could, however, afford food, thrift shop clothes, and some water from a nearby private fountain for drinking and basic sanitation. So, his fundamental living needs were met.

Eventually Bob became angry with his lot and said to the artist, “I need to live like a normal person with an apartment, car, health insurance, and basic appliances and TV. How dare you only pay me $3/hr. That is not a living wage. I feel like a wage slave. My clothes are only functional and not stylish, and my food tastes bland. This is all your fault because you won’t pay me a living wage.” The artist replies: “Am I responsible for your wellbeing just because you are my employee? No. And, the purpose of my business is not to give you a job in the first place, it is to make money for me through satisfying a demand for art. Your job is a byproduct of satisfying that demand. We made a voluntary agreement of exchange of work for payment in the amount agreed upon. We simply trade together. That is the extent of our relationship. You can quit trading with me anytime you wish. I only pay you $3/hr because your work that you perform for me is only worth $3/hr to me.” Bob angrily continued to work, but the next day he walked to his local politician and asked him, in so many words: “Can you please make a law that forces an individual, against their free will, to purchase services from others for a higher price than those services are actually worth?” Politician: “Certainly. What else am I here for?”

If the employer is a large wealthy company instead of an artist, does that change the point? The point is that a job should just be a voluntary trade without government coercion, even under the above extreme and rare circumstance of only $3/hr. I chose the low $3/hr as sort of a worst case scenario. If you can accept that the artist should not be forced to pay Bob more, then you’ve basically accepted the worst case scenario, and so you can accept abolishing the minimum wage on moral grounds. Any wage lower than $3/hr would not have been realistic, as Bob would not take the job since he actually can make more money by asking for change at an intersection.

Imagine person A offers to give something to or do something for person B, and person B offers to give person A something (money) in return. Also, it just so happens that the amount of money is smaller than the “minimum wage” of a law. This would be a consensual trade and should be legal. But, person C (government, or anyone) barges in and says “no” and forcibly stops the activity/trade because they think that they are the boss of everyone else. That’s how the minimum wage law works and that violation of free actions is immoral.

The above criticizes the morality of the minimum wage law, regardless of practical outcome. However, if you will only be persuaded by consequentialist arguments, you might be surprised that the vast majority of economists agree that the minimum wage law increases severe poverty and unemployment. This is because this law increases the cost of labor, and this causes buyers of labor (employers) to buy less of it, and so unemployment increases, mainly among the very poor, unskilled, and minorities, the very people that the law was supposed to help. Employers then shift toward machines and technology or move overseas where labor is cheaper when human labor prices rise in the U.S.. And, the higher labor costs get fed into higher prices for goods and services across the market, making it even harder for poor people to afford goods and services. When the vast majority of economists agree on something, we should probably hear what they have to say. And, don’t be afraid that everyone in America would suddenly be working $3/hr if the minimum wage were abolished. The market value of labor is almost never that low in reality, and in most cases it’s already much higher than the federal minimum wage. After all, everyone who is currently making more than the minimum wage wouldn’t even have their wage or salary changed at all by abolishing the law, because their labor is already worth more than that minimum floor.

Most people think that the minimum wage law is only a law that prohibits employers from paying employees a low amount. However, it is also equally a law that prohibits workers from selling their labor for a price lower than the minimum wage law mandates. It violates the freedom of the laborer as well. If I am a poor, homeless, black person who is trying to compete with other potential workers who are white middle class teenagers for a job position, I would probably lose because the employer would likely pick the white teenagers if he had to pay each of us the same minimum wage of, say, $7/hr. But, if we didn’t have a minimum wage law, I could offer my labor for a cheaper price (say, $5/hr) than the white teenagers would, increasing my chances of getting hired. This is one way that the minimum wage law particularly hurts poor minorities.

2 thoughts on “Minimum Wage Law

  1. Pingback: House of Cards Sends Wrong Messages, and a Discussion On Democracy | NOR GATE Libertarianism

  2. Pingback: $2.50/hr is a Livable Wage, and That’s Generous | NOR GATE Libertarianism

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