January 3, 2006

Minimum Wage Increase - A Moral Argument.

On January 1st the 360,000 workers in New York who are paid the minimum wage saw an increase of 25 cents in their hourly pay to $6.75, which is higher than the federal minimum wage of $5.15. There is a similar trend in a number of states to increase it beyond the federal level. There is much debate on the merits of raising the minimum wage (for instance, here) and there will always be. I will express my own views on the subject here.

The first question is whether it is moral for the government to intrude into a private businesses and demand a minimum level of pay. It is very important to answer this question before we go into an analysis of the consequences of such a raise. If one answers this question in the negative, there is no logical need for him (or her) to further pursue this subject. In this sense, I believe that it is intellectual hypocrisy on the part of the libertarians to argue against a raise in the minimum wage, because of what they believe are the harmful effects of such a raise. It is their proposition that government intrusion into economic activity is immoral in the first place, and pernicious in the second place. Presumably they can prove this proposition (though I never saw a proof, which does not prove that there is none). Then the immorality and perniciousness of this particular case of government intrusion follow as obvious corollaries.

On the other hand, if one answers the above question in the positive, as I will, then it becomes very important to go into an analysis. First, why do I think the answer is Yes? I am aware that, at some level, this becomes an issue of ideology. However, here is my attempt at a logical argument.

1. There are some issues in a business which are not the concern only of the people directly involved in that business and in these issues, the society (through government) has a say. For instance, the environmental consequences of a business. It is not hard, for many people, to see how a business can not be left COMPLETELY alone on this. The society, on the whole, has a say because the environment is used by everyone and no one can use it wrongly. Similarly, I believe that the society has reason to want that people working in destitution for the bare minimum get enough to lead their lives. I am not saying that "a guy mopping the floors should be able to afford a home, boat, daily latte, and cosmetic dental care", but he should get enough to be able to pay his bills regularly and not lose his sleep over how he can pay the rent next month.

For Noemi Rodriguez, 21, and her 2-year-old daughter, the minimum wage is a simple matter of going hungry. Ms. Rodriguez, a single mother who lives with her mother, makes $8 an hour as the chief photo technician at a Duane Reade in East Harlem. Six months ago, she said, "I earned the minimum wage when I started here, and I was still going hungry," she said. "It's not enough to pay utilities, buy food and take care of my baby."

My point is that one should be paid a decent wage, even if it is more than what is determined by the market. Of course, who will pay it? We will go into this later, but for now let me just say: I find it very hard to believe that paying a decent level of minimum wage is such a burden on the structure of market economy that, if implemented, it will have harmful effects.

2. Another important argument is that is perfectly conceivable that people are NOT being paid the level of wages determined by the market. The rationale put forward in such a scenario by the proponents of zero government intrusion is, of course, that it is a free choice exercised by employees to work in a business and they can leave if their demands are not met. Whatever the general logic and substance of such a rationale, it is particularly ineffective and insensitive in the case of people working for low wages. The very situation of their lives and the nature of their work makes it almost impossible for them to negotiate a better pay or to leave the jobs if necessary. They will typically hold on to any jobs they have for the simple reason that even a week without job can be devastating for them. That leaves them no time for pursuing alternative means of income or improving their general marketability. Any society claiming to be civilized needs to argue the case of such people through the systems it developed. One important way to do that is a raise in the minimum wage.

Thus it seems to me that there are good reasons to contemplate an increase in the minimum wage. Of course, one needs to study its effects more deeply before coming to any conclusion. I will write another post soon on an analysis of the effects of raising the minimum wage.


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