Minimum Wage Increase: Right or Wrong?

Posted: February 21, 2014 in Christians & Culture, Economics, Ethics, Politics

minimumwage11Raising the minimum wage was become a hot topic in the political sphere. Barack Obama has proposed to raise the minimum wage of federal contract workers to $10.10/hr and many states have followed similar paths. There has even been talk of tying the minimum wage to the consumer price index. However, there are many who decry these proposals as wrong, socialistic, harmful to the economy, etc. So how are you to think about this matter? Is there really a right or wrong answer? Let’s examine some arguments from both sides and then look at two underlying principles that may help you develop a more settled conviction on the issue.

Arguments for Minimum Wage Increase

The basic argument for minimum wage can be summed up in the words of President Obama in the 2014 State of the Union address: “…in the wealthiest nation on Earth, no one who works full time should have to live in poverty.” Supporting lines of argument are used to promote the minimum wage increase, ideas such as minimum wage will reduce turnover, reduce poverty, and create jobs. Perhaps the most appealing part of this argument is its seeming kindness to the poor and lower class. It rings with “let’s help the less fortunate among us,” and this certainly is attractive.

Arguments Against Minimum Wage Increase

The arguments against a minimum wage increase are more scattered. Many claim that higher wages would cause many to lose jobs, thereby increasing the unemployment rate. In fact, the Congressional Budget Office showed that approximately 500,000 would lose jobs if the increase took effect. So while 900,000 would rise above the poverty level, half a million others would lose their jobs. Is the net gain worth it? Some argue that raising the minimum wage would increase consumer prices, greatly affecting those with lower incomes. Finally, others argue that raising the minimum has never had a net effect on the poverty rate.

2 Fundamental Issues

The two sides represented in this debate both have important concerns in mind, however they often talk past one another. Those for minimum wage increases have a concern for the welfare of the people on the lower rungs of the economic ladder, while those against have moral economic and practical concerns. However, both sides have a tendency to overstate their case while ignoring the other. So let’s briefly examine, as I see it, the two underlying issues of the debate. By thinking through these, perhaps you will better understand the issue and be in a position to make a more reasoned argument.

Justice for the Worker

1 Timothy 5:18 says, “The laborer is worthy of his reward.” Both biblically and morally, it is clear that every man’s work is worthy of reward, and in our context, money. A person working without pay, specifically when the person desires pay for their effort, is akin to slavery. When a man or woman provides value to another through their efforts, it is an injustice to rob him or her of the pay due. But how do we determine what is a just wage? (I don’t like the term fair because it implies that we should all be equal, and that is not the case. Justice should be sought, not fairness.) Keep in mind that just wages and poverty are two different discussions.

Many people, a la Adam Smith and his “invisible hand economics,” have suggested the market will ultimately determine what is a just wage for different types of work. To put it differently, the people purchasing the product or service will determine its value. All things considered, this is a good system. Value will ultimately be assessed, and it will either come from a top-down system (i.e. the government) or from the consumers of the actual goods and services. It seems to me that consumers are in a much better situation to assess value given their nearness to the purchase. Additionally, given the number and diversity of consumers, large-scale justice is most likely in this market-driven scenario.

However, since the world is filled with sinful, corrupt people, there will be instances (perhaps many) were injustice occurs. Monopolies can be one such example. When a company corners the market on employment (e.g. a small town only has one large employer), then injustice may abound. So how are we to handle these situations? What about workers who are truly exploited by their employers? While these injustices must be made right, are minimum wage laws the answer? If not, what is the answer?

Value & Labor

The other major issue in this discussion is the value, or money, assigned to work. Those in favor of raising the minimum wage (or even having a minimum wage to begin with) are assigning value to all work being done. However, this value rarely has anything to do with the work being done, but rather by the money needed to live at some arbitrary standard, a standard often associated with the poverty level (which is based on an arbitrary western standard). So the logic of the argument goes like this: if you work, you should be able to live at a standard “we” deem acceptable.

One of the great joys of work, indeed a purpose given by God, is to create. When we work, we create and serve others. There is joy in this, but there is also reward. For in creating value, we earn a reward. The higher the value we create for others, the greater the potential for reward. When sinful passions such as greed and lust for power are suppressed, this capitalistic system is a beautiful Christian thing. However, when value and money are divorced from the work itself, a vital connection is severed. The government has imposed a value on work you have not done, perverting the justice of labor and reward. They have said, “If you work, regardless of the service and value to give to others, you should get x amount to live.” In doing so, they have undermined the value of real work and service to others.

Galatians 6:7 says, “Do not be deceived: God is not mocked, for whatever one sows, that will he also reap.” In the same way, by artificially created value in the marketplace through wage increases via governmental fiat, we should expect repercussions. Imposed value is no value at all. The inevitable result will be price increases, job losses, and reduced income for others. As the old saying goes, “There ain’t no free lunch.” If value is artificially given to the producers, the consumers will forcibly pay it for. The net economic gain will be temporary at best.

Conclusion

There is no easy answer. Poverty is a very real problem. Worker injustice is a very real problem. However, the integrity of work must be upheld. And we must never forget that we reap what we sow. Justice understands that actions have consequences and work entails reward based upon the value added. In developing a solution to the problem, we must not lose sight of these issues. To sacrifice one in favor of the other is foolish. Our job is to promote the welfare of the people, and this is most likely not as simple as guaranteeing a higher wage for some. But don’t just complain (we have the news channels for that); offer solutions, ones that are just, right, and good. Put forth ideas that promote work, service, dignity, and justice.

Comments
  1. Forcing wage rates from outside the market distorts the true value of labor. While I understand we as Christians don’t want to see workers being taken advantage of, the truth of the matter is the more government intervention into business and market place, the less jobs there will be. A free market would be much quicker, and cheaper, to correct problems than lofty government policies ever could.

    I’m always reminded of the parable of the workers that Christ told.

    “For the kingdom of heaven is like a master of a house who went out early in the morning to hire laborers for his vineyard. 2 After agreeing with the laborers for a denarius[a] a day, he sent them into his vineyard. 3 And going out about the third hour he saw others standing idle in the marketplace, 4 and to them he said, ‘You go into the vineyard too, and whatever is right I will give you.’ 5 So they went. Going out again about the sixth hour and the ninth hour, he did the same. 6 And about the eleventh hour he went out and found others standing. And he said to them, ‘Why do you stand here idle all day?’ 7 They said to him, ‘Because no one has hired us.’ He said to them, ‘You go into the vineyard too.’ 8 And when evening came, the owner of the vineyard said to his foreman, ‘Call the laborers and pay them their wages, beginning with the last, up to the first.’ 9 And when those hired about the eleventh hour came, each of them received a denarius. 10 Now when those hired first came, they thought they would receive more, but each of them also received a denarius. 11 And on receiving it they grumbled at the master of the house, 12 saying, ‘These last worked only one hour, and you have made them equal to us who have borne the burden of the day and the scorching heat.’ 13 But he replied to one of them, ‘Friend, I am doing you no wrong. Did you not agree with me for a denarius? 14 Take what belongs to you and go. I choose to give to this last worker as I give to you. 15 Am I not allowed to do what I choose with what belongs to me? Or do you begrudge my generosity?’[b] 16 So the last will be first, and the first last.” (Matthew 20:1-16)

    • Jordan Tong says:

      Thanks for the comment. I completely agree with your comment. As a business owner, I am in favor of little to no government involvement. As Thomas Sowell noted in “A Conflict of Visions”, there will always be a trade-off. Injustices will happen in a free-market society, but those injustices will be smaller and more efficiently dealt with than if we have a governmental top-down approach.

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