02 January 2007

Minimum Wage Boost

Minimum wage went up for California. If the Dems in the House and Senate have their way, it will soon rise across the nation.

Some members of the business community are once again bleating about how this simply won't work. Yet the truth about business is that there are so many variables that could be tweaked that management only tweaks a few at a time. When government regulators say it is important to, say, complete paperwork for drug approval, they manage to complete the paperwork. When the government makes them, say, pay their minimum wage employees fifty cents more per hour they comply. If they didn't have to complete the paperwork or pay their minimum wage employees more, they wouldn't.

Imagine the alternative to a minimum wage. What if the lowest-paid workers in the United States were paid no more than the lowest-paid workers across the world - workers who miraculously make it on $1 a day? Markets really don't care whether they pay workers 15 cents a day or 15 million a day, but communities don't have to show such callous disregard for the real needs of real people. There is no miracle equation that ensures that the least productive worker will just happen to make enough to buy food, clothing, and shelter. Management has many competing priorities and is unlikely to just spontaneously decide that of all those possibilities they will make raising the productivity and wages of their least productive workers the most important. Unlikely, that is, without regulatory compulsion.

Markets are great mechanisms but aren't any more prone to perfect solutions than are regulators. No one wants to buy a car that steers only right or left. Communities shouldn't rely only on regulation or markets; our least productive shouldn't rely on businesses raising wages out of boredom or sense of altruism.


Norman said...

Sounds like you're arguing for "felt-fair" pay '-)

Life Hiker said...

When the minimum wage is increased, many employers will increase productivity (reduce workers, that is), be more selective in hiring, or shut down because the new minimums make them uncompetitive. Some people at the bottom will not be employed any more.

But lots of people at the bottom will get a raise and their standard of living may go up just a little. The rest of us will pay for their increases in higher prices, and we will not be able to buy as much stuff as we did before the wage increase. The overall economy will shrink a little.

Maybe its "fair" to give the lowest on the ladder a slightly more comfortable perch. But perhaps it would also be fair to the rest of us if more of these people paid attention in school. America can't afford any more growth in its uneducated workforce.

Unskilled workers offshore are delighted that we are raising the minimum wage...it makes them even more competitive and helps ensure that America's industrial base continues its migration to their countries. Consequently, America must focus on out-educating its competition and try to maintain leadership in high-value production.

Sadly, we have no stomach for requiring productivity in the classroom. We will pay our unskilled labor a higher minimum wage while our country becomes less and less competitive. Not a pretty picture, but a predictable one.