Friday, July 31, 2009

This is why I don't always support the minimum wage

John Stossel at Reason: "A Minimum Wage Equals Minimum Jobs". Eh?
Several years ago, the city council of Santa Monica, Calif., decided to make the town a workers' paradise by passing a union-backed law requiring everyone to be paid at least $12.25 an hour.

At the time, restaurant owner Jeff King complained to me that that law would "dry up the entry-level jobs for just the people they're trying to help."

He was right. It's why gas stations no longer hire teenagers to wash your windshield. Wage minimums tell employers: "Don't give a beginner a chance."

Such losses are hard to see, but they are widespread. One company closes because it can't afford to pay higher wages. Another decides to produce its product with fewer workers, and another never expands. Perhaps most importantly, there's the business that never opens. The people who were never hired don't complain—they wouldn't know whom to blame—they don't even know that they were harmed. They are the unseen victims.

The good news is that the people of Santa Monica woke up and overturned the "living wage."
How appropriate this article is as Chicago debates whether or not they should allow Wal-Mart to open another store within the city limits. One of the issues that has come up in this debate has been whether or not Wal-Mart should be forced to pay a "living wage" to their workers. There is a perception that Wal-Mart doesn't treat their workers very fairly, although, I have to way to independently verify that.

Anyway here's more from Stossel:
If minimum-wage advocates really believe wages are set arbitrarily, why do they favor only a $7.50 or $14 minimum? Why not $100?

At those levels, even a diehard interventionist knows that workers would be hurt. But the principle is the same at lower levels. If wages are a function of productivity, not whim, then it follows that if the minimum wage is set above workers' productivity, those workers—the intended beneficiaries of the legislation—will be harmed.

The Law of Unintended Consequences strikes again. Well, let me correct that. For some minimum-wage advocates, the bad consequences are not quite unintended. Consider the support for the minimum wage from large companies like Wal-Mart and organized labor. Why do they want the minimum raised? Economist Alex Tabarrok of George Mason University answers, "[T]hese employers will benefit from an increase in the minimum wage because it will raise the costs of their rivals. This is why unions have typically been in favor of the minimum wage even when their own workers make much more than the minimum."

Where there's "humanitarian" government intervention, there are politically connected special interests reaping the benefits.
Tell you what, there are more pressing issues than this on the Wal-Mart issue in Chicago. There are issues of traffic and what this store could do to already established businesses in the neighborhood (Chatham) where this is supposed to be built.

As for labor at Wal-Mart what I say is that it is up to each and every individual worker or job-hunter to determine how much they are worth and what benefits they can get from their employer. If such a worker is a valued employee surely an employer will work with this employee to keep them at their company. More often than not it may not do much good to just refuse to pay the worker however much they are worth or to give them the benefits that they may need, especially health insurance.

BTW, I've worked out in my head the "single-mother" problem. She may need better pay and benefits the most. Perhaps more than a senior citizen who may have as much of a need for health insurance. But a single mother, who may not have much support for her and her children (she may only have one or she may have more), may have to clothe, feed, and house her babies. She may even have to worry about babysitters especially if no one in her family are able to take care of them while she's at work. The most important think a single mother should be worried about is health insurance for herself and her children.

Of course that being said, she has to negotiate that with her employer and it might take her some time to convince her employer. That also depends on whether or not she is a valued employee.

Well that's my opinion on this issue of wages. What do you think?

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