The New Yorker on the minimum wage

by Walter Olson on December 3, 2013

John Steele Gordon, Commentary:

[Steve Coll] also leaves out the fact that very, very few people earning the minimum wage are the sole breadwinners of a family of four. Most are entry-level employees, often teenagers, with no developed skills. Most people who take a job at the minimum wage are earning above that level within a year, having learned marketable skills.

To be polite, Mr. Coll is being tendentious.

P.S. Meanwhile, as part of its “new focus on inequality,” the New York Times ran a feature on “Life on $7.25 an Hour” and chose to profile someone whose lifestyle includes three cars and a NYC residence bought for more than $500,000. [SmarterTimes] And the Washington Post awards President Obama two Pinocchios for his comments on what economists think. Yet more: Coyote.

{ 11 comments }

1 Boblipton 12.03.13 at 9:44 am

I would have said “disingenuous” rather than “tendentious”.

Bob

2 Richard Vaznaugh 12.03.13 at 6:26 pm

Mr. Gordon’s opposition to the minimum wage is lacking in ethics in that cold, Ayn Randish way. Realizing this, of course, he employs an odd diversion of arbitrarily limiting the worthy beneficiaries to a small number of people: The “family of four with an annual income of $15,000″ and that even “they would be eligible for food stamps amounting to $7,584 and an earned income tax credit of $5,372.”

First of all, I suspect Mr. Gordon is probably opposed, as is the Republican Congress to such subsidies. Second, and the better question is why should employers (like Wal-Mart) profit from paying wages that can only be ethically justified by public subsidies.

3 Jack Wilson 12.03.13 at 6:38 pm

The minimum wage law is essentially a law that makes it illegal for you to work unless your skills are worth the arbitrarily set rate. Once you realize this you understand that the only fair wage is one that you and an employer voluntarily agree on.

4 Malcolm 12.03.13 at 6:53 pm

In answer to Mr Vaznaugh’s second question, I might pose a question of my own: What is the better way to help the poor and needy? Is it (a) to give them money (subsidies), or (b) tell a third party ie an employer to give them money ie a minimum wage, with the proviso that the third party may not feel the need to hire them at all.
For Wal-Mart to be viable, each employee must produce at least $1 profit for every $1 he receives in wages. Otherwise, there will be no point in hiring him. If the wages offered are less than he is capable of living on, then it is reasonable for the public or private charity to top it up. At least he is being productive. But if Wal-Mart doesn’t hire him, then the whole of his income must come from public or private charity, and he is not being productive.

5 gitarcarver 12.03.13 at 8:06 pm

A few months ago on Coyoteblog (http://www.coyoteblog.com/coyote_blog/2013/10/this-minimum-wage-conversation-is-not-a-hypothetical-i-have-it-all-the-time.html) discussed the other end of the minimum wage.

His business is more physically demanding than intellectually demanding (but experience does count for something.) Unfortunately as people age, he has to tell people they can no longer do the job and must leave. Many will ask if they can stay at a reduced pay rate just for something to do and to be a part of a company and setting they have come to love.

I frequently have to tell people I simply cannot pay them less. They ask if they can sign a paper saying they want to be paid less, and I tell them something like “no, the law assumes you are a gullible rube and that I am evil and infinitely powerful so that if you sign a paper, it just means I forced you to do it.” Which is all true, that is exactly the logic of the law.

People look at me funny sometimes when I say the minimum wage law limits employee rights by putting a floor on what they may charge for their labor. This is an odd way of putting it for them, because minimum wage laws are generally explained in the oppressor-oppressed model, but it makes perfect sense from my experience.

In other words, not only does the minimum wage hurt businesses, but it hurt individuals as well. When people are robbed of choices, no one benefits.

6 DEM 12.04.13 at 11:36 am

“Second, and the better question is why should employers (like Wal-Mart) profit from paying wages that can only be ethically justified by public subsidies.”

Says who? Wal Mart competes in labor market, where employees are free to sell their labor to the highest bidder. There is nothing unethical about individuals voluntarily choosing to accept Wal-Mart’s bid over that of any other potential employer. It is an entirely voluntary transaction. Moreover, the employee is free to leave Wal Mart’s employment at any time.

What IS unethical is people like Mr. Vaznaugh sticking their noses into the process to arbitraily decide how much is enough, and to forbid, by force of law, anyone from selling their wares for less than he believes to be “fair.” And of course his notions of fairness are completely arbitrary.

I’ll add that Wal-Mart’s operating margin is around 6%. It’s not as if the company has unlimited resources with which to juice employee paychecks.

7 Hugo S. Cunningham 12.04.13 at 1:24 pm

The liberal base never accepted the “welfare reform” signed by Bill Clinton, and have been trying to undo it ever since. One prong of their attack has been ever looser standards to qualify as “disabled.” The other prong is a super-minimum wage.
Welfare-liberals always claimed that work requirements were unfair because no work was available. With a super-minimum wage, unskilled workers genuinely will not be able to find work (automation will be cheaper), and will have to go back on welfare.

For the welfare-left, that would be a benign price to pay for some upward pressure on wages for those still employable. For the rest of society, the advantages are less clear. “The Devil finds work for idle hands.” It is no coincidence that the socialistic policies of John Lindsay as Mayor of NYC, increasing the welfare caseload and reducing employment by 500,000 during a time of national prosperity, were accompanied by an explosion in NYC’s crime rate.

The Earned Income Tax Credit (EITC) is a more productive way to help the poor.

8 Ron Miller 12.04.13 at 2:05 pm

“What IS unethical is people like Mr. Vaznaugh sticking their noses into the process to arbitraily decide how much is enough….”

I wish people would shy away from calling opinion on issues unethical.

That said, I believe the best system allowing the free market to price as it sees fit… and subsidizing those wages with state assistance if you want to increase the wage (which I strongly support). I have this opinion from taking so many economics classes. It takes you to the same place the minimum wage folks want to go which I think is the right place.

9 Richard Vaznaugh 12.04.13 at 6:10 pm

Unethical may have been overstated — the more precise description of a pure “free market” would be to say it is devoid of ethics. Similarly, believing that whatever results from market forces is somehow good, is a choice to follow an non-ethical belief system.

As a result, most markets in the industrialized world are all regulated to varying degrees including the labor market, arguably the most important market. In that way, we seek to use market forces correctly and ethically by not allowing them to reach imprudent or immoral results such as monopolies, environmental disaster, child labor, dangerous conditions and . . . avoidable poverty-level wages.

Meanwhile, a proper minimum wage is only bad for businesses who depend on substandard wages as part of their business model. Such business should be discouraged, IMHO, and businesses such as Costco, which do pay living wages, encouraged. In addition, a higher wage lift all boats, by boosting consumer spending.

10 Jack Wilson 12.04.13 at 10:51 pm

So you think people are better off with no job rather than a low paying job?

11 kimsch 12.05.13 at 12:53 am

The Earned Income Tax Credit is a rebate of Social Security and Medicare taxes (the payroll taxes). The worker gets full credit for these on his/her SS/Medicare statement, even though the funds paid in have already been refunded to the worker. Another reason the SS and Medicare “lockboxes” are empty.

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