The Economic, Political, and Ethical Case Against the Minimum Wage
G. Stolyarov II
Note from the Author: This essay was originally written in 2002 and published on Associated Content (subsequently, Yahoo! Voices) in 2007, where it earned over 1,200 page views. To preserve a record of my writings following the shutdown of Yahoo! Voices in 2014, I have given this article a permanent presence on this page.
We hear numerous cries these days to terminate worker abuse, to wrestle ailing souls from destitution and decay, to alleviate the suffering so widespread in third-world countries. These are noble goals and end s worth pursuing. But are the means proper? History has shown that government intervention in the affairs of business and attempts to warp the capitalist free market system only exacerbate world poverty. Third World totalitarian dictatorships have possessed unprecedented levels of starvation, unemployment, and deprivation precisely because they attempted to regulate their financial affairs. Labor union-dominated nations of Europe are collapsing into recession due to their inability to efficiently compete with freer economic orders.
In order to permit workers the ability to be rewarded based on their merits and employers the ability to negotiate contracts with their individual staff members, it is necessary to abolish a minimum wage system that in the United States has been proven to yield precisely the opposite effects.
The United States should effectively and radically repeal and prohibit all forms of government wage regulation upon all U.S. business ventures and foreign businesses on U.S. territory.
A vast majority of the arguments opposing wage regulations concern the flawed aspects of the minimum wage itself, and its harmful effects upon businesses, employees, the poor, and local governments, as well as its immorality in violating fundamental principles of a free market economy.
Let us begin with the basics of the desired system, otherwise known as capitalism, which, as the foundation of Enlightenment and Victorian Age culture, has dramatically raised living standards for all.
Capitalism, contrary to stereotype, is more than a mere economic system. It is a political framework as well, which is founded upon the principle of rights. Rights are courses of action that any individual must be allowed to pursue in any circumstance as an act of free will. The most basic right is the right to life. The abilities to own property or manage a business are means for improving life. Should the owner of a business resolve to employ another individual in order to support his right to life while the employee obtains material benefits and support of his own right to life in return, they would, in a purely capitalist system, resolve salaries based on a mutually profitable arrangement.
If a man possesses scant experience and is willing to work for, merely as an example, $1.25 per hour, he should be permitted this opportunity in order to sustain himself somehow instead of being deprived of the liberty to labor for whomever he chooses. If the employee is unsatisfied with wages and working conditions, and the employer is unwilling to ameliorate them, the former may simply pursue another boss or occupation.
The company which neglects to furnish proper and mutually beneficial contracts with its workers will automatically lose human resources, and eventually collapse due to competition from more functional firms. The worker who neglects to work with skill, diligence, and effort, will earn smaller amounts of money than one who industriously pursues his occupation.
Capitalism is the only genuinely meritocratic order, which rewards individuals based on actions, not inherited titles, position power, "divine right", or "the will of the proletariat." This order, in which supply, demand, and consent are the determinants of decisions, where the business world acts on its best interests and not artificial standards, has demonstrated itself to be nearly devoid of unemployment and life-threatening destitution.
But what takes place when a "middle man" intervenes for the sake of "fairness"? Limits are set, freedom of will is restricted, rigid regulations are established, incompatible with reality, that inflict naught but harm on an otherwise perfectly functioning economy.
One of these notorious regulations, enacted in the United States during the socialist Franklin Roosevelt's administration, unfortunately set in stone certain effects of the Great Depression. This was the Fair Labor Standards Act of 1938, which first instituted a minimum wage. Policy analyst James Bovard describes the downward spiral that the economy had descended along as new minimum wage laws pummeled its workers with ever increasing strength. The unemployment figures are in the hundreds of thousands, sometimes millions. Not only is this the case, but the minimum wage has demonstrated particular damages to minority groups, such as African-Americans, and residents of inner-city neighborhoods.
Prior to the institution of a minimum wage, the unemployment levels of Caucasians were nearly identical to those of African-Americans. Both figures had increased dramatically throughout the past sixty-four years, but the rate of African-American job loss exceeded that of other groups. In addition, already materially disadvantaged communities or those with slower development paces have been crippled to stagnation by these interventions. Let us explore the reasons.
Unfortunately, in earlier American society, numerous persons possessed negative stereotypes of minority groups. When, for example, an African-American worker applied to them for an occupation, he was more likely than a Caucasian man to be granted a lower salary and a menial job. The only means for him to elevate himself was to prove his merits by accumulating experience and exerting himself with diligence.
Statistics show that almost all workers who begin at low salaries graduate to respectable wages within two years, as they become more valuable to the employer. However, since minimum wages had begun to exceed the employer's stereotype of the minority worker, or, on occasion, even a worker's capacities, the employer found it unprofitable and detrimental to even allow the man the opportunity to work! Thus, the latter remained in a state of dependence on the government for sustenance, and became yet another soul hopelessly plummeting into the abyss of welfare rolls.
A similar situation, although for different reasons, can be spotted in poorer neighborhoods, where the individuals wishing employment have not been sufficiently prepared for a minimum wage workplace by unsatisfactory government schools. Their skills are not up to the expectations, and instead of being permitted to learn by doing and sustain themselves in the meantime, they are denied the right to pursue happiness, since their labor is not worth the present hourly minimum wage of $7.25.
An occupation, however base at first, is the only key out of poverty, for a man does not remain at the most basic level perpetually. To reward one with low salaries is better than to drain the people's tax money and grant them free cash, while rendering them virtual deadweights to our society. In capitalism, low merit implies low wages, but merit is not a static quantity. It grows with the variety of the individual's knowledge. Eventually those entry-level laborers will become indispensable assets to the company and, since the company and its customers also possess a consensual and symbiotic relationship, to society at large. As we have determined, minimum wage initiatives harm minorities, low-skilled workers, and those whom they pretend to assist, the poor.
There is yet another group nearly dispersed by minimum wage laws, teenage employees. Many of these workers inhabit middle-class families with sufficient means for material prosperity, but seek something beyond mere existence: a college education. Due to the rapidly soaring costs at even public universities, most even upper-middle-class families are unable to afford their intelligent and aspiring child a respectable place. Thus, the latter must work gradually to supplement his/her parents' incomes in low-skill but crucial jobs.
An early start in the workplace presents a teenager with invaluable experience, the capacity for financial independence, and a knowledge of the workings of business. The teenagers who acquire industrious working habits early on are more likely to ascend to impressive heights of wealth and prestige in the future. Yet many of their initial skills do not by far reach the value of $7.25 an hour. Present minimum wage regulations (which the Labor Department stringently enforces and of which it seeks to create as many scapegoat violators as possible, in order to convey the impression of "doing its duty") render it illegal for such a firm as McDonalds to hire a teenage employee for $3.00 an hour, although numerous said persons would leap with joy at such an opportunity. Many highly bright individuals of an immense capacity thus become unable to afford a(even a family earning $150,000 annually, firmly in the top 25% of the nation in terms of wealth, is unable to pay outright for four years of college for a single child!) and become restricted by middle-class limitations, which leave one highly in want of dramatic improvement.
Another key argument concerns the negative effects of the minimum wage upon businesses. When a company is forced to inflict greater expenditures upon itself than is profitable, it is likely to bankrupt itself, lay off employees, or restrain desired spending, such as research, mechanization, and advertising. It also may withhold deserved pay raises from its more proficient employees, due the hassle of affording lofty salaries for the less qualified workers. The output of businesses will become reduced dramatically, and consumer prosperity will plummet. This is a fitting explanation for the mass destitution experienced in totalitarian regimes such as the Stalinist Soviet Union, China during the Cultural Revolution, Cuba, North Korea, Saddam Hussein's Iraq, and Sudan. In all these states, government regulations were colossal and nearly omnipotent, and minimum wages flew into the stratosphere. Yet, nobody earned those wages!
The economic problems associated with the minimum wage, witnessed in this country since the 1930s, have, however, been avoided by numerous other nations which are presently undergoing a transition from tyranny to capitalism. Their situation is similar to that of the United States in the late 1800s, which, if it had then possessed a minimum wage, would never have developed into a global superpower.
Such nations require an incentive to invest in the United States and provide employment opportunities which local companies are insufficiently developed to grant. However, absent an abolition of the minimum wage foreign companies will lack any manner of stimulus to invest in this country. Potential employees here do suffer from poverty and despair, but this is due to past wrongs inflicted upon them by regimes that were socialist in all but name, governments which drained from them their wealth and aspiration. Only their employment and the institution of a laissez-faire capitalist system will permit individual and nation alike to gradually accumulate wealth, merit, and prosperity. In pre-Chinese Hong Kong, for example, where there had been no minimum wage, unemployment was virtually non-existent.
Proponents of "humanity", remember this: capitalism works, precisely because it is humane! Abolishing wage regulations in regard to foreign companies on U.S. soil as well as home-based firms will result in a massive stimulation of global interaction and trade.
No serious economist will deny that the minimum wage is abominable in all its aspects, philosophical, economic, and political. Among other groups that suffer as a result of them are local governments, charities such as the Salvation Army, and numerous prosperous businesses systematically singled out by courts and the Labor Department as scapegoats. Like all socialist schemes, this one aims to "lessen the gap between rich and poor." But as history proves to us, this can only be managed by pressing the poor into submission and demeaning those of adequate income.
Labor unions, massive coercive behemoths claiming to support the workers they have devoured, wish to institute a select few of their employees into extremely high salaries (obviously yielding a share of their profits to the union bureaucrats) at the expense of nearly all other economic interests. Yet this is not capitalism. In a truly capitalist system, none seeks the sacrifice of others for his own gain, for such gains are but illusory, and the only genuine profit can emerge from either a mutualist symbiotic relationship, or at the least one which inflicts no harm upon others. The individual citizen should not suffer as a result of interventionist ploys to eliminate meritocracy. Thus, it is imperative to abolish all wage regulations on American soil.
Gennady Stolyarov II (G. Stolyarov II) is an actuary, science-fiction novelist, independent philosophical essayist, poet, amateur mathematician, composer, and Editor-in-Chief of The Rational Argumentator, a magazine championing the principles of reason, rights, and progress.
In December 2013, Mr. Stolyarov published Death is Wrong, an ambitious children’s book on life extension illustrated by his wife Wendy. Death is Wrong can be found on Amazon in paperback and Kindle formats.
Mr. Stolyarov has contributed articles to the Institute for Ethics and Emerging Technologies (IEET), The Wave Chronicle, Le Quebecois Libre, Brighter Brains Institute, Immortal Life, Enter Stage Right, Rebirth of Reason, The Liberal Institute, and the Ludwig von Mises Institute.
In an effort to assist the spread of rational ideas,
Mr. Stolyarov published his articles on Associated Content (subsequently
the Yahoo! Contributor Network and Yahoo! Voices) from 2007 until
Yahoo! closed this venue in 2014. Mr. Stolyarov held the highest Clout
Level (10) possible on the Yahoo! Contributor Network and was one of its
Page View Millionaires, with over 3,175,000 views. Mr. Stolyarov’s
selected writings from that era have been preserved on this page.
Mr. Stolyarov holds the professional insurance designations of Associate of the Society of Actuaries (ASA), Associate of the Casualty Actuarial Society (ACAS), Member of the American Academy of Actuaries (MAAA), Chartered Property Casualty Underwriter (CPCU), Associate in Reinsurance (ARe), Associate in Regulation and Compliance (ARC), Associate in Personal Insurance (API), Associate in Insurance Services (AIS), Accredited Insurance Examiner (AIE), and Associate in Insurance Accounting and Finance (AIAF).
Mr. Stolyarov has written a science fiction novel, Eden against the Colossus, a philosophical treatise, A Rational Cosmology, a play, Implied Consent, and a free self-help treatise, The Best Self-Help is Free. You can watch his YouTube Videos.Mr. Stolyarov can be contacted at email@example.com.Statement of Policy.
Learn about Mr. Stolyarov's novel, Eden against the Colossus, here.