Tuesday, July 26, 2005

Let's Start Caring About Those Workers

I don't know how many times I have heard people say "there's no such thing as a free lunch" -- yet again and again people seem to think that they can legislatively force lunches to be free. I can't blame them for their hope, but the naïveté in light of history is inexcusable.

I remember very clearly as a child asking, "Why don't we just print more money and give it to poor people so that everyone is rich?" This is a question only children should ask. Adults should know why people can't just make wealth from nothing. Adults should know that if you can't produce at least what you're paid, you're not going to keep your job. Adults should know the difference between a job and charity. No amount of minimum wage legislation or costly mandatory benefit programs make better workers and workers better off -- it just puts companies out of business and unskilled workers out of jobs. (And if we could force companies to hire underproductive workers and pay them more than what they generate, the companies are underpaying their productive employees in order to take a loss on the underproductive ones).

People seem to believe that it is the economists who do not care about the plight of the workers. Yet, if you examine what is actually best for all workers, you find that economists are often their only advocates. Politicians love to say that they are helping those minimum wage earners when they raise it by another dollar, but the workers are the ones most harmed by such legislation.

Minimum wage laws don't just regulate those "evil corporations that exploit the labor of poor workers," they regulate the worker's legal ability to bargain for a job. Let's say I have no skills yet and I'd like a job so I can make myself more marketable in the future (and earn more money later). I go to the local convenience store and say, "I'd like a job." Minimum wage is $5.15/hour, but since I have no experience, I can't do $5.15/hour worth of work -- I can only generate $3.15/hour. I might as well go to the manager and ask him for $2.00/hour to do nothing. There's no way that I am going to get the job given that scenario, but the experience is really important to me so I tell the manager, "I know I'm not that skilled yet, so I'll take $3.15/hour instead, just so I can gain the experience." The manager legally cannot hire me. I legally am not allowed to sell my labor for that cheap, even though that's what it's worth.[1] Instead, I remain unemployed and do not gain the valuable experience that will help me land a better job in the future.

So for all of those who put forth the argument, "It's impossible to live on only minimum wage," tell me this: Is it any easier to live on no income at all?[2] It's nice to come up with scenarios in which everyone is well off, but what about the costs? Let's not try to "help" the workers at their own expense.

I'll take a free market over a free lunch any day.

[1] Minimum wage laws are the most common example of a price floor, or minimum price at which a product (in this case, labor) can legally sell. The price floor is set above equilibrium, or higher than the market clearing price (how much the good would sell for without the restriction). The effect of a price floor is inevitably a surplus of the item being sold. In the case of minimum wage laws, this 'surplus' is of labor and it is measured in terms of unemployment.
[2] Another myth that exists is that the majority or even a significant percentage of minimum wage earners are supporting themselves and/or a family. To the contrary, those who earn minimum wage are typically young people who have obtained their first job and are supported financially by their parents. The above example accounts for almost all of minimum wage earners. They are not generally "living off minimum wage."

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