Jay Reding.com

More On The Minimum Wage

The Economist has a good piece on the realities of the minimum wage increase:

We have written a fair bit about the question of minimum wages over the last few months. It is probable that the minimum wage increase will not cost enough jobs to make its effects readily distinguishable from random economic variation. It is also probable that it will improve the lot of a few poor people, though not many, as fewer than 20% of those who earn the minimum wage live in poor households now. On the other hand, it also seems probable that much of any benefit that goes to poor families will come out of the pockets of other poor people—very probably even poorer people, such as convicts, who are currently barely hanging onto the fringes of the labour force.

The left wants to argue that the minimum wage is a transfer of assets from the rich (business owners) to the poor. The reality of the minimum wage is that it ends up being an asset transfer between poor people — or more likely an asset transfer between disadvantaged people and less disadvantaged people. Any increase in the marginal cost of labor tends to be felt most strongly at the bottom — if labor costs rise, businesses are less likely to hire workers who have a higher likelihood of producing less value for their costs. That means people who have families, less reliable access to transportation, or other personal problems. Single mothers, ex-convicts, people on drug treatment, all of those groups that are the most disadvantaged.

Increasing the minimum wage is pure political theater. All it does is assuage the guilt of wealthy white liberals while doing little to nothing to help people. In fact, it’s even a form of corporate welfare:

CEO’s who support higher minimum wages are not, as the media often casts them, renegade heros speaking truth to power because their inner moral voice bids them be silent no more. They are by and large, like Mr Sinegal, the heads of companies that pay well above the minimum wage. Forcing up the labour costs of their competitors, while simultaneously collecting good PR for “daring” to support a higher minimum, is a terrific business move. But it is not altruistic, nor does it make him a “maverick”. Costco’s biggest competitor, Wal-Mart, also supports a higher minimum wage, and for the same reason. Wal-Mart’s average wage is already above the new minimum; it will cost the company little, while possibly forcing mom-and-pop stores that compete with Wal-Mart out of business. This seems blindingly obvious to me. Though I don’t expect we’ll see “the minimum wage—it’s great for Wal-Mart!” in many Democratic campaign commercials.

In in all, raising the minimum wage has low societal costs — it won’t raise unemployment all that much. What it will do is impact the most vulnerable and benefit the least vulnerable. It won’t affect McDonald’s all that much, but it will affect the small-town cafe that can afford to pay its cooks $6.00/hour but not $7.25/hour. Big business doesn’t have much incentive to fight — why take the PR hit when most of them already pay more than the minimum. It’s the small fry that get the shaft.

Raising the minimum wage has nothing to do with poverty, or justice, or any of the other high-minded ideals that are used to justify it — not after rationally looking at what it really does. All this is about is pretending to care rather than actually doing something constructive — which seems to be enough for politicians and the American public. For those who actually need the most help, it isn’t enough and never will be.

Hat tip to Instapundit)

4 responses to “More On The Minimum Wage”

  1. Erica says:

    If you can’t pay your employees, why should you be in business?

    I mean, it would help businesses if they all had magical money trees that would give them whatever they wanted, but the truth of the matter is that labor is a commodity that has a cost. If your business can’t pay that cost then you do without.

    I don’t get to complain that nobody’s willing to rent me an apartment for $1 a month, and I don’t get to force my landlord to take food out of his own mouth to match my idea of what I should pay for his services. I either pay the rent or I do without a roof. Why should business be different? Conservatives always seem to want special rules for businesses.

  2. Mark says:

    Dude, you really need to let this go. If only there were more uncompromising ideologues like you amongst Congressional Republicans, the Republicans could have picked this PR battle in Congress and gotten smashed in the court of public opinion. There is no serious argument against raising the minimum wage…..only stale, recycled arguments about the devastating consequences that the minimum wage hikes incur, even though such dire consequences have not once come to fruition in the real world. The ranks of minimum-wage jobs as a share of the overall job market have gone UP, not down, in correspondence with the imposition and subsequent increases in the minimum wage.

    Here’s my impassioned request to you, Jay. Keep pressing this issue! Keep up the fanatical display of subservience to lawless unregulated commerce! Keep reminding the swing voters who went Republican in the recent past why they voted Democrat in 2006! The more guys like you we have stepping up to the mike, the better the Democrats chances of controlling government at every level and pushing forward minimum wage increases at their convenience with only a few howls of opposition coming from the balcony. Wow, you guys sure have squandered alot of “capital” in the last two years….and seem intent on squandering a whole lot more by refusing to choose your battles and obsessing over the impending ruin brought about by the least bit of working-class empowerment.

  3. Jay Reding says:

    There is no serious argument against raising the minimum wage

    Given that serious economists have found plenty, that line of crap only applies if one hasn’t been paying attention.

    Is not raising the minimum wage politically stupid? Probably. However, that doesn’t mean that it’s good policy, and if all we want government to do is pander, then we deserve the horrifically dysfunctional government we have.

    Of course, this also demonstrates that to the liberal, it’s not what’s right, but what’s politically correct that motivates every decision…

  4. […] Jay Reding on the minimum wage: The left wants to argue that the minimum wage is a transfer of assets from the rich (business owners) to the poor. The reality of the minimum wage is that it ends up being an asset transfer between poor people — or more likely an asset transfer between disadvantaged people and less disadvantaged people. Any increase in the marginal cost of labor tends to be felt most strongly at the bottom — if labor costs rise, businesses are less likely to hire workers who have a higher likelihood of producing less value for their costs. That means people who have families, less reliable access to transportation, or other personal problems. Single mothers, ex-convicts, people on drug treatment, all of those groups that are the most disadvantaged. […]