This is not the first time I've heard populist Bill O'Reilly advocate raising the minimum wage, and if it wasn't the fact that I've been doing a slow burn on this issue now for several weeks, if not months, I would probably let it pass. For those wanting a more rigorous discussion, Don Boudreaux of Cafe Hayek routinely discusses the issue on a frequent basis. But Bill's latest commentary is the proverbial straw that broke the camel's back:
Yes, the minimum wage should be raised in America. No one can live on seven bucks an hour.Now some who have read my post comments on the minimum wage can probably anticipate the points I'll make, but the first thing to point out is most jobs, probably around 97%, pay ABOVE minimum wage. What a minimum wage does is prohibit employment opportunities for workers whose going skill market rate is below the minimum wage. To a certain extent workers above that level benefit from reduced competition from new job seekers who gain experience and productivity meriting higher compensation, although I would argue this artificial shortage at the expense of other labor is deeply immoral; pricing other people out of the labor market by majority fiat is unjust by limiting their right to work by their own right to contract.
And for those of you who say it will hurt business, so what? There has to be some kind of fairness in capitalism.
Also, if the minimum wage were, say $11-an-hour nationwide, that would give folks an incentive to work, which is what we want.
And you can phase that in. By 2025, for example, the minimum wage should be 15 bucks an hour.
But Bernie Sanders in particular should know that the higher the minimum wage, the fewer jobs there will be.
Also, prices will go up in places like Costco and Walmart, where working Americans shop.
Sanders and the Democrat Party seem to forget that.
You raise wages across the board, some businesses will cut back and prices will rise.
For many businesses, labor is one of the biggest expenses, and profits may be marginal. Compensation is not just wages but benefits and other costs like training. Compensation is not arbitrary, because a business competes for labor in an open market. For relatively inexperienced and/or younger workers, an employer may need to invest in them through training; as the worker gains experience and becomes more productive, the business has an incentive to increase wages and not bear the burden of retraining a substitute.
Most minimum wage work is part-time and is not intended to be a career; workers tend to be less-educated and/or younger. They are typically clustered in the leisure, hospitality or retail segments, where productivity increases tend to be minimal (like 0.3% annually). Generally, wages correlate with productivity, which typically correlates to investments in human capital or technology, e.g., your labor costs are spread among a larger number of widgets; your margins can accommodate increased compensation. But when the state imposes a higher cost, say in fast food, it's not like productivity rises enough to accommodate your margins.
Well, as O'Reilly says above, simple: just increase your prices. It's not quite so simple; in market segments (e.g., fast food franchises), there may be pricing/vendor policies beyond your control. This is a competitive market and in general you face the law of supply and demand: fewer transactions at higher prices. Customers have other options, like a brown bag lunch. If you lose traffic, you have to find ways to reduce costs. You may reduce work and/or operating hours, reduce training costs, hire more qualified employees (e.g., retirees), etc.
Price controls are never good economics; price caps often result in shortages and price floors in surpluses. In labor markets, the minimum wage tends to result in surplus workers/unemployment. It is an unfair policy that adversely affects certain prospective workers, industries, and occupations.
O'Reilly argues that with higher prices, you provide more of an incentive to work. Well, the fact is, about 97% of jobs pay more, which is an already existing incentive for young people to invest in education and training to qualify. And if you are struggling to find work at the existing minimum wage, increasing the minimum wages just prices you out of the market as you find yourself competing against more, often better qualified workers.
"Fairness" in capitalism is minding your own business, O'Reilly; let the business and the worker come to their own voluntary agreement. Some income at a lower wage is better than no work at a higher wage. When I faced tough recessionary times, I could lower my salary demands to attract employer interest; I remember in one case where I agreed to a subcontract which gave the end client a trial engagement of up to 2 weeks to decide without obligation. A lower-wage worker doesn't have the same opportunity (say, agree to a lower wage in exchange for training costs) because the paternalistic State arbitrarily reduces his bargaining options. There is an equal protection argument here.
Minimum wage policy is little more than an implicit tax on low-wage work opportunities. It arbitrarily bars people with limited skills/experience from entering the workforce. It doesn't give workers a "raise"; if the employer goes out of business or reduces hours, you can actually be worse off. Political whores love to raise the minimum wage because it doesn't come out of their budget, unlike policy alternatives like an earned income tax credit.
No, Bill O'Reilly, there is no Santa Claus. Government interventions have consequences, seen and unseen. Wages are better decided by the market than the hubris of government policy.
