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August 2004

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Home » Archives » August 2004 » Minimum Wage Part Deux

[Previous entry: "No Grime on the Gold."] [Next entry: "He Will Save Rock."]

08/25/2004: "Minimum Wage Part Deux"

Here's my second round in the minimum wage debate with Raul Groom, a little late as usual. It's been a very busy time at work, and to compund that, havoc has been wrought upon my home. Havoc, thy name is Chrono Cross. Talk about addictive behavior.

Raul's rebuttal to my last statement is here under the Wednesday, August 18th heading.

Also check out his mostly well-reasoned, remarkably long response to the Paul Hamm controversy in the comments from yesterday's entry.

My response to Raul's rebuttal after the jump.

The intent of Raul Groom's rebuttal is to move the discussion of the minimum wage from the arena of practical data to the battleground of philosophy, which in fairness, was his original intent. In a nutshell, he says, the Elf is wrong, here's why, now can we go over here and talk about this? And it's a tempting offer, the chance to ignore the previous discussion. Groom knows it's tempting. He knows it because he knows full well that I made a mistake. And he wants me to take him up on his rhetorical get-out-of-jail-free card.

But he made mistakes, too. More importantly, the supplementary value of Groom's redirection would my implied acceptance of everything stated in his rebuttal. And between his inaccuracies, my own incorrect conclusions, and some rather startling new information I discovered, there's at least a little more to say on this matter. So how do we deal with this conundrum? Without further ado, I give you:

Old Business:

  • The insidious-looking italics of Step One: The italicization of the words "artificially created" was done mostly to differentiate from Raul's sentence, since I copied his opening line word for word except for the addition of artificially. That was a stylistic choice. While I didn't focus on it, I did briefly mention a logical reason for the heinousness of such a constraint, that being the use of force to make people adhere to such constraints. Interestingly enough, that's a philosophical point.

  • I'm not entirely sure what the Groomeister is talking about when he says that I reference an EmPI (if we must, though EcPI is funded by labor unions and is equally as focused on a specific agenda, like most think tanks) study as a Nuemark study. The only time I mentioned EmPI was in reference to their examination of the Card-Krueger data. I would not be at all surprised to discover that EmPI used some of Nuemark's conclusions to support their arguments, but I never referred to it. I suspect his remark was oversight - Groom and I are both quite susceptible to it.

  • "Vampire Elf's weird attempt to deny the fact that, all together now, no serious economist now believes that modest increases in the minimum wage result in increases in unemployment." If I were Chandler Bing, I would jump back, aghast, and utter the words "I SO never said that!" I did suggest (perhaps even rather pointedly) that there was a philosophical reason behind the support for the Card-Krueger study (and I'm way off base there - we all know, nobody ever rallies behind data that supports their personal causes). But I never remotely presented the idea that those economists came back to the other side of the fence after the suggested debunking.

  • Finally, on Card-Krueger: After much further research, I will submit that there was a good deal of error on my part. Their initial study was still a wreck of methodology, but later, better studies (by them and others) have backed up a good deal of their research. Nuemark's research has also been refined, culminating in the December 2000 match-up between C-K and N in the American Economic Review, which is where the initial conclusions of both groups began to come very close to meeting each other in the middle. At which point it becomes obvious the Groom's initial claim about the effects of minimum wage rate on minimum wage earners are at least more accurate than I initially thought. It appears the effect is minimal (thought C-K have almost completely backed off their initial claim that it raised employment).

    There is evidence, however, that number of work hours per low wage employee decreases when the minimum wage is raised. Not the same problem, but when a worker "has bills piling up and children to feed" as Raul puts it, a loss in total income is still remarkably unhelpful to the minimum wage worker. Additionally, current research led by an economist at the Federal Reserve (Tulip, Topics in Macroeconomics, Vol. 4, No. 1, 2004) is showing that it's very likely that the wage increase causes long-term job loss in other areas of the economy besides the "affected workers." In other words, higher income employees are losing jobs because of the overall damage to the economy by these wage increases. When you tinker with system, somebody has to pay the piper.

I'm going to bring Old Business to a close with another interesting tidbit, one that defies conventional wisdom. Would you be surprised to discover that most small business owners are actually in favor of raising the minimum wage? According to a study by the Small Business Administration, this is the case. So here's the question, for both conservative and liberal readers: Why do you think this is?

Throw your answers in the comments. Now, moving on to:

New Business:

The question was posed:

"If the minimum wage could be set at such a level that a person making the minimum wage were living above the poverty line, without creating substantial unemployment, should we do that?"

The answer is emphatically, No.

Unfortunately, the entire realm of philosophical motives behind such an answer involve such a detailed explanation that multiple books have been written on the subject. Suffice it to say, it's not because I hate the poor. It's not because I enjoy watching other people suffering (well, except when the Browns get smoked - I kid). It's not because I'm an insanely greedy bastard.

The base answer lies in a fundamental belief that the use of force to steal or violate someone's personal rights is fundamentally unacceptable, in all cases.

When the government passes a law requiring all business owners to pay a minimum wage, what they are really saying is, "Though you might want to enter into an agreement with another person of your own free will, we are making the decision that you are not capable of making correct decisions about such matters. Therefore we are telling you what the correct decision is. If you disagree with our decision, that's too bad. Here's a violin, playing a sad, sad song just for you. Furthermore, if you ignore our decision and continue to do what you wish, we will send police officers to arrest you. If you resist, they will use armed force to control you. If you continue to resist, they may have to kill you."

This becomes even more hideous when the topic is wealth redistribution. We're taking your money by use of force to give to some one else. There's another word for that: theft.

So what does that have to with the minimum wage. Well, the minimum wage is a truly sinister form of wealth redistribution, because it doesn't look like it at face value. The thing is, in order to pay employees the minimum wage, the money has to come from somewhere. Usually, the price of goods is raised to compensate. Suddenly, you are paying more for the same products you always bought. That money is neatly deposited in the bank account of someone other than you. Mandated by law, the minimum wage has now effectively forced store owners to take more money from you, lest they be thrown in jail. That's theft by force, in an extremely subtle and vicious manner, using the store owners as middlemen for the dirty work.

"But hey, we're helping out the poor. It's all good, man." Really, is it? Choosing to take from one person and give to another is not a really difficult moral dilemma. Even Robin Hood only stole to get back money that was unjustly taken by taxation.

Of course, the desire to help the underprivileged is undoubtedly admirable. But forcing someone to do so is tantamount to requiring volunteer work. It's so ridiculous an idea that it has to be couched in terms of one side being greedy to have any chance of success on the political level. Remember when Ted Kennedy actually tried to suggest that Republicans didn't want school children to have lunches? It's true! I invite my Republican friends over every Sunday and we put in children-starving videos and laugh our heads off. Sure. The framing of the minimum wage debate follows the same laughable concept.

It's not even a case where I think that it's not my problem. Poverty IS my problem and it's the problem of every citizen in the country. But I don't believe that the government is the best method of dealing with this problem. The private organizations that do this work are manned by amazing, selfless individuals, and they have an unrivaled capacity to do so much with so little. With fewer government attempts to "solve poverty," there would be more money available to these groups. And best of all, they do their work without taking a dime by threat of the gun.

The undermining philosophy in the whole response has been that the use of force is unacceptable except when harm (of most varieties) has been, or will be, done to another person. Where that line is drawn is debatable, but interfering with a legitimate contract between two individuals doesn't come anywhere near it. The minimum wage, and all like-minded laws that involve government interference where none is needed, should be abolished.