One can’t help but feel sorry for socialists who live in Minnesota. The reason? They are getting terribly embarrassed by the wage situation in that state.
Socialists have long claimed that a minimum wage is necessary to protect workers from greedy, profit-seeking employers. Without a state-managed minimum wage, the argument goes, exploitive employers would pay workers only subsistence wages and possibly even less.
But not so in Minnesota, where socialists are hanging their heads in shame!
The state-mandated minimum wage in Minnesota is $8.42 an hour for small employers and $10.33 for large employers. Therefore, given the socialist position, wouldn’t you think that the wage rate in Minnesota would be no higher than the state-mandated minimum? After all, at the risk of belaboring the obvious, if greedy, profit-seeking employers would pay no more than subsistence wages (at most) if not forced to pay more, then doesn’t it stand to reason that they would pay no more than $8.42 and no more than $10.33?
Well, guess what. According to an article in Sunday’s Washington Post, the wages that workers in Minnesota are receiving far exceed $10 an hour.
A construction company is paying roofers twice that amount — $20 an hour. Welders are getting $23.50 per hour. The going rate for service-sector jobs is more than $15 an hour. That’s what workers at McDonald’s are making.
Needless to say, workers in Minnesota are extremely happy. Welder Thomas Lawton, 22 years old, stated, “I’m very comfortable.” He makes $24.50 per hour. Bertha Cuellar, 41, who moved from Texas and now makes $22 an hour as a roofer, said, “I came over here with nothing, not even money in my pocket. But now I’m way more comfortable.”
So, what gives? How do socialists handle this? How can you not feel sorry for them for being so embarrassed over what is happening in Minnesota?
The situation in Minnesota show that wage rates are determined by the same laws of supply and demand by which all other prices are set. There is a severe labor shortage in that state, while at the same time, a tremendous demand for labor. The title of the Washington Post article calls it a “red hot labor market.”
That’s what happens when supply is low and demand is high. The price goes up. That applies not only to goods and services but also to labor. When there are few workers and many businesses vying for workers, the wage rate will go up regardless of the wishes of greedy, profit-seeking employers. Even if employers want to pay only subsistence wages to their workers, market conditions will determine how much they will pay. Even the greediest, most profit-seeking employer will have to match what other employers are paying or he will lose his work force to the competition.
Unfortunately, not all workers in Minnesota are experiencing gains. According to the Post, “The Black unemployment rate in Minnesota in July was 7.3 percent, more than triple the White unemployment rate, and worse than the national average for Black people in the United States.”
What can be done about that? Repeal Minnesota’s minimum wage law! That would enable Blacks to compete for jobs by offering to work at a lower rate than the state-mandated minimum, which most greedy, profit-seeking employers would find attractive. Moreover, it would enable entrepreneurs to start businesses in which they could pay Black workers less than the state-mandated minimum. Everyone has the right to participate in the economic prosperity in Minnesota. Unfortunately, the state’s minimum-wage law deprives many Blacks from doing so.
The situation in Minnesota shows that the socialists are wrong with respect to their exploitation theory of wages that drives their support for a state-mandated minimum wage. Ultimately, wages are set by the laws of supply and demand.
Moreover, the high unemployment rate among Blacks in Minnesota shows that minimum-wage laws actually hurt many at the bottom of the economic ladder. The best thing that could ever happen to the unemployed is the repeal of the minimum wage.
So, let’s pity the socialists but let’s also cast their economic theories into the dustbin of history.