Wal-Mart’s decision to revaluate its plans to open a number of new stores in Washington, DC — due to the city passing a new ‘living wage’ law — has elicited the predictable outrage from the left.
Unfortunately, liberals’ ignorance of economic law causes them to support policies that harm the very people they claim to want to help — poor and minority populations.
What the left fails to account for when advocating for policies such as the minimum wage is what the great French economist Frederic Bastiat called, “that which is not seen.”
Some will always benefit from minimum wage laws because their hourly wages go up. What is not so apparent is the damage that minimum wage causes — increased unemployment and less economic opportunity for unskilled workers, and a lower wage for those workers not subject to minimum wage laws, among other things.
An increase in the hourly wage of an employee might not seem like much money when considered individually, but it is a lot of money for an employer with a large number of employees who are subject to minimum wage. Since the employer only has so much money budgeted for his labor pool, the logical solution is to eliminate some of these positions, or to cut hours and scale back in a variety of ways.
The result is that some minimum wage workers will lose their jobs. Others will never be hired in the first place, becoming “that which is not seen.”
There are some jobs which are exempt from minimum wage. These include seasonal amusement park workers, newspaper delivery workers, certain agricultural workers, those in the fishing industry, babysitters, companions for the elderly and invalids, and staffers at companies with less than $500,000 in yearly revenue.
While one might be tempted to dismiss this group as trivial, according to the Bureau of Labor Statistics, in 2012, 2 million workers earned less than minimum wage as compared to 1.6 million who earned exactly minimum wage. When the minimum wage is raised, some of the workers who lose their jobs will migrate to sub-minimum wage jobs, forcing these wages even lower as this labor pool expands.
Washington, DC’s living wage law applies only to big box retailers and requires a wage of $12.50 per hour, over $5 an hour more than the federally mandated minimum wage. In addition to lower wages for sub-minimum wage workers, what we can expect to happen in Washington, DC is more people competing for minimum wage jobs and fewer raises for unskilled workers making less than the new ‘living wage.’
In other words, this new law will benefit workers at big box retailers while driving down the wages of unskilled workers at other businesses.
For liberals, good intentions trump economic law and individual choice. Not only are minimum wage laws an infringement on the economic liberty of employers, they also transgress upon the rights of workers. What about workers who are willing to sell their labor for less than minimum wage just to enter the workforce? Paternalist laws like Washington’s living wage deprive these folks of that opportunity.
As C.S. Lewis observed, “of all tyrannies, a tyranny sincerely exercised for the good of its victim may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies.”
The destructive effects of minimum wage laws are well known. Nevertheless, liberals still advocate such policies.
Good intentions are not enough. But for the left, they are apparently more important than the terrible results liberal economic policies continue to produce.