Minimum Wage Thoughts

This started as a reply to my comments at Shared Thought, but it took on a life of its own. Shared Thought is running a great website, full of interesting commentary. Though I disagree will just about all of it, I read it to keep myself honest.

The commenter defended the idea of the minimum wage and asked what would be wrong with linking annual increases in the minimum wage to the rate of inflation.

On the surface, it sounds like a wonderful idea. The liberal voice inside me said “yes!” when I first read it.

But, as is usually the case, the killjoy side of my personality took over with a warning: not so fast, sunshine. You can’t legislate wealth. Whenever anybody’s selling that crap, my hands tighten around my wallet.

The crux of the problem is that wage increases are inflationary. (I’ve read liberals scoff at this idea, but I think they are letting wishful thinking get the best of their mercurial selves. An increase in wages can be offset by other unpredictable factors (interest rates, money supply, GDP growth…), so it is not necessarily so that you get inflation every time you raise the minimum wage. It’s a bit like saying the last time I put a gun to my head and pulled the trigger nothing happened, so I think I’ll do this all the time).

Increasing wages are by definition inflationary. Increasing the minimum wage causes salaries to increase throughout the pay scale: the guy who was making $8.45 before the minimum wage increase will soon want $10 (why not? He’s got two years experience over the entry level guy!), and the guy who made $10 wants $13...etc.

Eventually, this will affect prices, on which the rate of inflation is based.

So as the rate of inflation increase, so does the indexed minimum wage. Thus, indexing wage increases to the rate of inflation creates a dangerous spiral. Congress - which rarely makes intelligent decisions - did indeed make a good one when it avoided tying the minimum wage to the rate of inflation.

I think that the minimum wage is a bad idea in itself, because it hurts the very people it aims to protect – low skilled workers – by denying them jobs. The minimum wage (at its current meager level) puts the US at a relative disadvantage to, say, Mexico. And the jobs that go south tend to be low skill, minimum wage jobs. One could make an argument that minimum wage laws destroyed the US textile industry (you could also argue that this in itself was not a bad thing. It was shitty work, but losing those jobs did increase US unemployment).

Raising the minimum wage does little to help the poor (most poor people earn somewhat more than the minimum wage), and wage increases are eventually offset by increases in prices. In addition, most people who earn minimum wage are kids, working in their first jobs and living in their parents’ houses.

I think the noise is Ted Kennedy's belief that he is looking out for the little guy. Kennedy, who spends more on alcohol in a month than minimum wage workers earn in a year, complains that “employees working 40 hours a week, 52 weeks a year, earn $10,700 a year, or $4,500 below the poverty line for a family of three.”

Uh, a family of three? How does it happen that someone with a minimum wage job ends up supporting a family of three?

In liberal mythology, it’s all chance. But in truth, it is very likely that a person is driven to these conditions by a series of stupid life decisions, decisions that society must discourage (and poverty is excellent at doing this).

It boils down to the fundamental liberal misreading of American poverty. Simply stated, it sounds something like this: if the poor had higher incomes, they would be just like the middle class.

It’s bullshit.

Poor people almost always become poor for a reason: they decided to have child when they were young and unmarried, they dropped out of high school, or they thought it would be cool to be a junkie.

Poverty is the necessary result.

Rewarding people who make those bad decisions sends the wrong message.

Poverty is sometimes deserved, just as wealth is sometimes deserved. I don’t know why this obvious statement so inflames liberals, but it does.

It is essential for society’s survival that a twelve-year-girl look at her sixteen-year-old sister, throwing away her life away as a teenage mother, and say this to herself: “There is no way in hell I’m going to let that happen to me.”

And in our uncaring times, that is exactly what is happening:

Births to teenagers (have) continued to fall, reaching an all-time low in 2001 of 25 births for every 1,000 girls ages 15 to 17. The drop was particularly strong among black teens.

Minimum wage laws, welfare, and food stamps are part of the same evil brew, discouraging responsibity among the poor, thus ensuring that they will remain in poverty.

The less we “care,” the more people will take responsibility for their own behavior and the better things will get.

Honest. This a former liberal talking.

- posted by total @ 7/19/2003 07:42:00 AM .