A Philosopher's Blog

Minimum Wage I: Arguments Against

Posted in Business, Ethics, Law, Philosophy, Politics by Michael LaBossiere on August 14, 2013
Minimum Wage In Paraguay, one simple figure

Minimum Wage In Paraguay, one simple figure (Photo credit: WageIndicator – Paulien Osse)

The United States government, like many other government, sets a minimum wage. This is the lowest (with some exceptions) that an employee can be paid per hour. There is considerable debate regarding the minimum wage ranging from disputes over the exact amount of the wage to arguments over whether there should be a minimum wage at all.

Some arguments over the minimum wage are grounded in concerns about economic facts. For example, there is some dispute about the economic impact of the minimum wage. Some contend that increasing it would increase inflation (which would presumably be bad) while some claim that increasing it would boost the economy by increasing spending. In terms of what should be done, these disputes fall nicely within the realm of consequentialism. That is, settling them involves sorting out the facts about the consequences. There would also be some moral aspects to the matter as well, such as sorting out the positive values and negative values based on who they impact and how.

Other arguments about the minimum wage are more ideological in nature and have minimum (or no) connection to matters of economic facts. These arguments tend to be philosophically interesting because of the strong connection to matters of morality.

One argument against the minimum wage is based on the notion that it causes a culture of dependency that interferes with the mobility of labor. The idea, at least as presented in various talking points in the more conservative media, is that a higher (or any) minimum wage would encourage people to simply stick with the minimum wage job rather than moving upwards in the economic hierarchy.

On the one hand, this has a certain appeal. If a person believes that she is earning enough and making a comfortable living, then she might very well be content to remain at that job.

On the other hand, there seem to be some rather obvious problems with this argument. First, unless the minimum wage were increased dramatically, it seems unlikely that anyone would be able to make a comfortable living on such a wage. It also seems unlikely that most people would be content to simply stop at the minimum wage job and refuse opportunities for better employment. People generally stick with minimum wage jobs because they cannot find a better job not because they think they are making quite enough. I would not claim that it is impossible for a person to live what he thinks is a comfortable life on minimum wage nor that a person might be content to just stick with such a job. However, such a person would be an unusual exception rather than one among a vast crowd.

Second, this sort of reasoning seems to be based on the problematic principle that it is necessary to pay people poorly in order to motivate them to move up the economic hierarchy. One problem with this principle is that it would warrant paying people poorly all the way up the economic ladder so as to allegedly motivate them. After all, if people are content to coast at minimum wage, then they would surely be willing to coast if the pay was better. This would thus seem to entail that only the topmost position in a hierarchy should not pay poorly since there would be nothing above that position and hence no need to motivate a person to move beyond it. Interestingly, this does seem to match the nature of CEO salaries—it is common for the CEO to make many times what lesser employees make. Since the number of topmost positions is rather limited, this would seem to be rather unfair. In fact, if this principle is pushed, it would seem to point towards having one position in total that has good pay—thus motivating everyone to attempt to get that one position.

Another problem with this principle is that it seems to be untrue. As a matter of fact, people do attempt to get higher paying jobs when they are available, even if their pay is not poor. People mostly seem to stick with a minimum wage job or a lower paying job because they cannot find one that pays better (there are, of course, other reasons).

As a final point, the idea that paying people to do work creates a culture of dependency seems to indicate the view that the workers are mooching or sponging off the employer. This is, obviously enough, absurd: the worker is getting paid for work done which is the exact opposite of mooching.

A second ideological argument is based on the notion of liberty and rights. The idea is that employers are having their liberty (or rights) violated by being forced by the state to pay a minimum wage.

This line of reasoning does have a certain appeal. After all, people (and corporations are the best sort of people) have rights to liberty and property. If the state tells employers that they must pay a certain wage, the employers are being denied their right to liberty via the coercive power of the state.

There are at least two obvious responses to this line of reasoning. The first is that workers are also people and hence would also have rights, including property rights to their labor. These rights can be used to argue for a minimum wage (or more)—after all, theft of labor would seem to still be theft.  The second is that being part of a society involves, as Locke and Hobbes argued, giving up some rights. While some employers would like the liberty to pay whatever they wanted (which might be nothing—slavery was and is rather popular), it makes sense that such complete freedom would not be consistent with society. Having a civil society, as Hobbes argued, does require the coercive power of the state. As such, the fact that the state is imposing on the liberty of the employer does not automatically entail that this coercion is wrong. The stale also imposes on the liberties of those who would like to steal and kill and these impositions are hardly wrong.

The obvious reply is to contend that while the state has a legitimate right to limit some liberties, this right does not extend to coercing job creators into paying at least a minimum wage. This cannot, of course, be simply assumed—what is needed is an argument that employers should have the liberty to pay as they please. Even if such a liberty is assumed, surely it would have at least some limit. At the very least, it would seem that an employer has to pay more than nothing. Then again, some might like to see slavery put back on the table. There is much more to be said about minimum wage and more essays will follow.

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  1. WTP said, on August 14, 2013 at 1:43 pm

    After several weeks of Mike saying little of neither consequence nor importance, I see he’s back to his old ways of spouting off on things he fundamentally does not understand. This entire article deserves a thorough Fisking, as we have been down this road numerous times before by both TJ and myself and once-upon-a-time Keornos (sp?). But let us focus on one thing, just one, of Mike’s implications here which is nothing but a bald faced abuse of language, and in my opinion, a flat out lie. That being:

    While some employers would like the liberty to pay whatever they wanted (which might be nothing—slavery was and is rather popular), it makes sense that such complete freedom would not be consistent with society.

    This is wrong in so many ways. First and foremost, if the employer chooses to pay nothing, the employee can also choose not to take the job. For instance, I do work for nothing on occasion, when I assist the local school district in teaching their pupils mathematics. I don’t have to do that. But such lack of reciprocation is consistent with society. I am not a slave to the school district. Slavery entails the physical control and ownership of the “employee”. This ownership is innate in the meaning of the word. Nowhere, legally, is this the case in this country and to make such an implication speaks to the utter dishonesty, sophistry, and character of the writer.

    This is but a start on the numerous fallacies and dishonesty presented here. I challenge anyone to justify this sort of statement in an argument from someone who purports to be fair and honest. I might concede stupid, but that’s a whole other can of worms.

  2. T. J. Babson said, on August 14, 2013 at 3:05 pm

    Some facts.

    Only 2.9 percent of U.S. employees work for the federal minimum wage of $7.25 per hour. Very few of those fit the stereotype the President painted. Less than a quarter of minimum wage workers live at or below the poverty line, while two-thirds come from families above 150 percent of the poverty line. In fact, the average family income of a minimum wage worker exceeds $53,000 a year.


    • WTP said, on August 14, 2013 at 4:45 pm

      True, TJ, but irrelevant to a rational argument as to the effectiveness of a minimum wage, or at least a significantly high minimum wage. Though it appeals on an emotional level. One rational question this point does raise is that given that the higher minimum wage is so heavily dependent upon teenagers from households significantly above the poverty line, could lowering that minimum possibly encourage employers of teenagers to consider the skills of teenage job candidates from less advantaged backgrounds, who by the very nature of being “disadvantaged”, are less likely to possess the dependability factors of their more advantaged peers? This would be especially true of smaller, mom & pop type businesses who employ teenagers based more on who they know (from friends and family) than complete unknowns from a lower socioeconomic strata.

  3. T. J. Babson said, on August 14, 2013 at 5:04 pm

    “…but irrelevant to a rational argument as to the effectiveness of a minimum wage…”

    I would argue that these facts show that the minimum wage is in some sense a problem in search of a solution.
    How can you judge the effectiveness of the minimum wage until you specify the problem?

    Is the problem that college students need more spending money?

  4. T. J. Babson said, on August 14, 2013 at 5:05 pm

    “sense a problem in search of a solution”

    This was supposed to read “a solution in search of a problem.”

    • WTP said, on August 14, 2013 at 5:26 pm

      Understood. But that problem exists in the minds of the mikeomasses as an exploitation of the worker and a bastion against slavery (see above…and this from someone who says there’s no such thing as a slippery slope argument). What it actually is, is a false solution that creates its own problems, especially as the “solution” inevitably gets larger.

  5. GoodbyeNavi said, on August 14, 2013 at 7:53 pm

    T.J. and WTP, are you two arguing that there shouldn’t be a minimum wage or that Mike’s logic is false?

    • T. J. Babson said, on August 14, 2013 at 8:06 pm

      I’m just trying to clarify the problem the minimum wage is supposed to solve. Most minimum wage workers are college students from relatively well off families looking for spending money.

      Are we going on a moral crusade because college students need a better data plan for their smartphones?

    • WTP said, on August 14, 2013 at 9:30 pm

      For me, it’s a little bit of the former and a large part of the latter. While I don’t outright oppose a standardized minimum wage as a consensus understanding of what the bottom rung of the labor ladder should at least be paid, I do object to it as an attempt to legislate morality that ignores the very real consequences of said moralistic meddling in economic matters. I object to this because of the damage done to the unskilled, untested laborers at the bottom of the economic ladder, the ones most harmed by unrealistically high minimum wage legislation, by denying them the opportunities to prove themselves. It denies them the opportunity to develop a sense of self-worth. Worst of all, the more time a person spends unemployed is time lost gaining the skills that will enable them to better themselves. Lower minimum wages leads to more jobs.

      Now where that minimum should be would be, what would define it, could be an interesting discussion. But you can’t have such a discussion with people who fail to understand or to take seriously the consequences involved. But worst of all, to imply that a lack of a minimum wage would lead to slavery is nonsense on stilts.

      • GoodbyeNavi said, on August 15, 2013 at 7:15 pm

        I can see how the comparison to slavery was off-putting. I would think he meant that without a minimum wage in place, some (possibly many) organizations would take advantage of that and pay next to nothing. This is not an optimistic view of humanity.

        I do wonder how lower minimum wages leads to more jobs?

        • Michael LaBossiere said, on August 15, 2013 at 8:37 pm

          I think that history shows that a significant number of people would be fine with paying the lowest wages possible and some would also be just fine with slavery. Sadly, the history in question is actually a mere second ago…

        • WTP said, on August 15, 2013 at 9:37 pm

          I do wonder how lower minimum wages leads to more jobs?
          Rather fundamental to supply and demand. If you are forced to pay someone more money than the job is worth, do you hire him? The oft-stated example, if you raise the minimum wage to $50/hr do you think there will be more unskilled labor jobs or less?

  6. T. J. Babson said, on August 14, 2013 at 8:27 pm

    BTW I highly recommend the “Three Languages of Politics” by Arnold Kling.” It does an excellent job of explaining why people have such a hard time agreeing on topics like the minimum wage. Mike, for example, sees employers as oppressors. This “oppressor-oppressed” axis is characteristic of liberalism. I do not see employers as oppressors. We see employment as a mutually beneficial contract between two parties.

    Here is a nice summary of Kling’s book:

    If you’re frustrated by how vicious and pointless politics is, a brief Kindle single by Arnold Kling may offer some insight. “The Three Languages of Politics” (£1.34, US link) dissects one of the main problems with politics: that progressives, conservatives and libertarians are all speaking different languages that rarely overlap and cause us to misunderstand and vilify our opponents.

    The three languages are based on three different ways of thinking about problems. Progressives, says Kling, see political problems as being conflicts between oppressors and the oppressed; conservatives as between barbarism and civilization; libertarians as between coercion and freedom. These ideologies cannot be boiled down to these three things, but the rhetoric used by their adherents often can be.

    As a libertarian I often find discussions with non-libertarians frustrating because they don’t even seem to care about the stuff that matters to me. (I’m told the feeling is mutual.) On drugs, for instance, conservatives seem not to care at all about the fact that people are put into jail for what they do in the privacy of their own home, and progressives often only seem to object to the harm caused by anti-drug laws, not to the very fact that these invasive laws exist at all.

    Of course this is frustrating and it is tempting to say that these people are coercive authoritarians – just as a progressive might say that I am a defender of oppressive businesses when I advocate for looser business regulation, or a conservative would say that I want to let British society unravel by letting more people immigrate to the UK. Maybe they have a point, maybe not. We’re speaking different languages without realising it.


    • WTP said, on August 14, 2013 at 9:39 pm

      eh. More excuse making for letting ideology do your thinking for you. Ideology is about what matters to you, the individual. Then shoehorning your observations to fit your adopted ideology. What I find most frustrating about ideologies is a refusal to learn from the past, a refusal to seriously contemplate ideas that you “instinctively” find abhorrent, a refusal to ask yourself where do your perceptions come from and how do you handle situations where you find your perceptions coming into conflict with an objective reality.

  7. Douglas Moore said, on August 15, 2013 at 12:20 pm

    We should establish as to whether increasing the minimum wage actually increases buying power.

    • WTP said, on August 15, 2013 at 12:48 pm

      But how would it do that? The “buying power” is contained within the monetary unit. $500 paid to one person has the same buying power of $100 paid to 5 people. The only way I can see to increase buying power of a currency is to increase the efficiency of producing whatever products you can purchase with that currency. By raising the minimum wage you are forcing the producers of products and services to either figure out how to get more productivity out of their unskilled labor, or find a way to do without manual labor by replacing it with machines, thus exacerbating the problem you are supposedly trying to solve.

    • WTP said, on August 15, 2013 at 12:49 pm

      oh, and welcome back, btw.

    • Michael LaBossiere said, on August 15, 2013 at 8:33 pm

      A good point. There are arguments that increasing the minimum wage would result in inflation. If this is the case, then the increase could be self defeating. Then again, there might not be inflation or it might be low enough that the increase in the wage still increases buying power.

      • WTP said, on August 15, 2013 at 9:38 pm

        Define “buying power”. Or run and hide from the argument. Your choice.

  8. T. J. Babson said, on August 15, 2013 at 7:49 pm

    Can somebody please explain to me the problem the minimum wage is intended to solve?

    Once we define the problem, we can judge to what extent the minimum wage is working.

  9. T. J. Babson said, on August 15, 2013 at 9:00 pm

    The Cost of a “Living Wage”

    By N. Gregory Mankiw
    Boston Globe, 6/24/2001

    If student movements are a leading indicator of social trends, and they often are, then the recent student takeover of the administration building at Harvard University is a troubling sign.

    The students wanted a ”living wage” ($10.25 a hour, plus benefits) for all Harvard workers. Like the broader living wage campaign, which could culminate in a much higher national minimum wage, the students were laudable in their intentions but deficient in their analysis.

    The appeal of the living wage is obvious. Life is hard for workers trying to support families on $7 or $8 an hour. If we could wave a magic wand and help those at the bottom of the economic ladder move up a rung or two, we should do it.

    But enacting a social reform is not like waving a magic wand. It is more like prescribing a drug with a long list of side effects. Sometimes the side effects are worse than the disease.

    Like most other prices, wages are set by the market forces of supply and demand. The major difference between high-wage workers and low-wage workers is not that the former are better organized or better liked by their employers — it’s that their higher productivity enhances the demand for their services. Workers earning only $7 or $8 a hour are typically those with the fewest years of education and the least experience, which depresses the demand for their labor.

    The living wage campaign wants to repeal the law of supply and demand and raise wages by fiat. The goal is to help low-wage workers. Unfortunately, it wouldn’t work out that way. One effect of a higher wage is a reduction in the amount of labor that employers demand.

    Take Harvard, for instance. How often does it need its janitorial staff to vacuum the classrooms and wash the blackboards? It’s a judgment call. An increase in the wage from $8 to $10 a hour raises the cost of labor by 25 percent. It is wishful thinking to suggest that this won’t affect the number of workers hired.

    Living wage proponents say that Harvard, with its huge endowment, can afford to pay higher wages. Yes, that’s true, but that’s not the point. Like all employers, Harvard is always making cost-benefit calculations, weighing the benefits of one project (hiring more janitors to clean blackboards more often) against others (hiring more professors to reduce class sizes). By raising the relative price of unskilled workers, the passage of a living wage shifts the tradeoffs in a way that means fewer of those workers will be hired.

    Living wage advocates often point to a study by economists David Card and Alan Krueger, which claims that raising the minimum wage does not reduce employment. This research became prominent during the Clinton years, in part because Krueger was once chief economist in Clinton’s Labor Department.

    Although Card and Krueger are reputable economists, equally reputable economists have attacked their data, methods, and results. Meanwhile, most research on the minimum wage finds that it reduces employment. Emphasizing the Card-Krueger evidence is like a doctor prescribing a drug relying on a single controversial study that finds no adverse side effects, while ignoring the many reports of debilitating results.

    Moreover, the adverse effects of a high minimum wage go beyond its impact on total employment. In addition to reducing the amount of labor demanded, a high minimum wage compounds the problem by increasing the amount of labor supplied. In other words, not only are there fewer jobs available for unskilled workers, but more people apply for those jobs. Studies have found that increases in the minimum wage encourage some teenagers to drop out of school earlier than they otherwise would. These teenagers take jobs that would go to unskilled adults, making it harder for those adults to make the transition from welfare to work.

    The case against a high minimum wage is even more compelling once one realizes that it is not the only way to address the hardship of the working poor. A better weapon to fight poverty is the Earned Income Tax Credit, a provision of the income tax system that supplements the income of low-wage workers. Like any spending program, this policy has the cost of higher taxes on everyone else. But those costs are smaller than the unemployment that results from high minimum wages.

    Throughout history, students have been drawn to utopian social reforms. But history teaches that such social reforms often fail to yield what the reformers promised. The living wage campaign is the most recent example.

    • T. J. Babson said, on August 15, 2013 at 9:02 pm

      This bears repeating:

      “…laudable in their intentions but deficient in their analysis…”

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