Proponents of raising the minimum wage argue that it will celebrate the worker and promote the dignity of work. For example, the Catholic bishops in Kentucky released a statement in January of this year, titled The Dignity of Work, calling on the Kentucky legislature to raise the minimum wage. They quoted Pope Francis, saying “It is through free, creative, participatory and mutually supportive labor that human beings express and enhance the dignity of their lives. A just wage enables them to have adequate access to all the other goods which are destined for our common use.” Does raising the minimum wage enhance the dignity of work or make it easier for people to participate in the economy?
In reality, the minimum wage accomplishes the exact opposite of those things.
How does raising the minimum wage work? Congress or a state legislature passes a bill saying the minimum wage offered to an employee has to be $12/hr let’s say. What this means is that employees who produce a value to their employer of less than $12/hr will very likely lose their jobs. In other words, raising the minimum wage tells workers that, unless they meet a certain bar or standard, their work is not valuable and they should not be employed.
Here is another way of looking at the minimum wage and how it sends the message that some work is not even valuable. Joe is an aspiring musician. He knows that the CDs he makes are not of the same value as a Kanye or a Toby Keith CD, so he sells his CDs for five dollars: enough to cover his costs, and still low enough that someone may take a chance on him (it’s only five dollars, after all). But what if the state government comes in and passes a law (probably with support of the music industry) that says no CDs may be sold for less than $20? At $5, customers would have been willing to take a chance on an unknown musician, but at $20 they are more likely to just pay for the well-known music instead. Under the auspices of promoting fairness and helping the little guy, the government has now helped more famous music stars gain a monopoly on the music market.
What if the minimum wage is intentionally used to de-value other work? Let’s say that you are a Senator representing a Northeastern state with a large textile manufacturing industry. You are concerned because southern states are employing workers at a lower wage and undercutting your business. What do you do? You pass a law to try to say that the south’s workers are not as valuable as your state’s workers. By setting a minimum wage which is equal to the value of your workers (who probably have some education) and higher than the economic value of the work of the southern workers (who you think were less likely to have even basic education). By doing this, you have undercut your competition by forcing them to pay more for employees that have less to offer, even though both sets of employees are doing the same jobs.
Some proponents of raising the minimum wage have good motives. They truly believe that raising the minimum wage will help workers. But unfortunately, setting a wage floor devalues some work by saying that it is not a worthy opportunity, as this video from Learn Liberty illustrates.
However, what matters is not the motive, but the effect of the legislation. When the government raises the minimum wage, it shuts out (sometimes purposefully) those whose skills do not reach a certain level. By doing so, the less quality work is told it is not valuable at all. Absent a minimum wage, all types of work are allowed to exist, and therefore all skills and quality of work have value. Those who are willing to give up quality in exchange for a lower price are allowed to do so, and workers who would like to work for less are able to do so.
Keeping the minimum wage low allows more people to participate in the economy by ensuring that lower quality work or lower skill sets are not priced out of the market.