If you do not like reading about economics or you believe that the minimum wage is a necessity for our economic system then stop reading. This posting will only make you angry or frustrated at best. For those who can handle some common sense then please read on.
Henry Hazlitt wrote a book that was first published back in 1946 called Economics in One Lesson. In Chapter XIX he talks about minimum wage law and its effects on things like unemployment, relief (what you and I recognize today as welfare and other federal/state aid). I will do my best to summarize what he said so that you are not reading this all day long.
I will try to do Mr. Hazlitt justice in how I present his information.
Think of minimum wage as a minimum price that a product can be sold for to the distributor. The product may not be worth the price that they are required to pay for the product. When they pass on the cost to the consumer, you and I, then the demand for that product will go down (depending on the product or commodity). This will do at least two things:
1. drive consumers to another product or service
2. since the demand decreased the profit decreases which eventually could lead to job loss at the manufacturer
So what happens if there is not a minimum wage?
1. workers can still pick whatever job they desire that will provide the income they need. If the job does not provide then people will not apply.
2. the competition for jobs would increase (this will be explained below) since the labor force would significantly expand
Okay, so how do I justify point 2 above?
Let’s say minimum wage is set at $8.00 an hour, which is $320 for a forty-hour work week. Now say that unemployment will give a person $250 dollars for someone who is classified as “unemployed” per their state’s guidelines. This equates to $6.25 an hour. So if a person can find employment or offer services at $7 an hour then they cannot do their service or fill that job. They are denied $280 a week so that our tax dollars can give them $250 a week. In Hazlitt’s own words, “we have deprived the man of the independence and self-respect that come from self-support, even at a low level, and from performing wanted work, at the same time as we have lowered what the man could have received by his own efforts.” In other words, he cannot earn more than the relief provided, even though he is capable of earning more.
Now things really get itchy if the relief or unemployment provided is equal to the minimum wage. Relief = $320. Let’s say an unemployed person finds a job that will pay him $340 a week. So going from being idle with relief providing $320 a week, to working 40 hours and only getting another $20 for those forty hours is not very motivating. ($340 earned minus $320 gov’t would supply if not working = $20)
So I think the point has been made that minimum wage laws do not help our economy, especially when coupled with relief provided by the government.
Now for the morality piece, I will leave you with a quote from C.S. Lewis out of his book Mere Christianity.
“I do not mean for a moment that we ought not to think, and think hard, about improvements in our social and economic system. What I do mean is that all that thinking will be mere moonshine unless we realize that nothing but the courage and unselfishness of individuals is ever going to make any system work properly. It is easy enough to remove the particular kinds of graft or bullying that go on under the present system: but as long as men are twisters or bullies they will find some new way of carrying on the old game under the new system. You cannot make men good by law: and without good men you cannot have a good society.”
But the system can be changed and should be changed to allow for men to earn their respect instead of it being taken from them and turned into a handout, whether via the relief or the minimum wage.
I will be surprised if I get any comments since this is so long.