Photo courtesy of USA Today./caption
There are many reasons to oppose raising the minimum wage. Most importantly by increasing the cost of labor a mandated wage hike causes employers to lay off workers and reduce remaining employees working hours. The tragic fact about the minimum wage is that though it is intended to alleviate poverty it all too often makes people poorer.
But that doesnt mean every criticism of the minimum wage is valid. A few popular arguments against raising the minimum wage are utterly callous not to mention economically unsound and are counterproductive to healthy debate. Below are just two examples of how not to argue against the minimum wage.
Flipping burgers isnt worth $15 an hour"
Weve all heard this argument before. Unfortunately those who invoke it are not talking about the market value of flipping burgers" but some vague definition of the jobs true worth." This true worth" or objective value" is supposedly determined by the difficulty of the job how hard the job requires one to work and the jobs importance to society. Flipping burgers is not particularly hard and its certainly not vital to our civilization so we shouldnt expect someone to get paid much to do it. By contrast many important and stressful jobs are not as remunerative as they ought to be; emergency medical technicians (EMTs) for instance make about $15 an hour and in some states even less. It would not be fair" to pay fast-food workers as much as paramedics so the argument goes.
On an emotional level the objective value argument has some weight. Some see protestors on the news pushing for a $15 minimum wage and ask: How dare those inexperienced fast-food workers demand to be paid so much just to flip burgers? Many others however interpret this kind of response as a callous disregard for the needs of low-wage workers. It makes it appear as though opponents of the minimum wage are harboring contempt for the poor rather than wanting to help them. From a political standpoint this is not a good position for an opponent of the minimum wage to be in.
More importantly the idea that ones wage ought to reflect his jobs value suffers from some serious issues of logic. Consider medical services. What is the objective" value of a doctor who helps to save a persons life from a potentially fatal disease? For the hypothetical patient the value may be infinite; his life is priceless. But clearly the doctor cannot be paid an infinite amount of money and probably will not even be paid as much as a professional athlete a job most would agree is less important to society. Is that fair?
In reality absolutely no one is paid according to the objective" value of his or her work. Even if a supposedly objective value could be ascertained it would be irrelevant to a discussion about market wages. As David Youngberg has recently written under a free enterprise system your income is determined by the scarcity of your contribution." The more people willing and able to do your job the lower your income will be and vice versa.
This is why paramedics are typically paid more than fast-food workers: not because paramedics are more important or because they work harder but because the skills required to do their job naturally make the supply of potential paramedics more scarce.
Admittedly hard work skillset education and societal importance do partially help determine which jobs are supplied and demanded (and in what quantity) but these factors alone cannot combine together in a vacuum absent the subjective valuations of workers and consumers to form the true value" of a persons labor.
Ironically the assertion that workers ought to be paid according to some objective standard of valueand that any deviation from that value is unfair"is precisely the same philosophy that stimulates the clamor for a higher minimum wage. Progressives simply differ on what they consider to be the true worth" of low-skilled labor. Once the existence of a jobs true worth has been conceded we are no longer talking about principles but to quote Winston Churchill merely haggling over prices.
Prices will skyrocket!"
In addition to negative employment effects the risk of rising prices is one of the most oft-invoked arguments against raising the minimum wage. And it has a lot of merit: minimum wages hikes tend to cause businesses to raise their prices particularly companies that employ a substantial amount of low-skilled labor. One study published in 2008 found that a 10 percent increase in the minimum wage will lead to a corresponding 0.7 percent increase in restaurant prices. Prices at fast-food restaurants went up by about 1.5 to 1.8 percent. Another paper published by Sara Lemos concluded that a 10 percent minimum wage increase could lead to a 4 percent spike in food prices in general. Further studies have yielded similar results.
The problem lies not in the substance of the argument but the manner in which its made. When it comes to the minimum wages effect on prices there is an insidious propensity to exaggerate particularly amongst the lay public. Many people are afraid that prices will skyrocket" if the minimum wage is raised too high. Now the word skyrocket" may be open to interpretation but its difficult to see how a 1.8 percent increase fits that description. For a $10 meal at Wendys a 10 percent minimum wage hike would push the bill up a mere 18 cents.
Still a small increase is still an increase and should not be ignored. It may not be a big deal to pay a few more bucks at the grocery store during one trip but that money can add up over time. Assuming food prices rise 4 percent as a result of a minimum wage increase it would cost the average family an additional $300 to $600 a year. For those living paycheck to paycheck the extra costs are by no means negligible.
On the other hand there are some workers for whom the income gains from a minimum wage hike more than compensate for the higher grocery bill. But this is not true for the majority of the poor. As Dwyer Gunn points out only 45 percent of poor working-age adults were in the labor force as of 2014 most of them working only part-time. A minimum wage increase would for the remaining 55 percent not in the labor force cost them hundreds of dollars per year in the form of higher prices with no corresponding benefit.
With that in mind opponents of the minimum wage would do better to focus on the overall effects of higher prices on the poor rather than on marginal price increases for individual products and services. When the financially well-off (relatively speaking) complain about higher prices for burgers or pizza it can seem selfish and it perpetuates the idea that they care more about saving a buck than about helping the poor.
Trust the Market
The perception that opponents of minimum wages do not care about the poor is unfortunately very pervasive. But aside from a few bad apples most oppose raising minimum wages precisely because it will make the poor worse off. They understand that when the government sets a wage floor above the market equilibrium there will be a shortage of buyers and a surplus of labor. For the working poor this means fewer jobs will be available; some will lose hours others will be laid off and many will never find work at all.
Few anti-poverty programs have a track record quite as terrible as the minimum wage. We do not need to invent objective" economic values or point out that burgers are slightly more expensive or belittle anyones job to demonstrate that raising the minimum wage is misguided. We simply need to trust that the free market will do a better job of improving the lot of the poor than the coercive measures of third-party observers.
This article was originally published by the Foundation for Economic Education.
Tyler Curtis is a lender at a community bank in Missouri. He also holds an undergraduate degree in economics from the Missouri University of Science and Technology. His work has been seen at the Mises Wire The Federalist and the Foundation for Economic Education. Follow him on Twitter @tylercurtis42.
Photo courtesy of USA Today./caption
There are many reasons to oppose raising the minimum wage. Most importantly by increasing the cost of labor a mandated wage hike causes employers to lay off workers and reduce remaining employees working hours. The tragic fact about the minimum wage is that though it is intended to alleviate poverty it all too often makes people poorer.
But that doesnt mean every criticism of the minimum wage is valid. A few popular arguments against raising the minimum wage are utterly callous not to mention economically unsound and are counterproductive to healthy debate. Below are just two examples of how not to argue against the minimum wage.
Flipping burgers isnt worth $15 an hour"
Weve all heard this argument before. Unfortunately those who invoke it are not talking about the market value of flipping burgers" but some vague definition of the jobs true worth." This true worth" or objective value" is supposedly determined by the difficulty of the job how hard the job requires one to work and the jobs importance to society. Flipping burgers is not particularly hard and its certainly not vital to our civilization so we shouldnt expect someone to get paid much to do it. By contrast many important and stressful jobs are not as remunerative as they ought to be; emergency medical technicians (EMTs) for instance make about $15 an hour and in some states even less. It would not be fair" to pay fast-food workers as much as paramedics so the argument goes.
On an emotional level the objective value argument has some weight. Some see protestors on the news pushing for a $15 minimum wage and ask: How dare those inexperienced fast-food workers demand to be paid so much just to flip burgers? Many others however interpret this kind of response as a callous disregard for the needs of low-wage workers. It makes it appear as though opponents of the minimum wage are harboring contempt for the poor rather than wanting to help them. From a political standpoint this is not a good position for an opponent of the minimum wage to be in.
More importantly the idea that ones wage ought to reflect his jobs value suffers from some serious issues of logic. Consider medical services. What is the objective" value of a doctor who helps to save a persons life from a potentially fatal disease? For the hypothetical patient the value may be infinite; his life is priceless. But clearly the doctor cannot be paid an infinite amount of money and probably will not even be paid as much as a professional athlete a job most would agree is less important to society. Is that fair?
In reality absolutely no one is paid according to the objective" value of his or her work. Even if a supposedly objective value could be ascertained it would be irrelevant to a discussion about market wages. As David Youngberg has recently written under a free enterprise system your income is determined by the scarcity of your contribution." The more people willing and able to do your job the lower your income will be and vice versa.
This is why paramedics are typically paid more than fast-food workers: not because paramedics are more important or because they work harder but because the skills required to do their job naturally make the supply of potential paramedics more scarce.
Admittedly hard work skillset education and societal importance do partially help determine which jobs are supplied and demanded (and in what quantity) but these factors alone cannot combine together in a vacuum absent the subjective valuations of workers and consumers to form the true value" of a persons labor.
Ironically the assertion that workers ought to be paid according to some objective standard of valueand that any deviation from that value is unfair"is precisely the same philosophy that stimulates the clamor for a higher minimum wage. Progressives simply differ on what they consider to be the true worth" of low-skilled labor. Once the existence of a jobs true worth has been conceded we are no longer talking about principles but to quote Winston Churchill merely haggling over prices.
Prices will skyrocket!"
In addition to negative employment effects the risk of rising prices is one of the most oft-invoked arguments against raising the minimum wage. And it has a lot of merit: minimum wages hikes tend to cause businesses to raise their prices particularly companies that employ a substantial amount of low-skilled labor. One study published in 2008 found that a 10 percent increase in the minimum wage will lead to a corresponding 0.7 percent increase in restaurant prices. Prices at fast-food restaurants went up by about 1.5 to 1.8 percent. Another paper published by Sara Lemos concluded that a 10 percent minimum wage increase could lead to a 4 percent spike in food prices in general. Further studies have yielded similar results.
The problem lies not in the substance of the argument but the manner in which its made. When it comes to the minimum wages effect on prices there is an insidious propensity to exaggerate particularly amongst the lay public. Many people are afraid that prices will skyrocket" if the minimum wage is raised too high. Now the word skyrocket" may be open to interpretation but its difficult to see how a 1.8 percent increase fits that description. For a $10 meal at Wendys a 10 percent minimum wage hike would push the bill up a mere 18 cents.
Still a small increase is still an increase and should not be ignored. It may not be a big deal to pay a few more bucks at the grocery store during one trip but that money can add up over time. Assuming food prices rise 4 percent as a result of a minimum wage increase it would cost the average family an additional $300 to $600 a year. For those living paycheck to paycheck the extra costs are by no means negligible.
On the other hand there are some workers for whom the income gains from a minimum wage hike more than compensate for the higher grocery bill. But this is not true for the majority of the poor. As Dwyer Gunn points out only 45 percent of poor working-age adults were in the labor force as of 2014 most of them working only part-time. A minimum wage increase would for the remaining 55 percent not in the labor force cost them hundreds of dollars per year in the form of higher prices with no corresponding benefit.
With that in mind opponents of the minimum wage would do better to focus on the overall effects of higher prices on the poor rather than on marginal price increases for individual products and services. When the financially well-off (relatively speaking) complain about higher prices for burgers or pizza it can seem selfish and it perpetuates the idea that they care more about saving a buck than about helping the poor.
Trust the Market
The perception that opponents of minimum wages do not care about the poor is unfortunately very pervasive. But aside from a few bad apples most oppose raising minimum wages precisely because it will make the poor worse off. They understand that when the government sets a wage floor above the market equilibrium there will be a shortage of buyers and a surplus of labor. For the working poor this means fewer jobs will be available; some will lose hours others will be laid off and many will never find work at all.
Few anti-poverty programs have a track record quite as terrible as the minimum wage. We do not need to invent objective" economic values or point out that burgers are slightly more expensive or belittle anyones job to demonstrate that raising the minimum wage is misguided. We simply need to trust that the free market will do a better job of improving the lot of the poor than the coercive measures of third-party observers.
This article was originally published by the Foundation for Economic Education.
Tyler Curtis is a lender at a community bank in Missouri. He also holds an undergraduate degree in economics from the Missouri University of Science and Technology. His work has been seen at the Mises Wire The Federalist and the Foundation for Economic Education. Follow him on Twitter @tylercurtis42.