Peter Schiff made an appearance on the Joe Rogan Podcast last week. Rogan allowed Schiff to make his case against the minimum wage, and he did a solid job. The problem with arguing against the minimum wage is that there are so many ways to show how silly it is, that it’s hard to stay focused and get the entire idea across.
Top ten lists might be the best way to quickly summarize issues and arguments, so here are ten of the best arguments against the minimum wage:
- It’s a fake issue
When deciding what problems to address, it’s important to prioritize and focus on the big issues first. If you’re late for a yoga class and your house is on fire, the downward facing dog can probably wait until later.
If you take a look at the characteristics of workers making the $7.15 minimum wage or lower, you’ll learn that it’s a tiny portion of the workforce (3.3%) and that half of these workers are under 25.
We’re often fed red herrings about single moms raising ten kids on a minimum wage salary. And while there might be examples of people in that kind of situation, it’s not even close to the norm. There will be instances of tragedy no matter what policies are in place. Perfection is an illusion.
- Entry level work is payment within itself
I got my first real part-time job when I was 15 years old. I worked as a cashier at a local grocery store within walking distance of my house. This was prior to the most recent federal minimum wage increase, so my starting salary was $5.15 per hour.
I brought zero skills to my employer. But after a year working there, I learned how to be on time, how to fit in with coworkers, how to deal with customers, how grocery stores operate, the names of a million fruits and vegetables, the relationship between suppliers, delivery, and distributors, and more.
And I got paid! In college, I paid to learn. At work, I was paid to be taught.
- You have to start somewhere
While Peter Schiff was making his case against the minimum wage, Joe Rogan made a common argument that goes something like this: “if you can’t afford to pay your workers a living wage, you shouldn’t be going into business.”
This argument is ridiculous on two fronts. First, if we decide that only people who can afford to pay “a living wage” have the right to do business, only the rich will be able to. When asked about the federal minimum wage going up to $15 per hour, former McDonald’s CEO Don Thompson said “McDonald’s will be fine.” And they will be. Few brands have the resources, global reach, and staying power of McDonald’s, so an increase in labor costs is unlikely to ruin them.
But what about the next hamburger entrepreneur? What if the next best burger is being concocted by an individual with limited resources? How can he get started if he has to pay more for labor than his laborers produce?
Workers have to start somewhere too. I left my job at the grocery store for a position at an afterschool program that paid $11 per hour. Without the first job on my résumé, I may have been passed over for someone more experienced. I parlayed the afterschool job into a gig with more hours at a $10 rate, and I’ve never looked back. My low-paying job kick-started my whole life.
- The minimum wage kills jobs
Here are three ways in which the minimum wage kills jobs:
- Automation becomes a cheaper alternative, so investment in robots is encouraged.
- As labor costs rise, employers get rid of workers and shift their responsibilities onto retained workers.
- Instead of firing employees, employers may cut hours, making full-time jobs part-time.
- Job creators avoid high minimum wage areas
Many factors go into determining where a job creator will decide to found or expand his business. These include distance from the creator’s family, location of target customers, and, yes, labor costs. The higher the minimum wage, the less enticing a location will be for a job creator to get started.
- When labor costs rise, other prices rise too
Prices do not exist in a vacuum. Based on supply and demand, competition, and other factors, owners set prices for their goods and services as to make for the most profitable outcome. If tomato prices rise, the difference will be made up somewhere. Perhaps the price of tomato-based products will rise. Perhaps cleaners and other contractors will be hired less often. Perhaps plans to hire new workers will be cancelled.
The same effect occurs when labor costs rise. Though it may not be easy to pinpoint, someone will be paying more for something… and it almost certainly won’t be ownership.
- The poor get priced out
When jobs are cut, the victims are tragically predictable: the urban poor. The first reason is that the urban poor bring the fewest skills. Poor performing schools mean inferior language and math skills, and broken families mean underdeveloped social skills. Next, location makes getting to work, which is likely outside the inner city, tough. They often rely on public transportation, so being on-call becomes impossible. Lastly, racism and classism are not as pervasive as some would like to believe, but discrimination is real. Non-whites and the poor are burdened with the worst stereotypes.
White suburbanites are better educated, more mobile, more local, and carry fewer negative presumptions about them. And that’s the truth.
- We can negotiate our own deals
Man has walked on the moon, climbed Mount Everest, invented penicillin, written The Odyssey, discovered DNA, and overcome the Bubonic plague.
I am wholly unconvinced that allowing employers and employees to figure out wages that work for both parties is too formidable to be permitted.
- Each state’s economy is different
As a believer in federalism, I do not think I have the right to tell each state and each city what to do. If San Francisco decides to raise their minimum wage, that’s up to them. And SF might be able to get away with it. A beloved and temperate city, even astronomical costs may be endured to live there.
But the same is not true of other locations that depend on low cost of living to attract and retain residents. Mississippi has the lowest cost of living of any state in the union, and it’s not exactly the kind of place young people yearn to start their lives in. Artificially raising labor costs would decimate the local economy and undermine one of few justifications for living there.
- The Constitution says nothing about the minimum wage
The 10th Amendment to the US Constitution reads “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
You find me the line in the Constitution that delegates the federal government the power to regulate private sector wages, and I’ll delete this article.