Minimum Wage Hypocrisy—By Clayton Welwood, Leader, BC Libertarian Party

This is an extract from my  post in response to an opinion piece by Michael Coren published in the Toronto Star. The text of the original article is in italics and my comments follow.

[Coren] The economic arguments are various and often at odds, and while there are competing precedents the consensus is that the economy will be boosted and not blasted by the change. More to the point of course, it will give countless people more of a chance to pay the rent and feed themselves. Any society that regards itself as civilized should surely allow its lowest paid citizens at least a modicum of hope and dignity.

I’m not sure Mr. Coren has made much effort to understand the economic arguments. Wage controls amount to fixing the price of labour. There was a time when many economists thought that price controls were a good idea. However experiments with them in the interwar period were not a success, and it has been argued that they helped prolong the great depression.

What about the claim that the economy will be boosted? It’s safe to assume what is meant here is the national economy as a whole grows or becomes wealthier. To answer this, we first need to understand how wealth is created; here are a few examples: a deposit of ore is discovered and mined, an engineering process is devised that allows the ore to be extracted more efficiently, a train engine is manufactured that allows the ore to be transported using less fuel, the metal is fashioned into a fence that keeps the deer from eating someone’s garden. In all of these examples, the value of the manufactured output is worth more than the sum of the inputs, and both parties of each transaction consider themselves better off for having made the deal. In other words the economic exchanges are win-win.

The same can’t be said of the following exchange: A restauranteur hires a bus boy at $11 an hour. The next month, the provincial government raises the minimum wage to $15 per hour. The restauranteur’s expenses have increased, but there is no additional wealth created (no increase in sales). If the restauranteur considers the value of the bus boy’s work to be below $15 per hour, then the transaction has become win-lose: the bus boy’s gain is the owner’s loss. But this isn’t sustainable. If the owner isn’t able to boost sales or cut expenses to cover the increased wage cost, she may just decide to lay off the bus boy and clean the tables herself.

It’s possible that economists who support the minimum wage do so mainly because they believe it will affect a wealth transfer from the rich to the poor. But if that’s their goal, why not advocate a more direct method like raising taxes on high incomes and reducing them on low incomes?

[Coren] The Ontario government is committed to increasing the minimum wage to $15 an hour by 2019. It’s still hardly a livable income but at long last something is being done to remedy the insultingly low current level of a little over $11.

A wage that Mr. Coren finds “insultingly low” isn’t necessarily viewed the same way by someone whose employment options are more limited than his, such as a high school student, an unskilled immigrant, or someone who is partially disabled.

[Coren] In many ways this is a pivotal moment. Stand up with those who earn little and deserve more, or sit down with those comfortable with the status quo. Thanks but I’ll stand.

Mr. Coren may think he’s being quite brave and standing with the downtrodden. In fact, he’s doing nothing of the sort. He’s advocating for using power of the state to limit people’s choices. He’s saying to the labourer who has lost an arm in an accident and his prospective employer, “I don’t care if you’re willing to work for $14 an hour and someone is willing to pay you that much—I know better than you what a dignified wage is and I’m prepared to see those who disagree locked in a cage.” He’s saying to the owner of the little noodle shop who makes less than minimum wage herself, “you’re exploiting your workers—you should be paying them a living wage, and I’m willing to see you bankrupted to make that happen.” He is saying to the bright young man with autism who is eager to work but socially awkward enough that few employers would risk hiring him, “It’s best that you make a career out of receiving disability payments from the government, even though the local used bookstore owner would be willing to give you a chance to fill your days with work you’d enjoy for $7.50 an hour.” He’s saying to pretty much all the minimum wage workers at big retail chains, “You’d be wise to quit now and study robotics engineering or software design, because raising the minimum wage means your jobs will be automated sooner rather than later.”

Mr. Coren is attempting to support the working poor, not by reaching into his own wallet, but by using the coercive force of government to reach into the wallets of others. There’s nothing noble in this. And if he is willing to scratch the surface of this issue, he may just find that minimum wage hikes haven’t delivered the benefits they promised. Actually there’s no good reason to think that the government interfering in any agreements between consenting adults can have better effects than doing nothing.

[Editor’s Note: For the full post, with a link to Michael Coren’s piece, see  www.libertarian.bc.ca/blog.]