Two sides of the minimum wage


With a minimum wage increase once again prominently featuring a policy debate, it seems wise to treat the issue a bit differently. Instead of outlining the positive and negative effects of a particular increase of the minimum wage, I’ll offer the best arguments for and against any minimum wage.

In so doing I’ll attempt an ideological Turing test, making the arguments so clearly that a reader cannot discern my personal position. By explaining the best arguments on both sides, I hope to achieve two goals.

The first is to make clear the need for compromise. The second is to maximize angry comments from readers. Wish me luck.

The best argument for a minimum wage involves several labor market failures that affect low-wage workers. It begins with the fact that most low-wage workers are in a poor position to negotiate wages. They may be young, inexperienced, poorly educated or speak little English. Employers have enormous bargaining power over them in ways they do not with better-skilled, better-educated, more mature workers.

At the same time, labor markets have become increasingly concentrated, thus employers are more able to exert market power over workers. Information technology, such as online help wanted ads, permits employers to engage in tacit collusion in setting salaries for low wage workers. Likewise, human resource professionals in many cities and industries meet frequently to discuss wage and benefits standards. While this is so plainly illegal that the U.S. DOJ issued a recent warning to HR professionals, state-level anti-trust enforcement is sadly almost non-existent.

At the same time, the social safety net provides many health, food and social benefits to low-wage workers. In a perfectly free labor market, workers would require extra pay to support their families and would demand higher wages. In that way, taxpayers subsidize low-wage workers in ways that benefit employers and those who buy their goods or services. For all these reasons, we should have a minimum wage in order to protect workers and taxpayers from the existing labor market’s failures.

The best argument in opposition to a minimum wage is that government should not, and cannot, be in the wage- or price-setting business. Government has no role in a great many high-stakes personal decisions. Government cannot tell us what language to speak, what church to attend, who to marry or with whom to form a family.

No government may tell us adults how much alcohol we may consume, whether or not we can smoke tobacco, nor increasingly whether or not we may freely purchase cannabis or other drugs. Government cannot tell us whether or not we may own a gun or what type of house, automobile or boat we may own. Government isn’t permitted to do these things because free people won’t allow government to do these things.

There is also a simple competence issue. Our federal government spent more than $100 million each for an F-35A fighter, paid for most of Boston’s Big Dig debacle and wholly funded a bridge to nowhere in Alaska. Given these enormous limitations in knowledge, no government can reasonably tell an ice cream shop owner in Loogootee what she should pay a high school student or tell the high school student how little he should be willing to work for. The mere existence of a minimum wage infantilizes Americans, while depriving them of an essential freedom of free exchange.

There are other respectable arguments for and against a minimum wage, as well as many poor ones. Still, I hope I have done a fair job outlining these two viewpoints, which I consider the best for and against a minimum wage. If I have done so, and you, dear reader, are honest with yourself, you must admit that both the argument for and against hold a great deal of truth. I would go so far as to say that both arguments are essentially true.

The policy environment facing functioning democracies is almost always like the minimum wage debate. Both sides offer argument possessed of both supportive facts and truth. Yet, entirely reasonable, educated and well-meaning people still disagree. It is a hallmark of a liberal democracy that our policy debates are dominated by matters in which compromise is not just possible, but necessary. That is largely because we’ve solved most of those problems where compromise is not possible. So, give thanks for this type of political disagreement; it marks us as an advanced, functioning democracy.

Those nations that lack a well-functioning democracy have fewer debates that lead to compromise. In those unhappy places, simple facts are often in dispute, and the most mundane of policy matters marked with cultural or national consequence. Citizens outside of democracy often view compromise as losing, as a lack of patriotism or as cavorting with the enemy. We must not admire the politics of these sad, insecure and failing places.

Our circumstance is to be envied. Our Constitution, our norms and our culture permit us to debate matters with respect and understanding. So, within a liberal democracy, we do not have enemies over public policy. Our only domestic enemies are those who seek to undermine those bonds, break our Constitutional norms or exclude some of us from deliberation.

As Congress commences a debate on increasing the minimum wage, we should view this as a crucial moment for our Republic. We have just passed through the most significant assault on our Constitution since the Civil War. Our ability to overcome that and prevent it in the future depends in part on how effectively we compromise over legislation. We should view the minimum wage as a good place to start.

Michael J. Hicks is the director of the Center for Business and Economic Research and an associate professor of economics in the Miller College of Business at Ball State University. Send comments to [email protected].

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