Menu Close

Full Employment

MYTH: Minimum wage laws guarantee employment at a minimum wage.

FACT: Minimum wage laws create unemployment because people who are perceived to have less productivity than the minimum wage requires will not find employment and will receive no wages at all.

SOLUTION: Eaglenomics combines extreme mechanisms from both the Right and the Left to achieve full employment.

Many countries have minimum wage laws that purport to help poor people. Instead of providing a minimum wage for the poor, these laws cause permanent unemployment for a broad swath of the poor. This is because there are many people who cannot get a job at the minimum wage rate because the employers do not perceive them to have enough productivity to justify the minimum wage. Our society, through this minimum wage law, has made them unemployable. This is a brutal tyranny that we have imposed upon those least able to assert their rights as members of our society. We have made it illegal for them to exchange their labor for the wage that will allow them to be employed. And the media and general public blithely resorts to their simplistic “conventional wisdom” that is based on neither fact, nor serious analysis. By society’s wanton recklessness, we have relegated generations of an entire segment of society to having lives of grinding destitution, immorality, crime, and imprisonment.

Society has created an entire underclass of unemployables. With no hope of legitimate employment, they are forced into dealing drugs, theft, breaking and entering, robbery, prostitution, or other criminal endeavors to find a means of sustenance. And we, as the society that has created their plight, have no legitimate complaint for their behavior, since we have cornered them into this desperate situation. We deny them the ability to become gainfully employed, but then provide no alternate means of support. Many object that providing employment opportunities below the current minimum wage would not be enough to dissuade entrance into lucrative drug dealing and other criminal activities. But, they would be surprised to find that the average street drug dealer makes less than minimum wage, and lives at home with their single mother. The higher incomes in drug dealing are found with the higher level drug dealers who have many street dealers working for them. These higher level drug dealers do not have to pay any more than they do because the minimum wage laws create a large pool of unemployables to draw from.

It has been repeatedly asserted that everybody deserves a “living wage”. These words are easy to say, and are very appealing on many levels, but they are also based on a fiction that is wrong on many levels. In a free market system of production, it is simply not possible to have a minimum wage, and to not arbitrarily deny the poorest segment of society employment. As a society, we cannot shirk our responsibility for our citizens, and try to transfer it to employers. Employers only owe the employee a market wage under the free-market production model.  Society owes much more, because society demands everything of its citizens when it is under threat:  even their very lives. To call on people to risk their lives, or the lives of their loved-ones, in time of war, but then to deny them a basic share in that society, is unconscionable exploitation.

It is the responsibility of society that people have the basic stuff of living: adequate housing, clothing, food, education, protection, and healthcare. If we make it the responsibility of the employer, then there is no security for the individual and no advantage to being part of a society. People have developed a “law of the jungle” mentality that has no place in an organized civilization. They have dreamed-up this belief that each individual is responsible for meeting all of their own needs. Even packs of dogs in the wild know better than this. Inherent in an organized society are many responsibilities of the individual, but also many responsibilities of the society. In the Middle Ages of Europe, society was organized by a system known as feudalism. Under this system, the peasant was in bondage to the land in a way that was similar to slavery. The overseer of the manor was the nobility or lord, who saw to managing the work of the manor and also to the needs of the peasants. This was the concept of noblesse oblige, where the nobility not only received power and wealth, but was also accorded the responsibility to manage and provide. In our form of civilization, people are no longer peasants in bondage to their employment.  Rather, they are now free agents who are able to apply their labor to the use they choose. Employers have not supplanted the nobility in the areas of responsibility, because they have not been awarded the monopoly positions that the nobility had. So, they no longer have the excess resources that monopoly status provides. In a free-market system, competition necessitates that every employer operate at the level of efficiency that the market dictates. Businesses that pay above market rate for a given productivity of labor tend to be squeezed out of the market or go bankrupt. Since society has chosen to gain the increased productivity that a free-market system gives, then society must assume the responsibility that the free-market system is incapable of carrying. This is a very difficult concept for many to grasp. They don’t understand why society can’t just require that businesses pay a minimum living wage, and why the minimum wage would prevent someone from getting a job. But the efficiency of the market derives from the fact that innumerable individual decisions are made by business managers to maximize the productivity of their companies. Without this freedom to manage, society loses out on the increased productivity inherent in this system. However, society has also come to recognize that unbridled free-market business activity leads to actions that are detrimental to society.  So society has written laws to moderate or prohibit these negative behaviors, and tries to balance the negative effects of unbridled business with the negative effects these laws might have on productivity. One of these laws is the minimum wage law. It was intended to prevent businesses from cheating employees of their deserved wages. We have this sense that individuals deserve a minimum standard of living in return for being part of society. But we failed to see that this law would backfire and hurt the very people it was intended to help. The only workable way to guarantee a minimum standard of living in a free market system, while also guaranteeing full employment, is for society to make up the difference if what is paid by employers does not meet what we think should be a minimum standard of living. The way society can make up this difference is by subsidizing some minimum level of food, housing, healthcare, education, job training, and remuneration.

Most people don’t want others to suffer and they feel discomfort at seeing this. Others don’t care, or talk themselves out of their discomfort by telling themselves that the individual is to blame for their plight. Some people do not think that it is society’s role to guarantee a person a job or a minimum standard of living. They have made the mistake of inappropriately transposing the mechanism of free-market productivity into self-responsibility for minimum standard of living. Implementing this wrongheaded thinking not only hurts the individual, but it also hurts society.  And it even hurts those who do not feel the discomfort at the suffering of others. They end up paying because many of those who are not able to provide for themselves through legitimate means will resort to crime, or divert even more public resources because of their abject poverty.

Having no access to employment denies these lower-valued unemployed a starting point, since the bottom rungs of the employment ladder have been removed, and they have no way to get started. They can’t get the experience, training, employment record, or job socialization that a starting position would provide. Job socialization skills include learning to take direction, developing the work ethic of reporting to work, working a full shift, learning to work with others, developing communication skills for the work environment, and learning what the expectation is of appropriate job dress and mannerisms. These may seem like trivial skills for people who have the advantage of growing up acculturated to these requirements, but this is an important step for those who have not. Acquiring these skills further qualifies the worker for improved earning capability. Giving undervalued workers the opportunity to work will also allow them to demonstrate their abilities and gain increased wage rates based on an increased assessment of their productivity.

Again, if society wants these poor workers to have more than the employment market is willing to pay them, their income can be augmented by society through supplements of basic needs such as food, housing, healthcare, education, job training, and remuneration.

With minimum wage laws, employers who want workers below the minimum wage have a preference to hiring illegal aliens, because illegal aliens have deportation as the incentive not to turn in the employer. This is not the case with employing citizens at less than the minimum wage, since the minimum wage laws mean that the underpaid employee can blow the whistle on the employer without the same risk of deportation. The result is that poor citizen workers are displaced by non-citizen workers.

Some of the benefits that society gets in employing those not employable at the minimum wage are: added productivity, less crime, lowered drug and alcohol debilitation, less illegal alien infiltration, retention of businesses that might otherwise go to a lower-cost country, increased investment in impoverished areas—including added infrastructure, schools, and tax base.

The added opportunities from eliminating minimum wage laws should also be extended to young workers. Society has mistakenly underestimated the value of job experience as schooling for young people who find formal schooling to be ineffective.

Minimum wage laws did not come into being because of a groundswell of either demand by poor workers, nor because of public sentiment. Rather, they came into being through lobbying of Congress by the Northern unions, who were seeing businesses moving to the lower cost, and non-union,  states of the South. The minimum wage laws were an internal tariff on Southern labor, and Southern goods. This anti-competition tactic was also used by the British in India, and by the whites in Apartheid Africa. Today, the most vocal supporters of the minimum wage laws are still the unions. Not because they have a soft spot for the poor, but because they do not want the competition of lower cost labor. If they really cared for the poor, they would not advocate “closed shops”, but would allow the employers to hire the workers that are perceived to be lower productivity at lower wages. But now we have seen that the lower-end jobs have left the country altogether because of these shortsighted actions. And those who were supposed to benefit from the minimum wage laws have suffered the most.

Every country needs the full spectrum of jobs to match the spectrum of worker capability. It is fantasy that a country can “advance” to the point where all workers are highly skilled or college-graduate professionals, and that the unskilled work can then be exported to developing countries. People come in the full array of innate ability. In fact, much of what we call “unskilled” requires innate skills that go unappreciated. For instance, many manual assembly line jobs call for a high level of manual dexterity and extreme levels of mental and physical endurance to do this type of work. And there are a multitude of jobs in a factory or distribution center which require talent that our standard IQ tests do not measure. This was demonstrated in an episode of the CBS television series, Undercover Boss. The CEO of a major distribution warehouse company went undercover to try and do several of the non-managerial jobs in his company. The result revealed the high level of talent required to do each of these jobs. In one job, he was actually fired from his own company because his talent in that area was so low that the supervisor determined he would not be able to perform the job at the minimum level required. This also illustrates the hidden nature of talent that interviews cannot adequately reveal. Without this revelation during the interview, a minimum wage requirement will prevent the person with hidden talent from getting the chance to prove their worth in the job.

Some proponents of minimum wage laws maintain that the laws do more good than harm. They claim that the wages lost, due to the number of jobs lost by raising the wage, is less the dollars gained by the remaining workers. The rebuttal is: What gives anyone the right to take away someone’s job for someone else’s benefit? This is the worst sort of thievery: stealing from the poorest in our society to give to those who are better off.

Others look on these minimum wage laws as preventing the wealthy employers from taking advantage of the poor. They see this issue simplistically, and do not understand how they eliminate jobs for the poor by raising the wages artificially through laws that coercively distort the market for labor.

We need to adopt this balanced system which optimizes the productivity and prosperity of the members of society, while actually providing the much-touted (but ever-elusive) “Safety Net” to those who need a basic level of survival support to supplement the market wage.

Leave a Reply

Your email address will not be published. Required fields are marked *