Recently, while vacationing to visit my parents for the holidays, I happened to read the front page of the Arizona Republic, and its remarks about the newly voted-in minimum wage increase in the state, from $5.15- to $6.75-an-hour. An almost one-third increase. So far as Arizona is concerned, there is no job in the entire state whose doing is worth less than $6.75 per hour. Painting fences, washing dishes, stamping mail for eight hours in the back of an office, all of these things are now judged to be worth this new minimum, in the interest of saving people from poverty.
A bit of basic math:
$6.75 per hour, for 25 hours a week - since most minimum-wage jobs are part-time - yields an untaxed income of $675 per month. Remove state and federal income taxes of a total of 19%, and income is reduced to $546.75 per month of true spendable income, or less than $7,000 per year.
Considering that the minimum wage’s stated goal is to preserve the public from poverty, it is difficult to imagine the squalor that a single person, living alone, would live in based on this income. Finding a legal living space for that amount of money would be miracle enough, nevermind the cost of food or gasoline to get to work.
The problem being ignored here is that these part-time jobs are not held by destitute single people, but rather either teenagers living in their parents’ household or people taking second jobs to augment their income. In the meantime, basic economics is lost on the proponents of this miserable feel-good legislation. Every dollar forced from the hand of an employer to an employee whose work is not producing that dollar’s worth of work is taken away from the employer, whose own business interest would instead have him hire a second employee, or create a better product. Labor, being a service, is no less vulnerable to the folly of planned-economy policies than any other good.
Imagine a minimum price for food. Single-serve candies which normally cost five cents are now lumped into the ‘minimum’ category, along with ninety-nine cent chocolate bars and bags of chips. The worth of a single peppermint or lollipop is not the same as that of a full chocolate bar or bag of chips, and when the consumer comes to make a purchase, his best value is with the latter two. Peppermint candies cease being sold, an entire market ceases to be viable, and a demand goes unfilled.
In the same way, a dishwasher who only generates three dollars of productivity per hour is nonetheless paid almost seven. The employer, who without this minimum wage policy could afford to have two dishwashers, must instead pay one worker the value of two, without getting anything from it. In the short-term, this means that the employer’s business suffers, hemorrhaging efficiency in the name of state-forced charity.
But even on the ideological side, this system fails, since now only every second dishwasher can find a job. Unemployment rises, productivity falls, and if enough business owners are similarly affected, the economy slows, resulting in further drops in wages, productivity, efficiency, and employment.
The free market is self-regulating. A market where certain conditions are forced will choke.
