The Maximum Wage Increase

2007

Once again Americans are pressed by politicians to consider the minimum wage issue.  This debate typically appears just prior to elections, manufactured with a sense of urgency.  The latest effort seems to have worked since many states are not only forcing higher minimum wages but are mandating automatic increases on an annual basis.

The good news is that raising minimum wage will not be an economic catastrophe in and of itself, at least not right away.  Businesses will adjust in order to sustain a profit.  Meanwhile, politicians will bask in the glory of saving the "common man".

The bad news is that long-term damage is being done to our free enterprise philosophy.  More and more, Americans appear to be following these do-gooder politicians into the arena of central planning, soviet style.

But the minimum wage debate provides a window into their fallacious thinking.  Wage controllers often make the following statements: 

• Isn’t it time that the government do something for the little guy?
• How can someone possibly live on $10,400 per year?
• We are a caring society.  Each person has dignity and value.  Raising minimum wage is the moral thing to do!

At first glance these arguments would seem appealing.  (I recall a CNN anchor breathlessly regurgitating them.  She sounded like a child explaining to her parents the absolute necessity of buying a gold fish.)  But a little examination reveals their emptiness.

To begin, you’ll notice these arguments lean on the ethic of caring.  This keeps opponents off balance since "caring" is an idea that is universally agreeable.  Who would not want to help others?  If you don’t agree with raising minimum wage you must not care!  (This argument is used for a slew of liberal issues.)

Liberals are particularly adept at using emotions to sell an issue.  Governor Strickland of Ohio, for example, frequently mentioned his Poor Aunt who was "stuck" in a minimum wage job.  Apparently she was a helpless victim just waiting for congress to come along and save her with a quarter per hour raise.

One wonders if liberal initiatives exist primarily to make one feel good about one’s self.  Or put another way; to relieve the guilt of one’s own abundance.  Perhaps the actual impact of increasing the minimum wage is less of a concern than that special feeling one gets from supporting a "noble cause".

There is a another fallacy that trails liberals like a lost puppy.  Proponents of liberal initiatives aren’t typically asked to sacrifice anything themselves.  They don’t feel any immediate discomfort from their decisions.  Rather, they impose them upon others, usually business owners and the "wealthy".

So when liberals speak of caring for the poor, or raising the dignity of the disadvantaged, they are not actually being charitable at all.  Rather, they are forcing others to be "charitable".  And upon reflection, charity is not the proper word to describe the confiscation of someone's wealth.

Politicians, in their misguided view of our economy, also frame the minimum wage issue as if the purpose of business is to provide jobs, as opposed to securing profits.  They believe that our economy is merely a "system" (I hate that word!) of wealth distribution, a malleable and whimsical structure that is supposed to provide guaranteed security for all.  And when the economy doesn’t seem to do as they like, they take matters into their own hands and begin tweaking.  Thus we are creeping towards socialism, manifested though high taxation, regulation, central planning, redistribution… the usual suspects.

Since the government can’t always hire employees themselves (though they do plenty of it) they apparently have the responsibility and authority to regulate wages, to ensure that every job pays what they consider adequate.  By extension, minimum wage jobs should not be perceived as merely jobs, but as careers.

The next time you order a Big Mac be sure to congratulate the sixteen year old on his/her career choice.

One might ask, why stop with minimum wage?  Why not set wages for everyone?  Aren’t teachers underpaid?  Don’t lawyers make too much?  Further, why stop at wages?  Shouldn’t prices be controlled as well?  Isn’t the cost of health care getting out of hand?  Oh, I forgot.  That debate is coming as well.

The belief that our economy can be self-regulating is deteriorating.  We are losing faith in the very philosophy that makes this country great and unique, the idea that natural economic forces, self interest, and good judgment, provides an abundance of opportunity.  Doesn’t controlling wages run counter to these underlying mechanisms?

What happens when government intervention doesn’t go as planned?  The answer is even more intrusion.  A tweak here.  An adjustment over there.  When liberalism fails it invites even more liberalism.

Some states, like Ohio, voted to have automatic wage increases that are based upon inflation.  Thus we have a monster that feeds upon itself.  Automatic pay increases will induce inflation, that in-turn lead to even more pay increases.  This is a self-fulfilling prophecy that could lead to a fifteen dollar Big Mac!

It's hard to imagine, but one of the byproducts of raising the minimum wage is that it can actually keep people down!  The minimum wage reduces concern businesses would naturally have with determining competitive starting wages.  The government has artificially done so on their behalf, by fiat.  This makes for a low shelf on which they can rest upon.  It can serve as an anchor on which business can strive for, work their way towards.  So perhaps the government is paradoxically establishing a "maximum wage", a glass ceiling for this group of workers.  And when employees stick around long enough to earn pay raises, it becomes only a matter of cutting their hours and dishing them off to the new guy (not to mention other means of controlling costs, such as automating productivity, reducing benefits, etc.)  So much for the grand social safety-net that liberals strive for.

It should also be noted that proponents of the federal minimum wage increase are concerned that states have been passing their own minimum wage standards independently from the federal standard.  This seems to have them upset!  Lou Dobbs of CNN exclaimed with disgust that twenty eight states have been "forced" to take matters into their own hands, supposedly because of congressional inaction.

But if states are managing the issue themselves, one might conclude that the federal standard is even less of a concern.  Most states seem to have the situation handled.  Is Dobbs actually concerned about raising minimum wage, or is he concerned about thrusting federal dominion over local interests?

Dobbs also ranted, inaccurately, that Americans are upset that congress has given itself numerous pay increases in the last ten years “without giving a raise to the American people”.  There are problems with his statements.  First, Congress can indeed give itself a raise.  It manages the very money from which it pays itself.  But in contrast, they are not able to "give raises" to workers of minimum wage.  They can only force others to shell out the cash.  Secondly, the public outcry seems to be a figment of his imagination (and rightfully so since there is no relationship between the two idea.)  Finally we get to the real meaning of Dobbs’ statement.  He is concerned about the symbolic gesture of raising the minimum wage.  Congress should make itself appear caring and considerate.  (What was that about wanting to feel good about thy self?)

To distract from these misgivings proponents want to bury voters in mountains of metrics to prove how their plan will dramatically improve the lives of many people, especially the poor, woman, and minorities.  Central planners always feel they can pull just the right strings when armed with the right set of "data collection".  This leaves voters with a choice; either to support the initiative or turn your back upon the poor.  Support increasing the minimum wage, or force Aunt Betty to starve!

While raising the minimum wage might appear to satisfy the short-term aims of helping people with their monthly expenses, and allowing supporters to feel good about themselves, we should ask what is lost in the decision.  What are the long term disadvantages of such pressures upon small business and our larger economy?  Common sense says that the sheer size of our economy will likely provide a buffer against this manipulation, but there will indeed be consequences.  And as voters give way to the emotional appeals from the likes of Ted Kennedy and Lou Dobbs, we should all take pause and get a little nervous.  What’s next on the leftist agenda?