Minimum Intentions
“The road to hell is paved with good intentions.”
Minimum wage is a prime example of a policy being judged by intent rather than outcome. Those who advocate for it, amongst the citizenry, have the greatest of intentions, however, what actually transpires as a result of these intentions never meets the lofty goals of pay equality, poverty combatance, or the like. Politics and economics today are riddled with the short term and the seen. One cannot entirely blame the public for succumbing to such illusions, but folly remains folly whether accidental or purposeful. Intent means nothing when the consequence brings destruction. Thus, the popularity of minimum wage laws requires an honest discussion. One devoid of what such legislation is supposed to do and deal with what these laws actually do. It may appear that minimum wage is a short-term solution, but in reality, it is a long-term problem.
One of the major arguments in favor of minimum wage possesses a fatal flaw—the assumption that a minimum wage position is some sort of career position and that the jobs are often held by persons struggling to keep their head above water and provide the most basic needs for their family. This could not be further from the truth. According to their 2019 report, the Bureau of Labor Statistics (BLS) found that 43.1% of all those employed who earn the federal minimum wage or lower were within the age range of 16 to 24. The next larges slice of the pie goes to those 25 to 34 with 25%. Thus, 68.1% of minimum wage workers are under the age of 35. If we dive even further into the report, we find the family situation to be far different from popular rhetoric. A combined 18% of all minimum wage earners could be reasonably classified as supporting a family with the split being even at 9% for both single parent households and married sole earners. The remaining 82% is comprised of 20% Married dual earners, which means that they are not the primary source of income for their household, with the next percentage going to single adults at 21%. The 41% leftover is made up of those living with family or relative(s), meaning they too fail to meet the qualifications of being the primary bread winners in their households.
Why is this important? Because it conveys a more accurate application of the minimum wage job. It strongly suggests that the majority of minimum wage earners are not supporting a family but are transient—only holding that position for a short while to gain experience, skills, and other necessary factors that assist in career development.
It is important to know what low wage jobs actually are, why they exist, and in their existence, who do they help. There is not a class system in America where the impoverished are destined to remain such indefinitely, while the rich draw a defined line as to who can cross it and who cannot. That is nothing more than political and mainstream media rhetoric that has no basis in real life economic activity. The word transient is used to show that different persons fluctuate in their income throughout the course of their life. Many who start off poor, move up into the middle-class and rich categories, while even rich people fall from the upper-class, landing in the middle or even lower-class segments of the socioeconomic ladder. There are numerous reasons for these fluctuations; career path, which involves raises and promotions, the selling of one or multiple properties, which must be claimed on taxes, industry bust or boom due to improved methods of production, an inheritance, etc. Generally speaking, the older a person gets, the more they earn, especially if they have remained in a given field throughout their career. The commonly repeated cliché of, “The rich are getting richer while the poor are getting poorer,” is also economically inaccurate. The poor are moving up into the middle-class, while the middle-class is moving up into the expanding upper-class. However, the details of that topic must be elaborated in a separate treatise.
Many fail to recognize the contextual significance and necessity of low-wage jobs beyond their victimization and exploitation by greedy capitalist. This is a short-term and highly lopsided perspective. Once again, low-wage jobs are generally entry-level positions that require little to no skill, experience, or training, hence the low-wage. These positions are intended for people to enter a given industry or the work force in general with the goal of expanding their own value in the labor market. Other members of this income bracket merely seek additional coin beyond the primary household earner. The frequency of part-time employees with such pay also speaks to the potential flexibility of these positions relative to other circumstances in a person’s life. Unfortunately, increasing the minimum wage artificially only strains these coinciding factors. The higher the wage, the higher the required productive output needed to justify such compensation. Would anyone argue that someone sweeping up the hair from of the barbershop floor is worth $15 an hour? We can clearly see why certain jobs are eliminated, while the remaining require more skill and experience than many entering the labor marking or relatively new to the labor market will possess.
Combining this with the fact that 74.9 percent of minimum wage earners, according to the same report, are part-time employees, the assume that a single parent or sole income provider would be the occupants of such a job is preposterous, even at a $15 an hour rate. Why would anyone bother applying for a part-time position if they were the sole earner or if their household were dependent upon their income? One could not argue job scarcity, because that would only reinforce the undesired stance that a higher price yields lower consumption, as it pertains to the price of labor. Further breakdown of the 2019 minimum wage earning population shows that 58.5 fall within the 16 to 19 age bracket. Once again, it is important to properly identify who the actual people are who make up these “struggling” members of society. This is a far cry from the 18 percent arguably struggle to make ends meet. The facts often conflict with political and mainstream narratives.
An example of such a narrative is the idea that wages, along with other prices, are arbitrary, businesses can set them however and whenever they like. This could not be further from the truth. All prices are interdependent and intertwined. Minimum wage supporters, accompanied by other price fixing promoters, treat the economy as though each part operates detached from ever other, completely forgoing the complications that artificial adjustments to any given price can have on the actors, who actually make up the economy, interact. The shameful part is that this is one of the most basic of economic principles taught in the most rudimentary econ class, nevertheless, such thinking runs wild in our society from the cafe shop to the oval office, proving that ignorance is far from bliss, but reality, it is quite destructive.
Consider what is seen and unseen when a minimum wage hike takes place. First, the price of labor increases, specifically those employees who keep their jobs experience a seemingly generous boon to their pay. These particular minimum wage workers are seen by the public and touted by the politicians, activist, and do-gooders as achievements in their fight against poverty, inequality, inequity, whatever, but what is unseen are the numerous workers who are let go and even never hired in the first place as a result of their neighbor’s raise. Is it better to work for little or for nothing? It is easy to answer nothing for someone else, when your pocket is full. Even the CBO (Congressional Budget Office) acknowledged this in their study of minimum wage effects.
“By boosting the income of low-wage workers who keep their jobs, a higher minimum wage raises their families’ real income, lifting some of those families out of poverty. However, real income falls for some families because other workers lose their jobs, business owners lose income, and prices increase for consumers. For those reasons, the net effect of a minimum-wage increase is to reduce average real family income.”
The net effect of minimum wage policies is a decrease in real income. In the long run the perceived boon to a specific group’s income will be offset by emitting a general rise in prices. This is a natural market reaction to the artificial increase in the cost of labor. In order to mitigate the adverse impact on production cost, resources shift away from labor toward more effective and efficient means of production. This minimizes the price bumps on the production end, but adversely effects the labor market—less people earning a wage at all and those who do earn a wage above the minimum wage can see their pay stagnated. Simultaneously, those who enjoyed the wage hike, now spend their added income on more consumer goods. This seems beneficial to a Keynesian based system that emphasizes consumption over savings, however, what is unseen, is the restrictions of that very law, which increased the income for one, but limited the production of another. As basic economic principles teach us, rising demand results in rising prices. This price increase incentivizes more producers to enter the market for that good, which increases the supply to meet the demand for that good. Unfortunately, labor restrictions on production, not to mention the enumerable other government-imposed mandates, inhibit producers’ abilities to produce and thereby meet the demand at the increased price. This keeps the price from adjusting to the additional supply. Thus, keeping the price higher than it otherwise would be. The general cost of living, especially for those in lower income brackets will see an augmentation, leaving the low-wage earners no better off, if not worse off, in the long run.
The more something cost, without a corresponding rise in demand, the less people will consume that something. A basic tenet of economics that is forgotten when relating to labor. The general public, more accurately, the voting public were and are not taught economics to any reasonable degree. I can attest to this, given my economics class in high school. A class that dealt with us pretending to invest in the stock market and a team presentation regarding an invention, but I cannot recall there ever being any mention of scarcity, supply and demand, marginal utility, prices, or the differing economic systems. Be it that the curriculum we are taught is largely dictated by both the government apparatus, be it state and/or local, along with the nation’s largest unions, is it really a surprise when young adults emerge from these respective institutions wholly unaware of the science that so emphatically impacts their lives? Thomas Sowell wittingly and accurately expressed that, “The first lesson of economics is scarcity: there is never enough of anything to fully satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.” Therefore, if politics governs government and government governs education, then education dwindles down to nothing more than a political tool of government. Consider mainstream media, activist, and even everyday conversations about the so-called issues. Are we not constantly bombarded by the first lesson of politics? The debate over minimum wage only exists today because of the ignorance of economics in the main. Yet, when people are challenged to read up on the science, they consider it unnecessary or simply not worth their time, but these same people will speak pompously of economic matters, even to the perversion of the voting booth.
In consideration of the above, one can assert that we both have and continue to suffer irreparable harm as a result of widespread economic illiteracy. Such a condition renders the reality of things to be this; people get so wrapped up in the perceived altruism of their intentions that they seldom stop to think about the real-world implications of their intentions. Again, lamenting that faithful saying, that the road to hell is paved with good intentions. Intentions on helping struggling parents and impoverished families that make up no more than 18 percent of minimum wage earners. Intentions to combatting exploitation but does nothing more than eliminate opportunities for the less skilled and experienced. Cut into greedy capitalistic profits, but instead does little more than diminish real income among on net. The data suggest a picture far different from that portrayed by politicians, activist, and do-gooders. We have to start thinking long-term as well as short, ponder the unseen and not just the seen, for only then will we continue this seemingly miraculous rise in both the domestic and worldwide standard of living.
References:
§ https://www.bls.gov/opub/reports/minimum-wage/2019/home.htm#cps_mw_whe_hist.f.1
§ https://minimumwage.com/what-is-the-minimum-wage/
§ https://www.cbo.gov/system/files/2019-07/CBO-55410-MinimumWage2019.pdf
§ https://www.aei.org/carpe-diem/thomas-sowell-on-the-differential-impact-of-the-minimum-wage/
