Editor’s Note: This is part 2 of an open letter from Prof. Howard Baetjer to a friend who commented on one of his Facebook posts about minimum wage laws. You can view part 1 here.
Baetjer and his friend, Adam, look at the minimum wage issue from very different perspectives, so Baetjer wrote an open letter. What do you think about the issue? Check out Baetjer’s response to Adam and let us know what you think in the comments below.
On April 27, I wrote
Let me try to refocus this discussion on the way minimum wage laws hurt the very people you are trying, mistakenly, I believe, to look after. Yes, minimum wage laws raise the wages of some. But they eliminate the wages of others by making them too expensive to hire. That’s wrong
If you don’t accept that, is it because you deny the disemployment effects of minimum wages, or because you think it’s okay to throw some people out of work for the sake of boosting others’ incomes, or for some other reason?
On April 29, you responded. In what follows I indent your words and respond in turn, unindented:
I accept the disemployment, such as it is, because a job that doesn’t pay you enough to live at a basic level is in many respects worse than no job at all.
You “accept the disemployment.” That is to say, you support a policy which will consign some number of poorly educated or otherwise disadvantaged people to unemployment…
I don’t believe you. I don’t believe that you could bring yourself to enforce it, to physically prevent some real person from taking a job he or she wants to take, to prevent a would-be employer from paying him, just because the wage they agree on is below some arbitrary amount.
As for the second part of the claim above, if a person should say to you, “I disagree. I would be the second income-earner in my household. We can use the extra money, and I need job experience, any job experience,” how would you respond? Would you tell him he his mistaken, that he would actually be better off unemployed? Who should get to decide whether a particular job is “worse than no job at all”? He, or you and the state legislature?
It leads you to take two jobs in order to live, and leaves you with no time to actually get trained for or find one job that would pay you enough to live on.
This is backwards: minimum wage laws lead to less training, not more. Much training for employment occurs on the job. And when minimum wages rise, some employers have to actually cut down on the training they provide to keep costs down. A main long-term harm of minimum wage laws is that they keep the unemployed unemployable by denying them work experience which can help them climb the job ladder to employment they can live on, and then flourish.
If there are things that are not worth a living wage, that can be done by automation, then by god it should be done by automation.
“[I]t should be done by automation” according to whose values? Your values, and those of other minimum wage supporters, or the values of the individuals affected?
Suppose a particular job can be done either by manual labor or by a machine. Suppose the machine can do it for, say, $9 an hour (amortizing the cost of the machine over its useful life). And suppose a particular individual—maybe many individuals—would be happy to do that job for $8 an hour. Shouldn’t they be allowed to do it? The only way they have to compete with the machine is to offer to do the work for less. Minimum wages of anything over $9 an hour deny them that option. Is that right?
It’s going to happen anyway.
Forgive the direct contradiction, but, no, it’s not. Automation happens only if and when it’s profitable to automate. It depends entirely on whether labor or machinery costs more. If labor is cheaper, a profit-seeking firm does not automate.
As I’ve said repeatedly, we should be encouraging the creation of businesses that support living wage jobs. One way we can do that is by insisting that jobs pay a living wage.
To repeat my rejection of this in different way, such insistence ignores the reality that particular jobs—in the sense of tasks or functions in a production process rather than positions on a payroll—are objectively worth only so much and no more (at a given time and place) to the consumers of the good or service produced.
If consumers won’t pay enough for a particular task to cover “a living wage,” however defined, then the worker who has the job of performing that task cannot be paid that “living wage.” We can “insist” all we want that employers pay more than the task is worth to consumers, but they can’t. They can’t afford to.
You are a software engineer, Adam, probably a great one. Suppose that for the coding, architecture design, and other software development you do in a year, Google’s customers will pay, say, $200,000 and no more. If Google were required to pay you a salary of $201,000, it would make no sense for them to keep you on the payroll.
The same is true for the employer of the second or third kid who pulls shopping carts off a grocery store parking lot. If that service, that task, is worth, say, $9 an hour to the customers of the store, and the minimum wage is $10 an hour, the store cannot afford to keep the kid on the payroll. Doing so would cost it $8 a day, $40 a week, $2080 a year. Grocery stores work on razor-thin margins. A minimum wage of $10 an hour would mean unemployment for that kid, and a messy parking lot for the grocery store and its customers.
Who would be bettered by legislating that job out of existence?