Raising The Minimum Wage Has Little To Do With Helping People

Its Real Value Is As A Tool To Reduce Welfare And The Size And Cost of Government

May 11, 2015 · 5 min read

By David Grace (www.DavidGraceAuthor.com)

The minimum-wage debate is almost always waged on moral grounds — whether unskilled, untrained, maybe not very smart people deserve to be paid more or less than a set amount.

That’s the wrong way to look at it. It’s not a moral issue and it’s not about promoting or thwarting the market allocation of labor services.

One of the most important aspects of the minimum wage is that it is an efficient and valuable mechanism to reduce taxes, reduce government bureaucracy and reduce the cost and size of government.

If you believe in those goals but you oppose raising the minimum wage to a living wage on moral grounds (“It’s not fair that ‘those people’ should be paid that much money’) then you’re just cutting off your nose to spite your face.

First off, minimum wage jobs are NOT mostly held by kids who don’t need a living wage. 78% of people earning the minimum wage are 21 years old or older. 63% of people earning minimum wage are over 24 years of age. The average age of people earning the minimum wage is approximately 35 years.

3.5 million people receive the minimum wage plus 10 million people are entirely unemployed which means that 13.5 million people or about 8.65% of the total potential workforce and about 5.6% of the adult population are earning a take-home pay of less than $1,000/month.

There are always people who are not very smart, not very skilled, not very determined, not well trained, not well educated, not very talented or just average and born into a terrible family or a terrible culture.

Somehow society has to deal with these people. Why? Because they won’t just disappear. You can’t kill them. You can’t ship them off to a desert island, and you can’t just ignore them in the ridiculous hope that they will crawl into an alley and quietly starve without causing any trouble at all.

All benign neglect gets you is a massive welfare system, gangs, drugs, and lots of expensive policemen, lawyers, judges and prisons, like we have today, plus another generation of people with the same problems. Benign neglect is the gift that keeps on giving.

Your only real choices are either to:

  • (1) deal with unskilled people through a welfare bureaucracy, police and prisons, all funded by taxes OR
  • (2) have jobs available that pay unskilled, untrained, and perhaps not very smart people enough to live on and to educate their children to be able to do better, OR
  • (3) create a massive government-funded program to train/re-train everyone to perform some job they are qualified for (if any) that does pay a living wage.

Looked at another way, your choice is either to:

  • (1) have unskilled people employed, paying taxes, with a stake in the success of society, or
  • (2) have them unemployed, getting welfare from a government bureaucracy, sitting around, alienated from society and highly susceptible to falling into gangs, drugs and crime.

Which one do you prefer?

Many, many people will not take unpleasant jobs that do not pay a living wage. If the only choice is

  • (1) taking home $1,000 a month by working full time at Burger King and
  • (2) not working at all and making do with welfare, petty crime or selling drugs, a great many adults will choose to stay home.

As much as you may not like it, the world doesn’t work the way you think it should. It works the way it does.

Setting a minimum wage equal to a living wage is not about being nice to people. It’s not about overpaying people for their skill level. It’s about admitting that it’s better for everyone to have unskilled, untrained, perhaps not very smart people working and supporting themselves rather than their sitting home and living off government subsidies.

You don’t like the government giving people food stamps? Then give them a job that pays them enough money so that they don’t qualify for food stamps.

Advocating closing down the government and simply saying, “You’re a loser. Go starve”

  • (1) is not going to happen and
  • (2) if it did it would cost every taxpayer much more for law enforcement and related costs (not to mention the decline in everyone’s quality of life) than that extra quarter for a fast-food hamburger.

The city doesn’t employ garbage collectors in order to be nice to them. It does it to stop rats and disease.

You don’t set a minimum wage equal to a living wage to be nice to people.

You do it so that everyone, even untrained/unskilled people, even people at the bottom of the barrel, can support themselves and raise their children without expanding the government welfare bureaucracy.

You do it because their supporting themselves is better for everyone than the alternative of taxes, bureaucracy, crime and welfare. You need to look at the minimum wage as an alternative/supplement to tax-supported welfare.

I would argue that the minimum wage should be set at $10/hour for people under 18, $13/hour for people between 18 and 24 and $16/hour for people 24 and over and that it should be tied it to inflation.

An increase in unskilled wages will be reflected in the price of the products produced by minimum-wage employees. Capitalist principals tell us that the price of a product should reflect the resources needed to produce it and through competition the market then chooses which products succeed and which ones fail.

Yes, we may have to pay a $1.25 for a Burger King hamburger instead of $.99 just like we have to pay to have our garbage picked up and for fire insurance on our houses. They’re all costs of doing business in an industrial society.

Dealing with the existence of unemployed, unskilled people in an urban society is one of those costs of living in that society. You can’t escape it. You’re going to have to pay it one way or another, either as a slightly higher cost for certain products or as higher taxes for the police, prisons and welfare systems.

It’s a cost that won’t go away no matter much you wish it would.

The question is: Do you want to pay that cost with taxes, cops and welfare or by spending a few pennies more for your Big Mac?

— David Grace (www.DavidGraceAuthor.com

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Graduate of Stanford University & U.C. Berkeley Law School. Author of 17 novels and over 200 Medium columns on Economics, Politics, Law, Humor & Satire.

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