© 2008 Michael Swickard, Ph.D.
“A peasant must stand on a hillside with his mouth open for a very long time before a roasted duck flies in.” – Chinese proverb
The new minimum wage law in
The problem with raising the minimum wage is that it puts the productivity-to-wage continuum out of balance. Companies must do something to get it back in balance. Typically, they shed the least-productive members of their staff, the minimum-wage workers.
Also, the least-productive members of each company are at risk of being mechanized out of a job. And, with increased wages, each company must increase prices, taking back from minimum wage workers the money that the government gave them.
The minimum-wage workers are now worse off rather than better. Every economist knows this to be true, but this is a political rather than an economic debate.
Never use a political solution for anything other than a political problem. We head to disaster when we use political solutions for health, economic, educational or security problems.
Our government initiated the minimum wage long ago. The economic problem is that without education, talent and/or a desire to do jobs other people would rather not, a person is in a very large pool of job seekers with not much to induce companies to hire him.
Why people are poor
Are people poor because they make the minimum wage? No. They are poor because they can only make the minimum wage. In the land of the free, wages vary considerably, as do talents and desires to do icky jobs.
If you track someone making $5.15 an hour to see how he went about building wealth and then track him making $6.50 an hour or $7.50 an hour, it is reasonable to assume he will not have made any move toward wealth, even at the higher wages. A few more shekels will not change financial habits. He will still not have a pot, nor the window.
It’s wrong-headed to talk about wages from the standpoint of what people need to live. If people really cannot survive on what is offered, they will not survive and the enterprise will fail. If they can survive but would rather have more, then it is a question of their choices.
The media is great at finding that “one person” who for 10,000 reasons cannot do the right thing and get more education, and cannot work jobs that other people would rather not do. So we are told people should be given a “living wage” consummate with what they would like to make if they had more education or a desire to work more icky jobs. We concentrate on that one person and miss that millions of other people are working minimum-wage jobs because they choose to do so.
Another troubling issue is that, worldwide, there is a debate over where to position the minimum wage. Many countries now peg the minimum wage to the median wage paid. As the most productive members of a society make more money, they drag the least productive along, which penalizes the most productive while rewarding the least productive.
That will only work for a while. We are not being compassionate by continuing the cycle of people not being productive. But what do we do with people who do not wish to increase their productive value? For many reasons some people make bad choices about their productivity.
Government must place incentives on productivity
An interesting debate is going on in the
The doctors realize that without the cessation of smoking the operation is much more risky. Giving more money to minimum-wage workers is exactly the same. Without an increase in productivity, the increased money is not going to make a better life for that person.
If this government really wants to help poor people, it must place the incentives on an increase of productivity. Nothing else will provide sustainable benefits. We need to never raise the minimum wage again and instead make productivity our central aim.
Teach a man to fish and he eats for a lifetime. Mandate that other fishermen give part of their catch to him and he does not help himself or them.
Rather than a minimum wage increase we should have reduced costs for attending colleges and trade schools. Then, when finished with their studies, the students could step into a world of productivity rather than a world of poverty.
There is something worse than poverty, and that is poverty without hope. All of us were poor when going to college. One day, though, we woke up to a rich and productive world.
Swickard is a weekly columnist for this site. You can reach him at michael@swickard.com.