December 6 2013
The Minimum Wage and the Human Factor
A friend of mine and I started talking about the fight to raise the minimum wage last night over dinner in a Mexican restaurant.
We talked about how hiking the minimum wage raises unemployment and about how some businesses already are operating on a thin margin between profit and loss. But as we looked around the restaurant, we thought about something else: we observed that there were fast, cordial members of the staff and, alas, others who were not so fast and far less pleasant.
Whether it’s a restaurant or any other kind of business, the government doesn’t know at ground level what employees are worth to an employer. Some slack off and perhaps are marginally worth keeping at a lower wage, but, if the government mandates a higher wage for these slackers, they will soon be gone. A business has to decide what an employee is worth, and an employee has to make herself valuable.
Powerline’s John Hinderaker has also been thinking about the minimum wage:
Here’s the thing about the minimum wage: it doesn’t do much damage, as long as you set it safely below the amount that employers are actually offering to entry-level, unskilled workers. Then legislators can pat themselves on the back without having done any serious damage. But if you set the minimum wage above the then-prevailing level for inexperienced and unskilled workers, the results will be dire.
The logic behind the minimum wage has always been murky. As Scott wrote quite a few years ago, “If you seriously think you can legislate wealth, why are you so cheap? Why don’t you set the minimum wage at $100 an hour?” Good question! Or how about $1,000 an hour? Then we could all retire at 40. What pikers these Democrats are!
The Democrats imagine that if they simply make it illegal to work for, say, $10 an hour, then presto! Everyone will have a job that pays more than $10 an hour. What could be simpler?
Here in my opinion, is what the quest to raise the minimum wage to a level that will not be sustainable for some business, doesn’t take into consideration: the human factor.
Hinderaker goes a step further and compares the logic behind the current minimum wage campaign to the logic that gave us the ObamaCare fiasco:
Just as with the minimum wage, [ObamaCare supporters] apply the bluntest possible instrument [to rules about purchasing health insurance]: they make it illegal to buy a cost-effective, catastrophic loss insurance policy. What do they think will happen? Since cheap insurance is now illegal, overnight everyone will have “insurance” that covers everything under the Sun, including–especially including!–free contraception.
In neither case do Democrats take reality into account. There are many people whose skills and experience allow them to create only a modest amount of value.
If a person can create $10 in value per hour, and the government makes it illegal to work for less than $11, the government has condemned that person to unemployment, with consequences that are likely to last a lifetime. Similarly, if a particular consumer optimizes his well-being with a health insurance policy that costs $5,000, and the government makes it illegal to buy any policy that costs less than $10,000, that person’s well-being has been seriously diminished.