Minimum Wages and Fairness

I used to have really mixed feelings about our minimum wage, but I think our economic problems are not really the result of the minimum wage.

On the one hand, I agree that people ought to be able to work for the amount of money that they are willing to work for.  But when you work for yourself, that is still the case.  There is nothing that prevents you from charging less than the hourly minimum wage rate for your labor if you are running your own business.  If you want to sell your time for two dollars an hour, you actually can be as long as you are running your own business while doing it.  Minimum wage only protects employees from other people, while in a strange way it actually opens up an economic space for entrepreneurs below that – not that anybody could live at that wage, but you might make some pocket change babysitting.

On the other hand, minimum wage exists to prevent one of the worst injustices of capitalism.  There is no principle in capitalism that specifically forces you to pay your workers; in fact, the principles of capitalism provide incentive to push wages down to save money in your business.  A big part of business is negotiating prices, and individual workers are some of the weakest negotiators around because they are dependent on their employers for their basic livelihoods. They have to work somewhere in order to eat and live, and employers know that.  It is much easier for a business to simply push down the wages for their workers than it is for them to drive down prices on goods – although, as Walmart has shown, with enough market share you can literally dictate the price to a seller.

What the minimum wage is supposed to prevent is employers taking over your life without providing reasonable compensation for it.  Business has been clever in recent years for working around the minimum wage, putting minimum wage retail workers on call (but only paying for hours worked), or giving modest managerial duties and putting an employee on “salary” to push their hourly rate below the minimum wage.  On some level, at least having workers “on call” is a creative business practice.

But there is actually no principle in capitalism that demands that you pay workers at all.  Capitalism was okay with slavery, and it was okay with share cropping (where workers kept only one tenth of their work).  It was we as people who decided that such onerous, exploitative practices were wrong.  If you put an employee on call, they ought to have some small additional compensation for the inconvenience.

We live in a country where we are born with literally nothing.  For the first years of our lives, what we have is only what other people have given us.  Once we become adults, anything that we own is the result of either the charity of others (like parents) or our own labor.  We must have a minimum wage in place in order to prevent the exploitation of people who are entering the labor market with nothing but their own hands to live by.

On the whole, I like capitalism.  It is a passably good system for generating material wealth.  But a pure, unfettered capitalism has no soul and no moral compass.  That is why we have laws against slavery and against abysmally low wages, because without them that is what capitalism gives us.  Yes, I like capitalism, but it must be balanced by some sense of moral decency and fairness.  I want to enjoy the benefits of capitalism, without suffering all of the worst injustices it can bring.  So that is why I’m not opposed to the minimum wage at all anymore.  Until we set up a system where people are not dependent on working for others to live, I cannot see a way to avoid it and still live in a decent country.

If we really wanted to encourage working and productivity, we wouldn’t tax it so much.  There are states where the tax on labor is higher than the tax on cigarettes and alcohol.  If we want to encourage businesses to thrive, one of the things we will have to do is lower the onerous tax on labor.  As it stands, that tax is so high it is basically a “sin tax” for working.  Between the payroll tax and income tax -which are most often taxes on the same money- labor is one of the most taxed things in our country.  We are burning this candle from both ends.  That’s where the real problem with wages is.

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