I was considering the minimum wage the other day and realized that there are multiple reasons why I think it is detrimental to the poor, and I have rarely heard them explained to people properly. I decided to consolidate all of the reasons to three big ideas and explain them fully because I think there are a lot of misconceptions about what the minimum wage actually does and how it effects people. Here they are:
It Prices People Out of the Market
I believe this is the most popular argument in one form or another. Initially, it might take the form of “I don’t want to pay $15 for a Big Mac”, however, these are essentially the same arguments. If you don’t want to pay for the Big Mac, you won’t go to McDonald’s, and if there enough people like you, McDonald’s will have to figure something else out. The technology that is available today makes it possible for some of these low-skilled workers to be replaced with tablets or kioks. In some ways this is already occurring with the ziosk at Applebee’s and Chili’s. These little machines allow the customer to order a beer and pay the bill through a touch screen. In Seattle, where there is now a $15 minimum wage, there is a new burger joint called the Blazing Onion Burger Company that is experimenting with iPads to allow customers to order. There are also companies that are using Facebook payment integration to make a giant jump forward to allow the customer convenience and increase sales.
When you are a teenager just trying to get a little work experience this is a very difficult challenge to overcome. In my experience if you are willing to work hard and show up on time, there are companies that are willing to give you a shot, but with the minimum wage increasing, it becomes more and more difficult for business owners to justify this expense.
Why Not Make It $50 or $100?
I find it helpful to always challenge ideas by taking them to their extreme, in this case it means questioning why the minimum wage shouldn’t be $50 or $100 dollars. If there is an ideal wage for the worker, why not just go to that wage and skip all of the arguments in the middle? If inflation is the issue there are ways to stop that (those reasons will be covered in another post). My point here is to skip all of the debates and arguments in between and force employers to pay the final hourly wage that all people deserve. Or go to what you think is the final solution, which I think is socialism.
It assumes that dollars are the only currency
I personally believe that this is the most compelling reason that is often left out of the argument. What if there is a person that wants to get into television or radio broadcasting and they are willing to work for an existing program for free? Shouldn’t that be their right? In this scenario the currency that they are being paid in is knowledge, because some fields are more hands on than others. If you want to be a carpenter or HVAC installer, your first step would be to get an apprenticeship rather than a degree, likewise it you want to be a television producer it would certainly add to your education to get an internship and from what I hear, some of them don’t pay. The question is, why do I care? If that person thinks it is worth their time to go and learn without being financially compensated, I say go for it. I have heard from people like John Stossel and Glenn Beck that their interns love it because they learn more from the internship then from school. Maybe it is costing the television money to take the time to teach the person and therefore it is not worth it yet to pay them in dollars on top of that.
Another way to look at it is that people pay for knowledge in the form of a college degree so how is that different than working for one of these places for free in order to receive more specific knowledge that might help you more than your university classes?
Why is it that we assume that the government needs to step in when there is a financial transaction between two parties? The minimum wage is a law that only restricts workers and their ability to learn and develop new skills. If we really want to help the poor rise above their current state, we need to get rid of the minimum wage and allow them to work for what they are worth.