“We Can’t Raise The Minimum Wage Because That Will Put Me Out Of Business” Is A Really Bad Argument

This Is What People Say When They Want The Government To Subsidize The Cost Of Running Their Business

DavidGrace
Jul 25, 2017 · 6 min read

By David Grace (www.DavidGraceAuthor.com)

We Can’t Abolish Slavery Because Having To Pay Farm Workers Will Put Me Out Of Business

Let’s imagine ourselves back in 1858. We’re watching a debate about abolishing slavery.

“If you abolish slavery and I have to hire people to plant and pick my cotton it will raise my costs so much that I’ll go out of business,” Calhoun J. Calhoun complains.

To which there are two replies:

  • So long as there is no non-slave labor, cheaper, equally good substitute for cotton, you won’t go out of business because consumers will continue to buy cotton at a somewhat higher price;
  • If the choice really, actually, truly is that we either have slaves working the cotton fields or your plantation goes out of business, then the choice is incredibly simple.

In that case your plantation should go out of business.

“But who’s going to feed all my ex-slaves if my plantation goes broke?” Calhoun whines.

In a free market economy, money does not disappear. It just goes other places in response to changes in price and product availability.

If there is a non-slave-labor, cheaper, equally good substitute for cotton and that cheaper alternative puts you out of business then consumers will spend the money they would have given you to instead buy that other product and that other businessman will employ the workers that you don’t.

We Can’t Abolish Child Labor Because Having To Hire Adults To Work In My Coal Mine Will Put Me Out Of Business

OK, now it’s 1938 and Congress is debating the Fair Labor Standards Act outlawing child labor. West Virginia Senator Pluto G. Crat stands up and warns: “If this law is passed my constituents will no longer to able to mine the coal that our country so desperately needs. If we outlaw child labor, coal mines all across the country will have to shut down, throwing thousands out of work.”

To which there are two replies:

  • If there is no non-child labor, cheaper, equally good substitute for coal, you won’t go out of business because consumers will continue to buy coal at a somewhat higher price, and
  • If the choice really, actually, truly is that we either have nine-year-old kids working ten hours a day in a coal mine or the coal mine goes out of business, then the choice is incredibly simple.

In that case the coal mine should go out of business and let the market work as it was intended.

If there is a non-child-labor, cheaper, equally good substitute for coal and that cheaper alternative puts you out of business then consumers will spend the money that they would have paid you to instead buy that other product and that other businessman will employ the workers that you don’t.

We Can’t Raise The Minimum Wage To A Living Wage Because Paying That Much That Will Put Me Out Of Business

Now, it’s 2017 and Ralph Greasegrill, owner of the Dine & Dash Café, complains to his Congressman, “If you people raise the minimum wage to a so-called ‘living wage’ I’m going to have to go out of business.”

To which there are two replies:

  • If there is no non-food-stamp-wage, cheaper, equally good substitute for diner meatloaf and mashed potatoes then you won’t go out of business because your customers will continue to buy their Blue Plate Specials from you even though they may cost fifty or sixty cents more, and
  • If the only way that you can continue to sell chicken-fried steak and baked potatoes is to pay your adult, full-time employees two-thirds of what they need to order to pay their rent and feed themselves, then the choice is incredibly simple.

In that case you should go out of business and let the market work as it was intended.

If there is a non-food-stamp-wage, equally good, cheaper substitute for your club sandwiches and that alternative puts you out of business, then people will spend the money they would have paid you at Safeway or McDonalds or Blue Apron or wherever and those other companies will employ the workers that you don’t.

The Consequences Of Low Wages For Unskilled Labor

When unskilled labor is compensated below the amount needed to feed, clothe, house, and support a full-time, adult, unskilled worker, the deficit in those living costs is made up by government subsidies such as food stamps, Medicaid, Section 8 Housing and the like.

The price for the products created by workers that are paid less than a living wage is lowered by food-stamp wages to the detriment of both the workers who create those products and also to the detriment of the other businesses that sell the products and services that those workers would have otherwise purchased if they had been paid a living wage.

And if those adult, full-time workers had been paid a living wage, those other businesses would have employed any workers who did lose their jobs if their old employer’s business declined.

Low prices for unskilled labor benefit the buyers of the goods produced by unskilled labor to the detriment of the taxpayers who pay for the government subsidies given to unskilled workers to make up the difference between the food-stamp wages they receive and the workers’ actual costs for food, housing, and medical care.

In economic terms, the low wages paid to unskilled workers are essentially a mechanism that transfers wealth from the taxpayers to the buyers of the products made with that unskilled labor.

Paying All Adult, Full-time Workers A Living Wage Is Not A Problem. It’s A Solution

  • If you are against higher taxes you should be in favor of higher wages for unskilled labor.
  • If you are against bigger government you should be in favor of higher wages for unskilled labor.
  • If you are against more government bureaucracy you should be in favor of higher wages for unskilled labor.
  • If you are against government welfare programs you should be in favor of higher wages for unskilled labor.
  • If you are in favor of a more prosperous economy where more citizens have more money to spend as they choose (not as the government chooses) you should be in favor of higher wages for unskilled labor.
  • If you are against the government paying for poor people’s medical care you should be in favor of higher wages for unskilled labor.
  • If you want to repeal Obamacare and cut Medicaid there’s a way to do that while still providing health insurance for almost all Americans without a government subsidy.

You get the government out of health care by requiring all employers to provide basic health insurance as part of the minimum wage, thus shifting the cost of health insurance to the consumers as a component of the product’s purchase price instead of placing the cost of both the health insurance and the bureaucracy to administer a government health care program to the taxpayers as part of their income taxes.

Click here to see: A Health Care Plan That Follows Republican Principles And Still Works

We need to see a living wage for all working Americans not as a bleeding-heart give-away but as a solution to the rising cost of entitlements, higher taxes, more bureaucracy and bigger government.

We need to understand that paying all adult, full-time workers a living wage is not a problem. It’s a solution.

– David Grace (www.DavidGraceAuthor.com)

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DavidGrace

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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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