The Washington Times has published a fascinating and insightful story about growing opposition to hikes in the minimum wage in various parts of the country. The opposition is based not so much on the principles of liberty as a practical reason: the increase is causing businesses to lay off people.
According to the article, which is entitled “Minimum Wage Resistance,” several localities in Illinois have chosen to opt out of county increases in the minimum wage to $15 an hour. The author of the article, Richard Berman, writes:
“What are these city leaders seeing that other states and localities have missed? Perhaps it’s the destructive effects of their neighbors’ good intentions.”
Berman then goes on to cite example after example of how increases in the minimum wage have caused businesses to close down and people to be laid off from their jobs.
As a result of the $12 minimum wage that was enacted in Arizona, an Italian restaurant in Tucson is closing, laying off 43 employees. The owners said, “I hired so many kids that I coached that is what’s sad.”
Consumers are experiencing significant increases in the prices of goods and services in areas where the minimum wage has been increased. That might well be due to businesses going out of business, leaving markets to fewer suppliers. For example, in Yakima, Washington, Country Kids day care is going to close, laying off 23 employees. According to Berman, “Mothers who supported the wage hikes are seeing their day care price tag skyrocket.”
In Spokane, a pub, a café, and a pet supply store have all closed. The owners cited the minimum wage increase as the reason. A pizza store has laid off an employee to reduce costs.
None of this is surprising, of course, to libertarians. As we have long pointed out, legislators cannot increase the economic well-being of people by enacting laws. If they could, then there would be no more poverty in the world. All that governments would have to do is enact laws mandating employers to pay employees $1,000 an hour and — voila! — no one would be poor and everyone would be rich.
One big problem, however, is that life just doesn’t work that way. Another big problem is that when people turn to Caesar to enact laws to abolish or reduce poverty, they only make the poverty and the suffering worse than it was before the law was enacted. The examples supplied by Berman confirm that.
What amazes me is that there are still so many people who really believe that a minimum wage can improve economic well-being. It’s really a testament to what public schooling and many government-licensed private schools to people’s ability to think critically.
Sure, for anyone whose ability to engage in critical thinking has been destroyed by their schooling, enacting a minimum wage is a no-brainer. Isn’t it rather obvious? Use the law to force those greedy employers to raise the wages of their workers, and everyone is better off. Who can be against that, right?
But those who are able to engage in critical thinking are going to say, “Wait a minute! Is it really that easy to raise people’s economic well-being? If so, then why stop at $15 an hour? Why not $1,000 an hour? Indeed, why not make the minimum wage equal to what congressmen earn?”
Let’s say that the minimum wage is raised to $1,000 an hour. I’ll bet that after reading Berman’s Washington Times article, those who are able to engage in critical thinking will say, “Won’t this just cause even more businesses to go out business? How are they supposed to pay their employees $1000 an hour?”
Well, it’s the same phenomenon at any minimum wage that is set. There are always businesses that are operating right at the margin. If their costs go up, they go out of business. That’s what is happening now to those businesses that are closing owing to the increase in the minimum wage.
But it also happens at the old minimum wage. Many businesses that would open up without the minimum wage — businesses that would operate at the margin — are unable to open up because of the minimum wage. We never see them because the minimum wage law prevents them from opening up, hiring people, and operating at the margin. But we would see them opening up if there were no minimum wage.
The principle is the same with respect to workers. Every employer places a subjective value on employees and prospective employees. If the employer concludes that the employee will increase his profit margin, he will hire him. If not, he won’t.
Let’s say that a worker asks an employer for a job. They strike a deal at $7 an hour. Both the employer and the employee are increasing their standards of living through their exchange, given that they are both giving up something they value less for something they value more.
But the state’s minimum-wage prohibits them from carrying out the contract. Even though they both have agreed on $7, they cannot go through with the deal. The employee remains unemployed, permanently. That’s why, in fact, inner-city black teenagers have had a chronic unemployment rate of 30-40 percent.
Supporters of the minimum wage and other welfare-state programs exclaim, “Please judge our programs by our good intentions. We really do mean well with our minimum-wage laws.”
But what good are good intentions? What matters are the actual consequences of government measures. And there is no doubt that the minimum wage brings unemployment, lack of opportunity, higher prices, and misery, poverty, and suffering to so many people. Best to just repeal it.
Finally, and most important, there is the principle of economic liberty — the concept that holds that people have the fundamental, God-given right to freely engage in economic transactions with others without the interference of the government.
Wouldn’t it be great if the current resistance to the minimum wage grew into a nation-wide wildfire of protest against this immoral and destructive law? Wouldn’t it be great if the rising tide of opposition were led by the poor, who the biggest victims of the minimum wage? Wouldn’t it be great if the growing opposition led to a full repeal of the minimum wage rather than its mere reform or reduction?