The recent flurry of minimum-wage ordinances, statutes or decrees insults economic truth and logic as much as the geocentric theory of the universe affronts the heliocentric. The edicts represent a stunning triumph of delusion over the law of supply and demand and social justice. They vindicate the wisdom of the late German Chancellor Konrad Adenauer, who sermonized that while God placed sharp limits on man’s intelligence, he left man’s foolishness boundless.
On Feb. 12, President Obama issued an executive order raising the minimum wage for employees of federal contractors from $7.25 to $10.10 per hour. The minimum will be raised annually in accord with the Consumer Price Index. The president urged Congress to visit the economic folly and social injustice on the entire nation by legislation.
State minimum-wage increases have been enacted this year in Connecticut, Delaware, Hawaii, Maryland, Massachusetts, Michigan, Minnesota, Rhode Island, Vermont, West Virginia and the District of Columbia. Seattle has bettered the misconceived instruction of Mr. Obama and these states with a $15 minimum wage for workers in the city.
But such wage edicts injure workers as much or more than business owners. Individuals whose value to employers falls short of the dictated minimum wage are priced out of the labor market. The greater the minimum is set above the free-market wage determined by the supply and demand for labor, the greater the number of persons thrown into the ranks of the unemployed. They forfeit the opportunity to develop work habits and skills that might later justify the specified minimum or more. And business owners are artificially encouraged to substitute machinery for labor.
Truth-resistant minimum wage advocates deny their depressant on employment. They maintain that wealthy employers have the means to pay. All that is lacking is the coercion of the law. But if that were no employment deterrent, there would be no reason to refrain from a minimum-wage law of $1,000 per hour in the name of reducing poverty. Indeed, if the price of labor has no material impact on employment, why not a minimum of $1 million per hour? Alchemy would no longer be a dream.
Minimum-wage laws are superfluous to ensuring that workers for whatever reasons do not suffer the penury of Oliver Twist. These laws should be replaced with “safety net” legislation that guarantees for all a frugal but dignified standard of living to be financed by all taxpayers. If community morals favor a safety net — which they should in any civilized nation — then the community should pay for it. The financing should not be thrust on employers by coerced payments of minimum wages.
This concept of social justice informs the U.S. Constitution’s mandate that if private property is taken by the government to advance a social aim that benefits all, then the government must pay just compensation for it. The burden cannot be fastened on the owner whose property has been taken.
Minimum-wage laws, however, should not be repealed in a vacuum. The multiplicity of socially unjust corporate welfare laws should also be terminated as part of the repeal endeavors. Double standards of justice are intolerable to any civilized society.
For more information on Bruce Fein, visit brucefeinlaw.
Please read our comment policy before commenting.