There’s an old saying “that the road to hell is paved with good intentions,” and it sprang to mind when I read David’s column this week.
Raising the minimum wage is one of those things that seems like a great idea in theory, but in practice only ends up hurting the very people it is supposed to help. That’s the thing about ideas that work in theory but not in practice — it means the theory is flawed.
The best way to help the unemployed is for them to get a job. Any job is better than no job. A job provides income, pride, self-worth and valuable experience. And the “free-market,” which David denigrates, is the best way to provide the most people with the best-paying jobs.
Minimum wage laws set an artificial floor for the price of non-skilled labour. This level is set arbitrarily by the provincial government based on what they think is politically “fair.” But the market also sets a price based on what employers are willing to pay for that task, and what potential employees are willing to accept.
Sometimes the wage the market sets is higher than the government-set minimum wage. A good example of this was Calgary in the oil boom a few years ago — when McDonald’s was advertising $18 per hour and full benefits for entry-level jobs. The minimum wage wasn’t helping anyone because employers had to fork out a higher rate just to attract entry-level workers.
The other scenario is that the minimum wage is above the market rate. That means employers hire fewer people. Why? Because the cost of each additional employee is greater. Just because the minimum wage goes up, doesn’t mean that employers have more money to hire the same number of people. If the minimum wage goes up above the market rate, fewer new entry-level positions will be created and some employers might be forced to lay off existing workers.
Higher minimum wages actually mean fewer jobs for low-income people in entry-level positions. It hurts the same poor people that David think it helps. And there’s proof — since the B.C. government announced it was jacking up the minimum wage to $10.25, there are 27,100 fewer part-time jobs in B.C. Heavens knows how many jobs a minimum wage at $19.14 would kill.
The answer is clear: to get the highest number of people working, let the free-market set wages.
7 Responses to Minimum wage
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Thanks Kathryn for digging up the stats for BC. I have just been re-reading the Henry Hazlitt primer “Economics in One Lesson” and he has a chapter on this very subject. Hard to imagine he wrote that in 1946. Maybe this should be required reading to graduate from high-school, so people don’t fall for the charletans and their feel-good solutions.
You’d be working for peanuts if the free market was actually running things.
There’s already a federal program to suppress wages for unskilled labour; it’s called “Immigration”. You have the government allowing hundreds of thousands of people into Canada each year from non-English speaking nations (usually Islamic) who have very little education or work skills. We give them free health care, so the employer doesn’t have to pay and bada bing, bada boom you got government sponsored wage control!
Now you got a surplus of unskilled, uneducated and illiterate people who will do anything for 8 bucks an hour!
BTW the total cost of this program is only 26 billion a year according to the Fraser Institute. Yeah but who believes those Right winged Preston Manning Fraser types anyway?
When not working the comisismon job, the employer has to pay at least minimum wage. The employee can possibly make an argument that he must be paid the hourly rate that he averages as a comisismoned sales person. But that one’s up for debate.References :
You would repeal minimum wages?
Russ,Good comments, I think it might help to get to the root if you diseusscd the purpose of minimum wage. When we understand the why of a situation, the what and how come a lot easier. That’s a lesson courtesy of Boyd K. Packer and David A. Bednar.Good post, I’m looking forward to more thoughtful insights from you on this.
I just found your website and can see that from this post, you’ve likely never had to work for minimum wage. Because even at that level, raising a family is difficult.
If we were to allow “market forces” to dictate salaries, we would have fewer people working and more ending up on welfare, because they couldn’t survive on poverty wages. Salaries lower than a minimum livable standard would create higher turnover, increasing costs to companies in finding and training new workers.
A similar argument is used for tipping; pay workers next to nothing and let tips create incentive. But here in Japan, that argument fails. Tipping is not allowed, yet workers still provide the best service in the world. Their incentive is not artificially created by “market forces.”