Why Some People Hate Wages That Are Too High For Workers To Qualify For Welfare
By David Grace (www.DavidGraceAuthor.com)
First off, the people who view business as a war with their employees, customers and competitors, who strive to grab every dollar they can get in any way they can that is not clearly illegal, hate the minimum wage because they are sure that without it they could pay even lower wages and make even higher profits.
These people would pay their employees $2 an hour and have them living in cardboard boxes behind the landfill if they could.
If they could avoid having to pay the medical bills for their workers who were injured on the job they would be really, really happy to do so.
These people believe that life is a zero sum game, that for them to get a dollar richer someone else has to get a dollar poorer.
They think they are or should be living in a survival-of-the-fittest world with themselves as the lions and their employees and customers as as the antelopes.
People who think this way comprise some, but by no means all, of the people who hate the minimum wage, leastwise hate a minimum wage that is high enough that full-time workers would fail to qualify for welfare.
Some People Wrongly Think That The Market Price For Unskilled Labor Is A Measure of The Inherent Value Of Unskilled Labor
These people believe that the labor provided by unskilled workers is so simple that it has little “real” value and therefore unskilled workers don’t deserve to be paid very much for it.
There is no such thing as a “real” value for goods and services. In a market economy goods and services do not have an inherent dollar value based on the work’s difficulty, skill, education or usefulness.
- If you value a service based on how difficult and unpleasant the work is, then lots of unskilled jobs would have a very high value.
- If you value a service based on how rare the ability to do the job is then making models of the Empire State Building out of toothpicks would have a very high value.
- If you value a service based on how long you have to go to school to be able to do that job then most college teachers would be paid a great deal more money than they presently are.
- If you value a good or service based on how “useful” it is, then the price of a life-saving medicine would be $10/pill, NOT ten cents/pill, and the price of a Patek Philippe watch would be $200, NOT be $20,000.
For a detailed discussion of the difference between what something is theoretically worth and its market price, see my column:
All this is to illustrate that the competitive market price for any good or service has nothing whatsoever to do with any theoretical measure of value based on difficulty, skill, education or usefulness.
For all goods and services, the market price is only a measure of the bargaining power of the buyer relative to the bargaining power of the seller.
Much greater bargaining power is why unionized sellers of unskilled labor get $30+/hour and non-unionized sellers of unskilled labor get $10 (or less) per hour.
For a detailed discussion of why bargaining power is what really dictates the price of unskilled labor, see my column:
The Price For Unskilled Labor Is Mostly Set By Bargaining Power Not Supply & Demand
Some People Think That It’s Unfair To Make Employers Pay More For Labor Than The Market Price
I think another reason that some people hate the idea of paying full-time workers a minimum wage high enough so that they no longer qualify for welfare is based on their ideas about fairness and morality.
They think that it’s unfair to force employers to pay workers more than the least amount that the workers are so desperate that they have to accept, and that workers don’t morally deserve to be paid more than the least amount they are so desperate that they have to accept.
Put differently, they think that it is unfair to make an employer pay workers the same wage that they would receive if the employer and workers had equal bargaining power, namely the same wage that unions have negotiated for similar types of work performed by their members.
I think many people think that
- If an employer has so much greater bargaining power than a non-union worker that it can grind the employee into the dirt to the point that the worker will have to accept a food-stamp wage or starve then that’s exactly what the employer should be free to do;
- There is some moral propriety in an employer using its hugely disproportionate bargaining power to pay workers the very least amount possible.
That argument makes as much sense as saying that it is morally proper for a monopolist to sell its products at the hugely inflated monopoly price that its monopoly power allows it to charge.
There is no fragment of “fairness” in either a buyer exploiting a massively superior bargaining position to pay an extremely low price for unskilled labor any more than it is “fair” for a monopoly seller to exploit its massively superior bargaining position to charge an extremely high price for insulin, gasoline or some other product on which the seller has a monopoly.
There is nothing “fair” “proper” or “moral” about a very high or very low price which is the result of a massive imbalance in bargaining power between the buyer and the seller.
For a detailed exploration of this warped notion of fairness and morality in the pricing of products or services see my column:
The Cover Argument People Make For Their Opposition To A Living Wage
Not wanting to admit that their real reasons for opposing a living-wage minimum wage are their beliefs that
- Unskilled labor has some inherent value which is equal to the lowest price that a worker is desperate enough to have to accept, and
- It’s morally wrong to force an employer to pay more than that the lowest amount someone is so desperate that they have to accept
these people needed to come up with some other, more palatable reason for their opposition a living-wage minimum wage.
Higher Wages Don’t Mean Fewer Jobs
The cover argument they often make goes something like this:
“I’m doing these unskilled people a favor by letting them flip my burgers at food-stamp wages because if employers had to pay a living wage then so many restaurants and so many retail outlets would go out of business that there would be no jobs at all for these unskilled workers and they would never, ever work again.”
This cover argument is false on many levels:
- Wages are only a fraction of the cost of the products being sold which means that much higher wages will, at most, only raise the final cost of the product by a small amount;
- An increase in the cost of making a product doesn’t necessarily require an increase in its price because it may be more profitable for the employer to absorb the additional cost without increasing prices;
- An increase in a product’s price doesn’t necessarily reduce sales because people will still want/need to buy that product unless there is an equally good alternative at a lower price and, if so, the makers of that alternative product will themselves have to hire more workers to meet the increased demand;
- Higher wages result in more consumer spending which stimulates the economy and, in turn, increases the total number of jobs available
For a detailed exploration of why higher wages don’t mean fewer jobs, see my column:
The “If I Can’t Hire Little Kids, My Sweatshop Will Go Out Of Business” Argument
This “higher wages will make these workers permanently unemployed” nonsense claim is similar to the same sort of criminally stupid argument that slave owners make if you tell them they can’t have slave labor any more, and that people who employ children in their sweatshops make if you tell them that they can’t use child labor anymore:
- “If I can’t use slaves/child labor then I will go broke, so I’m actually doing these slaves/children a favor by letting them work in my cotton fields/sweatshop because otherwise they would starve.”
Give me a break!
For a more detailed discussion of this “save my sweatshop” argument see my column:
But What If Some Employers Actually Do Go Out Of Business?
Government welfare paid to full-time workers in the form of food stamps, housing subsidies, and medical payments is nothing more than a subsidy to those workers’ employers.
The low-wage employer pays part of their workers’ costs of living and the taxpayers pay the rest of their employees’ living expenses.
As a general rule, a company that cannot stay in business without a government subsidy should go out of business. That’s how capitalism and a market economy are supposed to work.
If such a company does go out of business, those workers will get other jobs with other employers who do pay a living wage and the taxpayers will no longer have to subsidize the labor costs of their former employer who deserved to go out of business.
Higher Wages Are Good For Rich People Too
Increasing the earned income of the bottom 20% of the working population would greatly benefit the country by creating a stronger economy, less welfare, less government spending, and less crime.
Food-stamp wages punish the country with the costs of an impoverished working class.
Lower wages for the lowest level of workers mean lower wages for the semi-skilled class of workers above them. Low wages at the very bottom drive down the wages of all the workers above them.
For a detailed discussion about why increasing the wages of the bottom 20% of workers is actually good for everyone, including most businesses, see my column:
The Poorer The Bottom 20% Are, The More Money It Costs The Rest Of Us
— David Grace (www.DavidGraceAuthor.com)
