A Glibertarian View of the Minimum Wage at a Poorly Named Web Magazine

Thanks to Whiskey Fire, I now know about a conservative online magazine called The Federalist.  It looks like former Rick Perry policy analyst Sean Davis started this thing last September.  Davis also writes at Media Trackers, and both offer a pretty standard glibertarian conservative line with a splash of neocon and social conservatism for good measure.  Ben Domenech publishes The Federalist, and employs David Harsanyi and Mollie Hemingway as editors, and this staff list makes me wonder about something:

Why would a bunch of folks who would happily reinstate the Articles of Confederation if they could just keep the Second Amendment name their magazine The Federalist?  Don’t they realize that a huge expansion of the Federal Government was the Founders’ central political goal when they convened the Constitutional Convention?  These guys have more in common with “Centinel” and “Brutus” than with Publius.

Anyway, once there I caught a piece by Davis complaining that Obama had left out some important things we all need to know about the minimum wage.  This response to the President’s SOTU section on the subject is not the standard (and incorrect) “hiring will slow if labor costs more-supply and demand” line – Davis directly responds to two specific items in the speech.  The rest, however, looks like an argument that since most minimum wage workers are young, part-time fast food workers with poor skills, their labor is worth no more and probably less than the current minimum.  But he never comes out and says this, so I’m left with a few questions.

First I should point out that Mr. Davis correctly challenged the President on two points – that far fewer people would benefit from an increase than Obama thinks, and that some full-time workers live in poverty.  A quick look around shows Davis is right about both.

This however begs the question: if only 1.6 million workers make the minimum wage, many of those only part time, some of them 16 year-olds working ten hours a week, then what’s the big deal?  At $10.10 an hour a worker doing forty hours a week, fifty weeks a year, would earn a hair over $20K.  Together, he and his low-wage colleagues get paid $32.3 billion.  To get an idea of how this would just completely destroy the $16.2 trillion US economy, you need to know that Exxon Mobil could have paid every US minimum wage worker by itself in 2012 – that’s all wages, not just the increase from the current $7.25/hour  – and still banked at least $12.6 billion in profit.  And yes, that’s a “b” for billion.

I’m also left wondering why the age, hours worked, industry and education matters.  If Davis means here that some work just isn’t worth that much, he should just say so.  Anyway, the fact that firms employing these workers hired them at the minimum wage suggests that they are indeed worth at least that much.

Finally, I’d ask why it matters that a single person making minimum wage is not living below the poverty income line.  He or she would be if supporting a family of four.   Wouldn’t it be great if one parent could support the family while the other raises the children?

Increasing the minimum wage transfers wealth to America’s lowest paid workers in a way Conservatives should support.   Think of it this way: it amounts to a tax on businesses that never passes through Government hands.  Employers would subsidize their own workers rather than paying taxes which government agencies then distribute to eligible citizens.  Wal-Mart could get its workers off welfare, for example, and presumably get more productivity out of workers inspired by their higher pay.  Why wouldn’t it prefer paying its own workers enough that they don’t need welfare rather than paying taxes to support welfare programs?

Right now, the invisible hand of the market has failed to match wages to productivity increases.  That is, workers become more productive every day but employers are not paying them for this increase – they are pocketing the value produced as profits.  This suggests a market failure that government should address.  It also means that Davis is wrong with respect to whether labor is worth more than the pay it currently commands.

 

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