Tuesday, February 19, 2013

Minimum Wage vs. Libertarian

I like a lot of stuff Julie does, and consider myself a libertarian as well, but I have to completely disagree with her on this issue. Her reasons for opposing a minimum wage are logically unsound, based more on Neo-Con propaganda than facts.

Rebuttal to Minimum Wage Argument Made by Julie Borowski

In her first few sentences, I do agree with Julie. I would like to know where the heck Obama came up with that figure as well. It does sound awfully arbitrary. Speech rhetoric that probably won't go anywhere anyway, but will appease the working poor for a time fooling them into believing that the Democrats are actually looking out for them. I don't trust politicians, and as much as I support an increase in minimum wage, I don't expect Obama to deliver any better than he delivered on his promise to close GITMO or to repeal so much of the tyranny imposed by the Bush administration.

There is another standard we can look at though, regarding minimum wage. Something a little more thought- out than the hollow promises of political speechwriters. Let's have a look here for a moment, at the proposal by the Minumum Wage Workers' Union of America:

Analyzing a Pracitcal Minimum Wage

On this page, we will itemize a sample budget for a single person in order to analyze what a fair standard would be for a minimum-wage worker. It is our position that a person working eight hours a day, five days a week, at any job, should be able to support themselves to a minimum basic standard of living. This practical wage is necessary in order to elevate the class of working poor to contributing members of society. Working for anything less than what is needed to subsist on independently, is nothing short of slavery.

All figures are based on national averages, for a Federal standard.

RENT ------------------------------$1000
BASIC UTILITIES --------------$200
FOOD ------------------------------$300
CLOTHING -----------------------$75
TRANSPORTATION ----------$500
HEALTHCARE -----------------$350
MISCELLANEOUS -----------$400
Average Basic Monthly Expenses  $3,025

A full-time job at 40 hours per week is 173.2 hours per month calculating 4.33 weeks in each month. To find a reasonable minimum wage, we divide the average basic monthly expenses figure, by the number of hours worked. For the average American worker to support themselves without government assistance or by borrowing beyond their means, that worker must earn...

$17.47 per hour

Of course, that figure must be after all taxes and contributions are taken, or that anyone earning that amount must be exempt from all such garnishments and liability. A person who cannot even afford to pay their own way, cannot afford to pay taxes. Forcing them to pay taxes that will jeopardize their basic standard of living, is unsound economics and in the long run will only force other taxpayers to subsidize those workers, in turn jeopardizing their own living standard, in a perpetual cycle that we see happening today as more workers descend into deep poverty. 

If $17.47 per hour seems unreasonable to you, or just downright impossible, consider a few more facts. There was a time when a grocery clerk, or a department store salesperson could actually support themselves on what they earned. That is not so today.

Using data by the U.S. BLS, the average productivity per American worker has increased 400% since 1950. One way to look at that is that it should only take one-quarter the work hours, or 11 hours per week, to afford the same standard of living as a worker in 1950 (or our standard of living should be 4 times higher). Is that the case? Obviously not. Someone is profiting, it’s just not the average American worker. -Source

Based on consumption growth since 1968, the minimum wage today would have to be $25.05 to represent the same share of the country's total consumption. Based on national income growth, the minimum wage should be $22.08. Based on personal income growth, it should be $21.16. -Source

After adjusting for inflation, minimum wage workers today are paid about 26 percent less than they were in 1974.
At the top 1 percent of the American income distribution, average incomes rose 194 percent between 1974 and 2011.  Had U.S. minimum wages risen at the same pace as U.S. maximum wages, the minimum wage would now be $26.96 an hour. -Source

Click link for full article and detailed description of how budget figures were calculated.


Essentially, what that author is pointing out, is that anything less than a practical minimum wage is slavery. And not only slavery, but slavery subsidized by taxpayers who are next in line to become slaves themselves, in perpetual economic decline, as designed by the Federal Reserve System.

In the days of racial slavery, the slave owners were obligated to provide for the needs of their workers. To pay for the food, shelter, clothing, and even provide the basic medical care for their slaves. Contrary to some modern perceptions of those times, a slave worker was as expensive as an automobile is today and treated accordingly. Sure, there are some people who beat on their cars. But for the most part, responsible car owners make sure that their car is well kept and given proper maintenance. That was true too, in the shameful era of the slave laborer.  

Now some may see it as vulgar to compare a human being to an automobile, but this is only to highlight the depravity of what we are seeing today with the exploitation of low-wage American workers. They are treated worse than slaves, worse than automobiles, in many ways. No oil changes and running on empty, yet expected to run hotter and faster each and every day.

As if the abuse of the low-wage worker were not enough, the middle class-worker, the common taxpayer, is being forced to subsidize the labor costs of the corporations. Rather than mandating a corporation like Wal-Mart pay their own true labor costs, by paying a wage so that their employees can subsist, you, the taxpayer, are now forced to make up the difference through social welfare programs. Now you must pay for the "oil changes" on their equipment and put "gas in the tank" so to speak, with foodstamps, medical care, and so forth, to keep the corporate labor force running.

As a libertarian, I believe that providing for liberty over slavery is a noble cause, not to mention lower taxes and making companies pay their own expenses. 

But I digress. Let's dig into Julie's next point now.

"Why not 50 or 100 dollars...? (paraphrased)

Because Julie, we are trying to establish a minimum wage, not a free-for-all.

Now this cuts right to the core of the role of government. As a libertarian, I believe that the only role of government is to protect the interests of the people, individually and/or collectively, from those who would exploit our liberty to nefarious ends. Therefore, I believe it is within the purview of Constitutional governance for the Federal government to regulate interstate commerce in such a way that a worker must be paid an equality wage that will provide for their most basic living expenses as a human being, in order to prevent said workers from requiring social welfare subsidies.

In essence, if you want to do business in the United States, you must pay your workers enough so that they may afford the bare essentials without need for government assistance to merely survive.

Without such protection from our own government, there is nothing to stop exploiters from demanding that we all work harder for $2 a day. There is no liberty for a working stiff who makes less than a worker in some third-world country.

As Americans, we are supposed to be doing it better and smarter than the other guy, to be a beacon of hope, not to reduce ourselves to a point of global communism. If Libertarians, as a political party don't agree with that, then maybe I am in the wrong camp.

"Any minimum wage... will prevent some people from getting a job."

Is it your position then, Julie, that there should not be a minimum wage at all? That we should take our $2 a day and be grateful for it?

The reality is that a higher minimum wage will only marginally cut into the profits of companies, who exploit the welfare system in order to subsidize their own labor costs. As we showed above, you only get lower prices at Walmart, because you pay more in taxes to pay the food, healthcare, daycare costs, etcetera, for their workers... whether or not you even shop at Walmart.

If a company could actually afford to lay off workers, they would, will, and do, regardless of payroll obligations. Millions of people have been laid off in recent years, without any minimum wage increase. They have already been doing this to the detriment overall economy, as quality of goods and services plummet, while CEO's are steadily increasing historically unprecedented wealth. If you can't afford to pay your employees an honest day's wage for an honest day of work, then you simply cannot afford to be in business and it's time to close your doors.

If it takes 100 employees to operate your shopping center, then you can't lay off 20 of those people simply to protect your profit margin. Your business will not function properly and customers will move to your competitor, who provides better service and/or products. A company only hires as many people as they need. That is true no matter what the minimum wage is.

"Gee, I got a fat bonus, I think I will hire some people I don't need."" -said no CEO ever

In short, no, a minimum wage increase will not prevent anyone from getting a job if there is a job to be done.

"Let's say I'm a ... teenager."

Between the "why not $50 an hour" bit and now this teenager gambit, Julie is clearly relying on false-logic tactics of disinformation, with "straw-man/red herring" arguments.

Teenagers are not the only minimum wage employees, and only make up a small portion of that labor class today, thanks to depressed wages and skilled workers being forced into unskilled jobs.

More and more adults with families are trying to support those families with minimum wage jobs. Minimum wage standards are not there to protect some high school kid who is living at home with their parents, and who needs the money for a new set of headphones. The people who are filling these jobs today are trying to feed their own children and keep a roof over their heads. The less they are paid by the companies who are profiting from their labors, the more the taxpayers will have to contribute in order to keep these families from starving to death in the streets.

"...I want to work for $7 an hour, you want to hire me for $7 an hour..."

This is the one point in her argument that cuts to the core of libertarian principles. The free will of two people to enter into a business arrangement. In an overly simplistic interpretation, Julie sees the minimum wage mandate as infringing upon the liberty of these two persons. What she fails to acknowledge is that without a minimum wage standard in this country, companies will be infringing on the liberty of people who don't want to make that same deal, but who are then forced to by circumstances outside of their own control and the impositions of corporate greed.

No man is an island, no business arrangement exists in a vacuum. This is why we have codes of ethics and laws to protect against unfair business practices from Wall Street to your local farm stand. This is why you can't put a gun to someone's head and say, "either your brains or your signature will be on the contract." This is why you can't serve someone a plate of food that will make them sick a half-hour after they walk out of your restaurant, and then claim, "buyer beware."

If this potential employee and the employer were to enter into an arrangement for pay below the minimum wage, they would not be practicing liberty, they would be in effect conspiring to undermine the worth of other workers who were not party to this arrangement.

There will always be someone who is willing to work for less. There are people in India and China who work for pennies a day. Here in America, illegal immigration and related labor exploitation has been detrimental to our economy, thanks to the dampening effect on wages and thanks to a total lack of labor bargaining leverage by American workers. This hasn't just effected minimum wage workers either, but the entire working class across the board. The market is flooded with workers who will work under the table for less than what is mandated by labor laws, putting everyone's wages and jobs in jeopardy.

If the majority of jobs in America only paid pennies per hour, what do you think that would do to your own pay rate? Again, minimum wage standards are not there to protect some teenager who wants his first job, the standard is there to protect the labor market as a whole.

"...and maybe in a month or two would have given you a raise if you were any good."

Well, if the employer can afford to give a raise in a few months, he can afford to pay a fair wage right now! If you hire someone, at any pay rate, and they cannot perform the job, you fire them. It's as simple as that.

Besides, entry level pay rates are not a negotiation. They are a set standard regardless of your resume and skills. If your local burger joint is hiring a cashier, it's a minimum wage position, whether you are a teenager looking for an after school job, or you are a single mother who just got laid off from your job as the manager of a burger place across town that just closed down. A manager looking to fill the cashier position isn't going to pay someone with experience a few more dollars per hour to do the same job that the kid with no resume can do for less. They also are not going to give that cashier a raise, ever. Now granted, a cashier who works hard might be promoted in time to another position that pays better, if someone else gets fired or leaves, but that cashier position will always pay the same minimum wage amount.

As a side note and personal anecdote, I used to work in a contract position with a state government. When the contract was originally signed, it called for the employees to be paid a rate that was double the minimum wage at that time. If the minimum wage were to go up under this Obama plan, it would be the first raise for those employees in 20 years.

"...fire employees, cut their hours..."

False. An employer cannot cut the number of man-hours required to perform a task. It's as simple as that. Also, employers do not keep people on the payroll as a matter of charity. If they didn't need that employee, they would have already fired them, regardless of what they were being paid. Even if you are paying a person $2 an hour, if you don't need that person there, it's a waste of money to keep them there.

"...and raise their hiring standards..."

To what? College educated burger flippers? The market is already flooded with unemployed and underemployed skilled workers. The employers don't have to raise their hiring standards, the market has done that for them already. In the past several years, studies have shown that half of college graduates are either unemployed, or are working minimum wage jobs unrelated to their field of study.

So if a raised hiring standard really is of relevance here, then clearly the employers need to start paying a lot more for these college-educated grocery baggers.


Wikipedia explains this principle stating...

"In business, economics or investment, market liquidity is an asset's ability to be sold without causing a significant movement in the price and with minimum loss of value."

This is a concept that seems to be foreign to people like Julie and opponents of a minimum wage increase. Low-wage workers are more likely than any other class of worker to spend what they earn. If you pay them more, they will spend more, creating economic stimulus.

This was the principle and reasoning behind former President Bush's economic stimulus plan, when he mailed everyone a $300 check.

Why is the economy in such dire straits right now? Because employers are forced to pay too much for unskilled and entry-level workers? No, it's because no one is buying anything. How do you get people to start buying things again? Make sure they have the money to go buy things, while instilling consumer confidence in the markets.

Increasing the minimum wage will create market liquidity through increased spending. More spending means greater demand  for goods and services to be delivered. Greater demand means more jobs for people who are out of work right now, to deliver more goods and services. More goods and services being delivered, means lower per-unit cost for all of the things we spend money on. More people with jobs, cheaper goods and services, means even more spending, creating economic vitality and prosperity for all.

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