Excessive Spending - Keep Minimum Wages Down

Yes, keep minimum wages down. That's what is advocated in Cafe Hayek, a site moderated by two George Mason University professors.

As a direct response to that, I wrote the following comment on their site:

"Let them eat cake."

I believe that was spoken by a French economist who didn't understand the connection between economic theory and political reality.

Hmmm.

Then, Cafe Hayek had another post that expanded on the notion that raising minimum wages nationally makes companies uncompetitive and forces layoffs.

My response was:

If keeping wages low were the key to competing, then Costco would not be able to compete with Wal-Mart/Sam's Club. The fact that Costco not only competes, but pays significantly higher wages AND has higher customer satisfaction shows how spurious the argument against raising minimum wages is.

The number of employees affected would be a small fraction of total employment, but the positive impact to those employees would be significant.

Coffee shop tales notwithstanding, the fact is that minimum wage rates have never been the measure of any company's ability to compete.

They also quoted the "Coyote Blog" where the following was stated:

"In a number of locations, we have been forced by rising minimum wages and associated costs (particulalry workers comp.) to switch some of our cleaning and landscaping duties from our live on-site employees to local contractors. These contractors may pay their workers more than minimum wage, but the workers are often twice as productive as ours, yielding a cost savings for us. When minimum wages are $5.15 an hour, these contractors can't compete with our own workers, but when minimum wages rise over $7.00, as they are across the west coast, this option starts to become attractive."

My response to that post was:

Hmmm. As a small business owner, I would have to say that you are just making excuses for your own business inefficiency. After all, these contractors will have to pay the same minimum wages, so why can they do it and succeed when you do it and fail?

The argument about "affordability" is a red herring.

In an email to Prof. Russell of GMU, I wrote:

Perhaps, instead of railing against a few extra dollars an hour, you and your fellow economists can devise a workable roadmap from subsistence to success that can be taken to the single parents in the poor sections of Detroit and similar cities... one where money really doesn't matter. Of course, one could always say economics deals with the larger picture and creating workable "roadmaps" is not part of that process. Too many variables, etc. Yes, one could say that... and that increasing the minimum wage is a bad thing for the recipients... and it is okay to create a Catch-22, where you need a better education to get out of poverty, but it costs too much to get that education if you are earning "minimum wages"... and it's good for the poor to have competition between U.S. workers and Chinese workers for the entry-level jobs that are the path out of the minimum-wage trap.

One could say those things... and nothing is solved... but the macro numbers look good. At some point, there is a need for both business and government to recognized that leaving a permanent underclass to its own devices may be more expensive in the long run than creating and managing processes to address the situation. Lowering corporate taxes and outsourcing entry-level jobs has helped corporations, but not necessarily translated into opportunity for those on the lowest economic rung in the U.S. So, if increasing the minimum wage is too costly as a first step, what is the first step?

The U.S. has a healthy overall economy (despite pockets of recession like Michigan). Capitalism is the engine of the economy. But if capitalism has no room for compassion, then perhaps we must question its tenets. A system that care only for the winners does not necessarily reflect the founding principles of this country.

The pilgrims did not operate their settlements on the basis of "I got mine."