On Why Not to Raise the Minimum Wage
by Casey Breznick
Disregard logic. Ignore the laws of economics. Suppress economic liberty.
These statements describe the absurd rationale behind the recent and ever-growing calls to raise the national minimum wage. As conservatives and libertarians know, the existence of minimum wage laws and raising them by congressional decree or executive fiat is an immensely damaging government intervention into the labor market and the economy as a whole.
The problem is that the movement’s theoreticians – that is, “do-gooders” from government, academia, Hollywood, and left-wing journalism – are in fact proudly and decidedly anti-free market and anti-business. The trickle-down ignorance seeps into a significant portion of the populace, and from there the absurdities, falsities, and polemics are compounded.
The only way to combat Leftists’ strongly held beliefs is to first win the battle of ideas, not of policies. Once the erroneous assumptions and logic are done away with, the corresponding policy proposals will necessarily disintegrate. Having reduced the theoretical foundation to quicksand, the fantastical arguments built atop them sink – fast.
‘The Laws Are Mine, Not Thine’
While many economists and businessmen make it clear that raising the minimum wage will impact the economy negatively, their protestations and well-reasoned arguments often fall on deaf ears and closed minds.
Instead, revisionist economists, populist politicians, and their media cheerleaders seek to rewrite the axiomatic laws of economics – the laws of supply and demand. They negate the facts that labor is a commodity just like gold or wheat and employment is the consumption of labor, just as buying gold watches or bread is consumption. Correspondingly, they refuse to acknowledge that raising a wage artificially high – that is, above what the market deems it should be – will result in less employment, all else being equal.
Wages are prices. If the price of something is too high, no one buys it or fewer people buy it. Anyone who does, irrespective of income level or amount of wealth, suffers a loss via higher costs. A household’s net worth or a company’s bottom line decreases. These higher costs ripple through the economy, spiraling employment down further via compounding higher costs levied on consumers and via declining private financial and capital investment. This is how central planning erodes economic prosperity. This is how big government first increases the misery of some, only to pass it on to everybody else.
If a price of something is properly set, consumption of it is maximized in the context of sound economic decision making, on the individual and national scales. No more is consumed because no more is desired by those in the best positions to determine this desired level, e.g. business owners. Minimum wage laws do not shift this demand up, only down.
Conversely, free markets always, always properly set prices; if prices are ever distorted, it is because a free market is not present. Distortions arise not from the free exchange of self-interested market agents but from laws passed to protect special interests or unnecessarily regulate businesses. These laws are products of the Big Government-Big Business love nest that is crony capitalism, another name for corporatism, which is another name for socialism. Under these systems, such unfair and unjust laws replace the objective, utility-maximizing laws of economics. Conflated with politics, they become strictly self-serving and designed specifically to help some and hurt others – laws that treat not everyone equally, laws that are “mine but not thine.”