by Dr. Roy Cordato
Senior Economist, Emeritas
Do you believe that a minority teenager, maybe a high school drop out, with very few job skills, has a right to work? Or do you believe that being low skilled, maybe so low that you can only command $8 or $9 an hour in the job market, means you should have this right taken away? Oddly enough, the progressive left, those who claim to be the most compassionate in our society, have adopted the latter position. The position that will likely be adopted by the Democratic party platform later this summer argues that anyone whose skills are so low that they can’t command $15 an hour has no right to gainful employment. In fact, they argue that any employer who attempts to hire such a person at a rate that is commensurate with his or her skills will be breaking the law and subject to severe penalties.
This is the reality of raising the minimum wage. If you are in favor of a legal hourly minimum wage of $15, you are arguing that a person loses his right to be employed if his skills are not at a level where he can generate at least an equal amount in production for an employer. (It should be noted that you are actually saying more than this since to hire someone for $15 an hour it probably costs an employer about $17 or $18 given Social Security taxes and mandated benefits like, in some cases, health insurance).
Of course this is not how the minimum wage is typically described. When raising the minimum wage is discussed we typically here moralistic platitudes like “no one should be forced to work for less than $15/hr.” or people “deserve to receive a living wage.”
But what is never explicitly stated is the implied flip side to these clichés. When the Bernie Sanders or Hillary Clintons of the world claim that no one should be “forced” to work for less than $15/hr. what they are really saying is that no one should be allowed to work for less than $15 regardless of how poorly they have been educated or how limited their skills. Or when they say that people deserve a living wage they never add the implied follow up which is “or no wage at all.”
In the mind of the typical progressive, there is no relationship between skills and wages. The view seems to be that if a higher minimum wage is mandated that employers will continue to make all of the same hiring decisions that they had been making previously except that the people they employ will be paid more. In some cases, more than 100% more. In this progressive view a person’s wage is just some arbitrary dollar amount that is forced upon the worker and that without a minimum wage an employer could pay his workers any positive amount above zero and the worker would be forced to take it. It is classic Marxist economics where workers are exploited and are at the mercy of employers. As Marx himself put it, there is very little difference between an employment relationship and a slave relationship.
But in a free and competitive labor market that is not how things work. Competition for labor insures that people are paid according to what economists call the value of their marginal product, which is a fancy way of saying that wages will tend to reflect the value to the employer of the worker’s productivity. If an employer underpays the worker he runs the all too real risk of having that employee leave for another employer who would likely bid him away.
This also means that an employer will not pay any worker more per hour than the value of what that worker is producing per hour. Simply put, the cost associated with employing a worker—that is wages, plus benefits, plus employment related taxes—has to be less than the benefits that are received by employing the worker. Employers are not in the business of taking losses on the workers they employ. At $15/hr. a low-skilled worker who can only produce $8, $10, or $14.99 worth of output per hour will not only go unemployed but as noted above lose his or her right to be employed at any of those lesser wages that might put that person in a job.
This is the cruelty embedded in the calls by progressives for a $15 minimum wage. Historically the idea that the minimum wage will put the least fortunate among us out of work was widely recognized. It is why early 20th century progressives favored the minimum wage in the first place. It was part of the general scheme of the progressive movement’s support of eugenics to keep the “feeble minded,” immigrants, and people of color out of the labor markets. In South Africa, minimum wages were originally supported by all white labor unions in order to keep lower-skilled blacks from being hired to work in the diamond mines, that is to prevent them from competing for jobs that “belonged to white workers.”
While modern day progressives support the same policies that the eugenicist founders of their movement did they claim to be doing so out of humanitarian concerns and I do not question these motives. The problem is that the economic arguments that the founders of their movement understood quite well and used to promote nefarious and hateful ends still stand.