By Luke Kusick
Since the inception of the federal minimum wage back in 1938, earlier if you account for the attempt in 1933 to establish a minimum wage of .25 cents an hour, which was struck down by the Supreme Court as unconstitutional, the argument that has been made by politicians, the public and people who frankly never took a basic economics course is for a higher minimum wage in order for it to be a “living” wage. The argument for a living wage stems from the idea that the poorest of the poor who work these jobs are not able to move up the socio-economic latter due to not receiving enough money from their jobs because of a multiple of reasons, mainly of course greedy capitalists who want to impoverish the country while hording all the money to themselves.
This idea is not only naïve, but also based on no grounded facts or any basic economic background. As Murray Rothbard said “it is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people would consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in the state of ignorance.” Every single economist unilaterally agrees that an increase in the minimum wage directly affects the amount of people employed. When the amount people are forced to be paid goes up, the supply of workers who are willing to work increases, which makes sense. As the amount of money that employers are forced to pay employees goes up, the amount of people who will want to work at an increased wage goes up. However, at the same time, employers demand for workers goes down as the wage increases causing unemployment. A simple Keynesian graph (I know the scary graph man who somehow is still recognized as a ‘good’ economist makes it into an Austrian discussion on economics) shows the relationship between employment and the increase in the minimum wage.
Before the minimum wage is set, the market creates a wage that the most amounts of people will work at and that employers will hire the most amount of people, an equilibrium wage. However, once the government tries to artificial raise the wage above the equilibrium, the wage of some workers will increase; however, a lot more will become unemployed and only further the problem of poverty in this country.
Another argument that always stems from needing a living wage is that the cost of living has risen tremendously and employers should be forced to pay more in order to compensate for the increase in price. Many argue that two people who work minimum wage jobs should be able to provide for a family of four. What they see is the price of everything going up in America, mostly due to liberal and republican policies that increase taxes, increase spending, bailout failing corporations, fund illegal wars, kill innocent civilians, and then inflate the dollar to the point where it is worth a fraction of what it was worth in the 1960s. When people who use the living wage argument see that prices wage, they simply refuse to ask the question why, rather they immediately create a scapegoat to try to push the problem onto, in this case employers. In the mind of the average progressive, America’s shortcomings come from entrepreneurs and businessmen rather than the government who erodes any time of free market society to flourish. The issue of people not having enough money to live a good life is an issue and certainly having a more livable wage is plausible but by simply increasing the minimum wage not only are you threating and making poorer the same people who you champion and venerate but you are also passing the buck down to the next generation to deal with. The real way to solve the problem is to look where in the government we can loosen laws. For example, if I was an average Joe who somehow found a way in my backyard to simply plant enough food to sell on the corner for the street to outcompete the local supermarket I couldn’t simply go onto the corner and sell my fruit. Instead I would have to apply for special licensing, which will cost thousands of dollars, get proper inspections every year, another thousands of dollars, and apply for special permits on permits that will finally permit me to sell my fruit. At this point I can no longer outcompete the grocery chain but rather must make up for the cost that the state has put onto me in order to sell fruit that I grow in the backyard. This forces many people to instead of going out there to make their own small business to instead work for minimum wage or for a salary that would make them less money then they would make independently.
The problem that we now face is overregulation. Overregulation of the free market has led to the problems we see in society. The more and more restrictions we put on individuals to make it for themselves, the more and more poverty will naturally grow. Selling something in this country should be as simple as having three apples and selling them to a passerby who wants three apples. That’s it. Instead we have mountains of regulations that prevent such time of sales from happening and forcing people to take lower paid jobs in order to compensate. But now, the state, which has ultimately caused the problem, thinks they can magically solve it by just raising minimum wage. It is easy to see that anyone who argues for a “living” wage is ignorant of the actual economics behind it and instead wants to go down a path that time and time again has proven to not fix the problem of poverty, going to the state. In short, a living wage is no wage for most people and people who supported it will ultimately blame corporate greed for the increase in unemployment.