Thursday, May 08, 2014

"Free" College and the Minimum Wage

I got into an online discussion with a friend of a friend about the minimum wage. The discussion started with my friend’s friend saying that we should offer free college education to everyone, to which I said,

Free college education. That's an interesting idea. How do you propose this? Should we enslave all higher education professionals...and compel them to work for nothing? But they must eat and wear clothing...who will pay for that? And what of their task know, the guys with whips...who will pay them? And will the quality of education suffer under these conditions? Or did you really mean to say that the government should take over all higher education schools, confiscate even more money from us, and provide college education at no cost (other than taxes) to the students? But then that's not really "free" is it?

Then he proposed raising the minimum wage, to which I said,

If there is anything that should be mine--mine to do with as I please, mine to take anywhere I wish in this country, mine to decide without any interference from bureaucracy--it should be my labor, i.e. selling the labor of my hands. I should be able to sell it at whatever price I deem. Minimum wage is government tyranny in its most pure and undiluted form, though, as illustrated on the cover of Jonah Goldberg's book Liberal Fascism, offered with a smiley face with the best of intentions, for "our own good", but tyranny nonetheless. It is leviathan government descending from on high to tell me, "no, you may not sell your labor for that price." And if there is no one willing to buy my labor at the price they deem fit, too bad for me. Here are some crumbs we will give you from our noble largesse from funds we have confiscated from your fellow citizens who are more "privileged" than you.

Then he said, So therefore, if all I can sell my labor for, (assuming that I can find a job), is lower than the cost of living, that's a good thing?

And I said,

Please enlighten me on the "cost of living". What is it? Usually when that term is used today it is in reference to an index arbitrarily set by the same set of bureaucratic tyrants that tell us what the "minimum wage" should be.

And he said, My personal definition of the cost of living is food, shelter, clothing, transportation and costs associated with employment.

And I ended with this,

Food, shelter, clothing, transportation--and how do you measure that? These days I eat quite well (too well, judging by my waistline) but when I was first married and making minimum wage, my wife fixed a whole lot of hamburger helper dishes. We also rented a furnished and utilities-paid one bedroom apartment. We had a second hand TV and a crappy little record player with tiny built in speakers, the kind you would see in children's bedrooms. We had one car. My wife would drop me off at work, then drive herself to work, or I would carpool with a friend at work. We agonized about any clothing purchase and found the best price we could before buying. We didn't have a dishwasher or cable TV or air-conditioning in our car or a smart phone with a data package (they didn't exist in 1975), but we got by and actually saved money. Not because the minimum wage was so much better then, but because we lived as frugally as we knew how.

In times before mine it was common for people with large houses to take in boarders to supplement their income, or to actually run boarding houses as a business. These were very common for single men or women, and quite reasonable since one was only renting a room and sharing a common bathroom. It was also common for men who never earned enough to support a family--for whatever reason--to remain single and live in such boarding houses their entire lives. Today both the boarding house scenario and the conditions in which my wife and lived when newly married seem unthinkable today. Things like personal computers, wifi, central air conditioning, dishwashers, cable TV (and multiple TV sets), smart phones with large data packages, multiple cars per family, $200 or $300 basketball shoes, are all considered necessities and indexed as "the cost of living".

As to the worth of the individual,  [he had indicated that paying someone a small wage meant that employer, or society or something, valued them less as human beings dm] you seem to be conflating a person's worth as a human being with their worth as a wage earner. One has virtually nothing to do with the other. As Jesus told us, we are all of great worth to God by virtue of the fact that we are created in God's image.

But a wage earner's worth is based on the value his or her labor brings to the employer. The entrepreneur creates a product or service which is only worth what people are willing to pay for it. When the entrepreneur needs additional labor other than his own to make that product or provide that service, a job is created, but only at a wage commensurate with what the customer is willing to pay. When wages are arbitrarily driven up--by government fiat, let's say--the entrepreneur often finds that the job is simply unnecessary, as in the case of theater ushers for instance, or can be replaced by mechanization, as in the case of berry pickers or the young bag boys at grocery markets who would take your deposit pop cans here in Oregon, both jobs of which have now been replaced forever by machines. Entrepreneurs don't create jobs so people can have jobs--only the government does that, which they do solely by confiscating money from producers.

Entrepreneurs create jobs because they need work done which they can sell as a product or service at a profitable level. If they cannot do that at a profitable level, they fail and go out of business, and all the jobs from that business end. This is the cold equation. It's not about how anybody "feels" about you, or whether they like you, or whether you "deserve" to earn more (whatever that's supposed to mean). It's just this: can you bring a profitable value to your employer with the work you do? And the other part of this cold equation is that minimum wage laws, apart from being tyrannical and immoral, don't make jobs, or sustain jobs, they end them. Some of them, some whole classifications of jobs, forever. And who is hurt most by this? The low skilled, young worker trying to get a start in the job market. And who among that cohort does this hurt the most? Without question teenage black males.

My economic hero (and hero of other intellectual sorts as well), Thomas Sowell, was a Marxist in his economic ideology, all the way through his academic studies, even as he studied under free market sage Milton Friedman. But what turned Sowell from a Marxists to one of our most eloquent defenders of free market enterprise was his experience working for the Federal Labor Commission as an economist and seeing for himself the raw data. The disastrous effects, especially on his fellow American blacks were clear and irrefutable. When he began to make noise at the Commission about this, they basically told him to shut up about it. So he quit, went back to teaching economics and began his writing career, no longer a Marxist but an ardent apologist for classical economics and free market enterprise. When I read his text, Basic Economics, the scales fell from my eyes. I have since read everything I can find by this giant of clear thinking, and I urge everyone else to do the same. Or at least read Basic Economics.