|
|
|
The Santa Fe city council recently took a step away from a free society in their decision to raise the minimum wage to $8.50 an hour. They also took a step away from common sense. The core issue involves what is traded between employees and employers. In the business model, workers trade productivity to employers for wages. The employer and worker voluntarily agree on the value of the productivity and thereby negotiate the wage rate. Both voluntarily negotiate. The employer has wages to trade for productivity while the employee trades productivity for wages. If wages are not satisfactory, the employee will sell the productivity somewhere else. Likewise, if the employer does not get adequate productivity from the employee, the employer will not do business with that employee. Enter the Santa Fe city council. They believe time is what is traded between an employee and employer. In their model, productivity does not enter the equation. What drives their model? Only the time spent by the employee and, importantly, the employee's need. There is no concern whatsoever for the employer. What this means is that Santa Fe has become a welfare state. In a welfare state, time and recipient need are what is rewarded. People get a certain amount of financial reward each month, based on need. All they need to do is spend a month and have need, they do not have to be productive. The minimum wage is an attempt by government to change the business model of productivity traded for wages to a socialist model that trades time and need for wages. So, what's wrong with that? Plenty. First, it focuses the employee on time rather than productivity. The clock is what is important in the socialist model rather than the financial bottom line. Second, it punishes the employer because the needs of the employer for productivity are not ever considered. Finally, the minimum wage is an unfunded mandate from the government to the employer who must pass the cost of this mandate on to the customers. Ultimately, the customers must pay more for products and services. They pay for a benevolence to which they are unaware. Establishing a minimum wage is not the proper role of government. Importantly, the minimum wage has done more to hurt less-productive workers than help them. Since the business model is based on productivity, increasing the mandated minimum wage decreases the value to employers of less-productive workers. This gives employers an incentive to use machinery rather than people. Many years ago there were more manual jobs. These jobs had not been mechanized yet, so to get job experience all one had to do is get on the power end of a shovel and dig your job. With the rising minimum wage, the productivity value provided by people with shovels was inadequate. What employers did about the government-mandated rise in the cost of people manually shoveling was to bring in earth moving equipment and not hire manual laborers. Who loses? The fragile population who need the entry-level jobs the most. The government is smug that they have mandated a living wage and the fragile population who need a job are out of luck. There are fewer jobs for less-productive workers. There is an even larger issue. We are free if we can voluntarily make deals with people. Why should the government get between me and someone who wants to do business with me? If I'm over 21 and agree to my compensation, why is any of this the government's business? Let's say I want to be a baker so I go to Bob the Baker and negotiate, "I know that for the first couple of months I will be less-productive for you as a baker. With my inexperience, I'll probably ruin more dough than Enron. I am willing to work for $2.00 an hour the first three months to match my wage and productivity." What's wrong with our agreement? After all, Bob and I made the agreement freely. We cannot agree because Bob the baker will go to jail if he pays me what we agreed. There should not be a minimum wage in a free society or the society will not be free. © 2003 Michael Swickard, Ph.D. |
|
Home
|