Letter to the editor: Good intentions have unintended consequences - The fallacy of minimum wage laws
Disclaimer: None of these arguments are new, and I owe much, if not all, of my written thoughts below to the teachings of Dr. Thomas Sowell, Frédéric Bastiat, Henry Hazlitt, and others too numerous to name.
I empathize with low-paid workers. I began my professional career earning minimum wage. My parents were middle class, and I never went without. I am privileged to have grown up in a household with a mother and a father who were present, active, and loving. Others are not so fortunate, and I wish to make the case against minimum wage laws because I believe, and the evidence supports, that these laws disenfranchise the most vulnerable among us, those without the benefits I had growing up.
The world can be brutal, and no shortage of problems exist that affect different people in different ways. Yet, we must constrain the urge to have politicians in near- or far-away lands solve these problems for us, as we so often overlook that which Bastiat, in his Parable of the Broken Window, refers to as the “unseen.” I wish to illuminate the “unseen” negative consequences of implementing and increasing minimum wage laws.
Something amazing happens in academia: the further one advances their academic career, the more quickly they are to toss out the foundational principles learned in year one. The lessons of Economics 101 are prime examples. In the most basic of courses in economics, students learn that a binding price floor creates a surplus of goods. To paraphrase Dr. Sowell, when the artificially high price is of labor (minimum wage), the surplus is of laborers (unemployment).
Dr. Sowell argues, as backed by his research, that minimum wage laws are a barrier to professional knowledge and skillsets for members of the population who are uneducated and lack experience. These individuals are often the young, the poor, minorities, or all the above. Minimum wage laws prevent these individuals from entering the workforce and beginning their journey up the jobs ladder by pricing them out of the market for their potential employers.
Minimum wage laws increase unemployment, and the only reason the U.S. Department of Labor does not make this case more vociferously, as Dr. Sowell argues from experience, is because a significant portion of their budget relies on enforcing such laws. Their interests lie in protecting their own salaries and jobs, not actually increasing employment opportunities.
When one argues for the increase of the minimum wage to a “living” wage of $15 per hour, one can easily see the benefit to the employee that may have had their wage rate doubled. Yet, more difficult to see is the employee who lost their job. Employers do not have an endless budget, and if the wage rate doubles, the staff will be cut in half.
In addition, even the threat of increasing the minimum wage has increased the rates at which companies automate any job which they can. We have witnessed automation right here in Kinston with our fast food locations. Those new kiosks at McDonald’s, Taco Bell, and elsewhere have replaced human cashiers. Jobs have been lost.
Someone like Jeff Bezos, who pushes for a national minimum wage of $15 per hour, is quite nefarious in his motivation. As he continues to automate his company, Amazon, he knows that the increase in minimum wage will hurt his competition and their employees, while his robots do not get paid hourly. Sometimes the biggest beneficiaries of capitalism become its worst enemies.
I believe in free will and the freedom to choose, to borrow a phrase from Milton Friedman. I rarely support government coercion. Minimum wage laws remove choice from both the employer and the employee. Given the current economic crisis, I imagine many unemployed individuals would accept a job at $5 per hour, yet the government creates crime from an otherwise mutually consensual economic transaction.
I would never want to force an employee to work for a wage to which they did not consent. Similarly, I would never want to force an employer to hire an employee for a wage to which they did not consent. Proponents of increasing the minimum wage not only advocate for removing choice from individuals but also pretend that choice does not exist.
Individuals in our society are, aside from minimum wage laws, generally able to choose the way they alienate their own labor. If an individual is underpaid, they will seek work elsewhere. Businesses compete for labor. I know this firsthand having worked at Chef & the Farmer. We paid new employees at a training wage above minimum wage because we had to compete with other employers, and we wanted the best employees. Furthermore, minimum wage is never meant to be a permanent wage. Laborers increase their value as they increase their experience and education. The market value of and competition for laborers increase as the skills of the laborer increase. Starting wages are just that, a start.
Increasing the national minimum wage to $15 per hour is a disaster waiting to happen. While anecdotal, the case of restaurant workers in Washington, D.C. is a prime example. Proponents of the increase wanted to help, among others, the restaurant workers because their minimum wage was $2.13 an hour before gratuity, a paltry amount indeed. Yet, the restaurant workers knew something that the proponents of the increase did not: they made far more than the current minimum wage, and far more than the proposed increase of $15 per hour because of gratuity.
Were the new minimum wage for these workers to be $15 per hour, the gratuity system would be eliminated as the entire cost and pricing structure of restaurants would be fundamentally altered. The restaurant employees would see a decrease in their wages, and they knew it. These workers were a core component of the opposition faction. Like many government programs with good intentions, the increase in minimum wage would injure most of the constituents that were the intended beneficiaries. Good intentions, unintended consequences.
A plethora of empirical data exists to support these claims, and, again, I have the likes of Dr. Thomas Sowell and liberty-minded economists to thank for the ideas I put forth in this letter. I, too, want more money in the pockets of the poor, more food on their table, more opportunities made available. Yet, mandating increases in minimum wage laws will make the poor poorer, the hungry hungrier, and the opportunity-deprived opportunity-less. I wish I were as eloquent or as thorough as Dr. Sowell, but I am not. Therefore, I shall end with a quote of his:
"Unfortunately, the real minimum wage is always zero, regardless of the laws, and that is the wage that many workers receive in the wake of the creation or escalation of a government-mandated minimum wage because they lose their jobs or fail to find jobs when they enter the labor force."
Thank you for your time and consideration.
Sincerely,
Jason Kops
Kinston, NC
