The Land of the Free - Conservative Politics Web Site

The Living Wage by Jeff Jackson (11/23/03)
The Land of the Free - A Conservative Politics Web Site

There has been a renewed debate recently about what level the federally mandated “minimum wage” should be set at. Along with this people have called for a “living wage” which goes above and beyond the current goals of the minimum wage.

The rational is compassionate. Certain jobs just don't pay enough for certain people to maintain a lifestyle that they might wish to. Flipping burgers at McDonalds (referenced from now on as a McJob) for $6.00/hr 50 hours a week just isn't enough for someone to buy a house, put food on the table, raise 4 children, buy a new car, or what ever. $15,600 a year just does not go that far.

Forget about holding people responsible for not spending more then they can reasonably expect to earn at such a job. Forget that if they can not afford to live in a $75,000 home they should not be considering it and spending their hard earned money. Forget that if they cannot afford to raise a child that they might want to think about not having a child in the first place. We have to forget these things because if we actually hold people responsible for their spending then there cannot even be a debate over the minimum or living wages. If we actually held people responsible there would be no argument for such things.

Sure there are people that will be down on their luck from time to time and might have to take such a McJob until other things open up for them. We all hit hard times. We all face losing income from time to time and having to make considerations based upon new income levels. But before we start advocating wage floors we need to understand a few things.

The problem is that minimum (or near minimum) wage jobs are not meant to be a career nor are they meant to be a primary source of income. For a extreme minority of people it may be the only jobs they are qualified for which is sad. But for this minority of citizens it should not be the requirement of government to enforce a higher standard of living upon them when the market does not bare it. These McJobs are entry level, low skill positions that 99% of the work force in America today could do. Which means that there are a lot of people with which one is competing with for that job. Everyone from Tom the out of work Engineer at age 50, to Sally the high school student looking for a few extra bucks, to Reggie the career McJob holder are vying for these jobs.

It is a hard lesson in economics and how supply and demand effect prices. As supply in the form of available workforce increases there is increased competition. Increased competition yields a downward pressure on the wages and McJobs pay much less because so many people are available to do the job.

Once again, that burger flipper at McDonalds is a low end, bottom rung, entry level position. It is not designed to be a permanent employment opportunity except for those that either are not capable of doing better or that simply do not want to do better. And for those people charity is where they need to turn rather than government. For some however they are too proud to go to the church food pantry and take donations but would rather receive anonymously that government check each month rather than let people know they need help.

But no, despite proven economic principles there are some out there that want there to be a “living wage” applied. Its arbitrary of course as to what a “living wage” is. And what it ultimately is is nearly Communistic to suggest that government should set a wage that must be paid to workers to give them a certain standard of living; “to each according to his needs”. Such things as the "living wage" of course also creates additional leverage for politicians and government over the people that benefit from such a policy. The "living wage", while on the surface appearing compassionate, is nothing but method for control over those that receive the wage and a burden on the businesses that must pay it.

The whole concept of the “minimum” and “living” wages has serious economic impacts upon our country's economy. To those that desire such things, those that cry for mandated wages, they are a wondrous thing. They overlook whether or not the burger flipper engages in enough productivity each hour to make whatever arbitrary “wage” they decide to set however.

If they decide that the “wage” should be $10.00 per hour and McDonalds only gets $9.00 of productivity per hour out of that worker what would happen? Best case would be that McDonalds would have to increase its prices to not just get $10.00 per hour but high enough to also pay their share of the employee's taxes, unemployment insurance, health insurance, dental insurance, raw materials (buggers, buns, etc.) consumed, hourly utility costs (electricity, gas, etc.), and so on. Not only does such a mandated wage increase the cost directly for McDonalds by having to pay their employees more, but also potentially increases the cost of all of their supplies.

If the people making the buns for McDonalds are also held to this new “living wage” they would also have to increase the prices they sell the product to McDonalds at. Then we also have to consider the truth that those that who supply the flour and other raw materials to the bun manufacturer will also have to do the same.

That extra value meal that used to cost you $5.00 now might very well cost you $6.00 or more. Hey, the money to pay these inflated salaries has to come from somewhere. And no there is not some magic government money tree in the back yard of The White House either.

So what does setting these wages arbitrarily high do? Institution of arbitrary wage floors has a cascading effect where costs multiply exponentially depending on how many prior rungs on the production ladder exist before the consumers get a product. And what happens if the cost to the consumer increases to the point where they no longer want to buy happy meals from McDonalds? McDonalds closes its doors and everyone that was supposed to be helped by artificially inflating wages now goes from making $6.00 an hour to $10.00 an hour for a short time to $0.00 an hour. On top of that no new McDonalds will be opening any time soon. Well, unless the government starts to subsidize McDonalds to keep them afloat. In which case we as taxpayers are forced to pay for McDonalds food that we do not even want to buy. But we are forced to do it anyway only without any food in our stomachs. In such an instance it is again a redistribution of the wealth that we earn to those that do not earn it. It is a convoluted method of doing it but a method none the less.

If we look at low end manufacturing jobs and get away from food products we see that eventually there is a point where it becomes cheaper to pay a person in India in $2.00 an hour to make widgets and ship them to the United States rather than pay U.S. workers whatever arbitrary wage the government chooses to set and make them here. This also leads to a loss of jobs.

What happens is the effect that always happens when governments tinker with the economy for the sake of political expedience – it fails. One needs look no further back than to the conflict between the former Soviet Union and its communist like philosophy and the United States and its more open markets. Both had incredible military power on the scale of super powers never before seen. Both had the ability to wipe out each other and much of the rest of the world with a few pushes of a few buttons. Both had access to vast natural resources.

But in the Soviet Union the average family lived below the standard of living of the average U.S. family. There was not much difference between the two societies except for the economic ideals practiced by their governments. Eventually the Soviet Union collapsed under its own weight. It collapsed under the weight of Communism, government control, and a populace not encouraged to do better.

This is not a pie in the sky or a simplistic review of what happened to the Soviet Union. It is a view based upon what happens when governments tinker too far with the free markets. What happens is a society filled with disincentive to do better and artificial prosperity that has nothing to do with the actual value of a good or service.

When government tinkers with the economy of its society nothing good comes from it. What comes from it is an artificial vision of the truth. And like everything artificial, there is not one thing real behind it. And without anything real behind it, an economy cannot sustain itself through bad times or even through the good times.

In the end it all collapses unless new and ever expanding regulation is used to continually prop it up. Eventually, however, it will still collapse under its own weight.

The same thing is true of the “living wage”. People complain now about jobs being shipped over seas? Wait until the government decides that the “living wage” needs to be $30,000 per year or $14.42 per hour (40 hour work week, 52 weeks per year). If people think we cannot compete with Koreans that make $0.10 an hour now with the minimum wage around $6.00 per hour, we're going to be in for even a bigger rude awakening when "living" wages become the norm.

But of course for some, Communism and its like-minded economic brethren are the cure all to the economic problems of the “poor” and “lower middle-class”. Never does it cross their minds that hard work, perseverance, and a little luck go a lot further than letting government meddle with the free markets. No, that is too simple for it doesn't give any of the politicians any power over their constituents. Instead their minds are set in a single gear and that gear is let's take Communism all the way and prove once again that it fails.

Let's take it all the way and make everyone's salary $1,000,000 per year. That would solve everything right? No more poverty. No more losers in life's lottery left behind. No more excuses. No more freedom either.

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