The legally mandated minimum wage is an economic issue, of course; but it is more fundamentally a moral issue. Unfortunately, usually only the left, with its claims about the alleged fairness of higher minimum wages, talks about the moral dimensions of the policy. That needs to change. Continue reading “The Moral Case Against Minimum Wage Laws”
Bernie Sanders, along with everyone who advocates minimum wage laws, at least implicitly recognizes that those laws can throw some people out of work.
Bernie Sanders, along with everyone else who advocates minimum wage laws, at least implicitly recognizes that those laws can throw some people out of work. Otherwise, Sanders and his allies would insist on a much higher minimum wage, say $100 per hour.
An exchange during the November 14 Democratic debate is instructive. Sanders clashed with Hillary Clinton over whether to raise the national minimum wage to $15 or $12 per hour. But why did the “democratic socialist” Sanders not ask for even more? Does he seriously think a working head of a family can prosper financially on a paltry $15 per hour? Why not $20? Why not $50? The answer is obvious: A higher minimum wage would throw even more people out of work.
Of course, the assumption that people earning a minimum wage support a family solely on that wage is usually false—usually those people are teens or young adults, often getting free rent and other perks at their parents’ house. But, for obvious reasons, advocates of minimum wage laws usually pretend that the norm is for someone earning a minimum wage to support an entire family on it.
During the debate, Sanders even admitted that minimum wage laws can throw people out of work. Moderator Kathie Obradovich asked:
You’ve talked about raising to $15.00 an hour everywhere in the country. But the President’s former chair of the Council of Economic Advisors, Alan Krueger has said the national increase of $15.00 could lead to undesirable and unintended consequences like job loss. What level of job loss would you consider unacceptable?
Sanders began his reply, “Let me say this—you know, no public policy doesn’t have in some cases negative consequences.” He made this concession because only an idiot would claim that a minimum wage set above a certain floor wouldn’t throw some people out of work.
True, Sanders later spouted nonsense about how a minimum wage would increase (some) people’s disposable income and “create jobs”—ignoring the fact that those people thrown out of work have no disposable income. Sanders also ignored a number of other facts, such that wealthier people also spend money on goods and services and that money taken out of investment hampers business development and slows economic growth. But, for one shining moment, Sanders let slip the obvious if uncomfortable truth about minimum wage laws.
Incidentally, Krueger—the economist cited by Obradovich—has an October 9 op-ed in the New York Times explaining his view that a $12 national minimum wage would be a good idea but that a $15 minimum would be too high. I think Krueger is basically on the wrong track for a variety of reasons; as examples, he draws his conclusions largely from studies of a single industry (restaurants) for a short period of time, and he doesn’t consider alternative anti-poverty measures that would arguably be a vast improvement over any minimum wage. Maybe someday I’ll delve more deeply into his studies and related studies (if someone would like to finance such a project, please let me know).
But, for now, at least we’ve seen an important concession even from the far-left reaches of the American political landscape: Yes, minimum wage laws can throw people out of work.
As I wrote recently for the Objective Standard, if government imposes “a minimum on what employers may pay so as to establish a ‘living wage,’ logically, there is nothing stopping government from also imposing a maximum wage.” Now, just a few days later, Vox has come out with an article, “The Case for a Maximum Wage.” The author, Matthew Yglesias, maintains a fantasy that a “super-tax” (or something like it) might “avoid seriously reducing the number of hours people work.” But obviously a maximum wage—either absolute or de facto via the tax code—would discourage some of the most productive people from producing (or would encourage them to move). I’m reminded of a 2011 union rally in Denver in which some people chanted, “Eat the rich!” Morally, a maximum wage is an outrage that violates people’s moral rights to associate voluntarily and to operate their businesses and run their lives as they see fit.
Kristen Bell is a great actor and singer but a terrible economist and political scientist. In my Objective Standard blog post I take her to task for advocating a higher minimum wage.
The following article by Linn and Ari Armstrong originally was published March 4 by Grand Junction Free Press.
Union battles in Wisconsin spilled over into Colorado February 22 as union supporters and Tea Party groups held opposing rallies at the capitol. See FreeColorado.com for Ari’s videos. The clash offers a great opportunity to review the proper functions and legal protections of unions.
The essential principle is that individuals have the right to associate voluntarily with others, whether as friends, union supporters, or corporate investors. Our First Amendment recognizes the fundamental “right of the people peaceably to assemble.”
The great irony and hypocrisy of the left is that it seeks to deprive people of their rights of assembly and speech when they join corporations. People have the right to speak, try to persuade others, and contribute their funds to whatever (nonviolent) causes they want, whether as individuals or as voluntary participants in unions, corporations, or other groups.
“Corporations aren’t people,” the left continuously cries. True, and neither are unions. However, all groups are composed of individuals, and people don’t lose their rights (or acquire any new ones) by virtue of joining some group.
Employers too have the right to associate freely by seeking to hire whomever they please, on whatever terms both parties agree to adopt. Whether employers want to hire no union members, only union members, or some combination, that is properly their right. Thus, we oppose so-called “right to work” laws restricting the voluntary association of unions and employers.
The problem with the Wagner Act (also called the National Labor Relations Act) signed by Franklin Delano Roosevelt in 1935 is that, in conjunction with subsequent legislation, it violates the rights of employers and their employees to associate freely. Today’s unions use political force to drive wages for a select few above market rates, thereby contributing to unemployment and the degradation of American industry. And often government has permitted outright violence by union thugs, who have forcibly shut down businesses and viciously attacked nonunion employees.
Just law neither grants to unions special political advantages nor impedes their formation. Properly speaking, there are no special “union rights” or “corporate rights” or rights for any other group. There are only individual rights, which are the same for everybody, and which people retain when they consensually join together.
Note that when people form unions solely by voluntary consent and eschew violence and political force, those unions become part of the free market economy. The free market simply describes all the networks of individuals who respect each other’s property rights and interact voluntarily.
What about political-sector unions, which are the cause of all the fuss in Wisconsin? We might note that the obvious way to resolve the problem in many cases is to restore those jobs to the free market, but then we’d be accused of radicalism.
Government employees don’t need special legal protections for “collective bargaining.” Union members are free to rally, argue, campaign, and vote. And taxpayers have every right, through their elected representatives, to say no to union demands. The right of the taxpayer to his own earnings is what the political-sector unions blatantly disregard.
At the Denver rally, various union supporters claimed that unions are responsible for shorter workweeks, higher wages, and the rise of the middle class. In fact, insofar as unions have resorted to political force, they have thrown others out of work, undermined American business, and stunted the middle class.
The fundamental driver of higher wages is worker productivity. People in an economy as a whole cannot earn more than they produce. And productivity depends on capital formation. People can produce a lot more with computers, tractors, high-tech factory equipment, and automobiles than they can with crude iron tools and horse-drawn plows. Higher productivity is what enables people to earn more. Thank the capitalists, not the unions, for increasing wages.
True, in a small fraction of cases, unions might, without resorting to political force, persuade an obstinate business owner to pay market wages. In such cases the owner is better off paying more, or he’ll soon lose his best workers to competitors. Yet it is fundamentally this competition for labor, not union pressure, that drives up wages as productivity increases.
We were shocked to hear the blatant class envy of many of the Denver union supporters. “Eat the rich,” “tax the rich,” “tax those bastards up in Aspen,” stick it to corporations, we heard. How shameful.
True, some people in our largely politicized economy enrich themselves by gaining favors for the politically connected. That’s how newly elected Chicago mayor and Democratic favorite Rahm Emanuel gained his money, as Tim Carney pointed out a couple years ago in the Washington Examiner.
But big earners in the free sectors of the economy produce their wealth through years of dedication, hard work, long hours, and foresight. They drive our prosperity. Their money belongs to them, and their rights should not be sacrificed to destructive and hateful envy.
Critics of collective bargaining by political-sector unions rallied in Denver February 22; here Kathy Welch, State Senator Shawn Mitchell, Jeff Crank, and Patti Reynertson share their thoughts.
CO Union Supporters Speak Out (video)
Even though I think unions often get their way illegitimately through political force, I wanted to give the union supporters who rallied in Denver February 22 an opportunity to share their views.
As noted, not all of the union supporters were particularly eloquent in their presentations (see also reports by Bob Glass and Kelly Maher).However, I interviewed a number of union supporters who were articulate and well-informed.
I would note that nobody else has done more to record and publish the views of union supporters at the Denver rally. Advocacy journalists are still journalists, and they can give a fair hearing to people with whom they largely disagree. (Moreover, often journalists who claim to be straight news reporters egregiously bias their stories and misrepresent the views of those they dislike.) The first video offers several interviews:
I added several editorial notes to the first video. Here they are:
The Independence Institute claims Colorado ranks between 29th and 36th in the nation in per-pupil spending, depending on assumptions, based on figures from the NEA, Census Bureau, and US Dept. of Education. Source.
Rick Ungar writes for Forbes that a Wisconsin bill indeed included language about potentially selling or leasing utilities, though Koch Industries denied any interest in purchasing them. Source.
The Denver Post reports that Xcel claims its “authorized” return “has averaged 10.63 percent, but the company’s actual average return has been about 8.6 percent.” However, nothing about this shows that subsidies for solar energy creates net jobs when the costs are considered.
The next video features a conversation with teacher and union organizer Cathy Royce of Canyon City:
The final video of union supporters features several more interviews:
Paige commented February 25, 2011 at 4:44 PM
Thanks for posting this Ari, I Appreciate it!
Paige commented February 26, 2011 at 9:29 AM
Ari- on the editors note that Gov. Walkers tax cuts cost 140 million, and Wisconsins projected deficit is 3.6 billion…
My research shows your facts to be correct, however Wisconsins current deficit is only approx. 138 million which tells me their state would be in the positive if it weren’t for Gov. Walker.
Why does he expect public workers to pay for his mistakes? Why is this s union issue? Seems to me the politicians are in the corporations corner not the other way around. At least in this case…
Activist Bob Glass took scores of photos of the opposing union rallies in Denver February 22; some of them are reproduce here with his permission.
Glass also described his experience just before the rallies: “I parked my car a few blocks away from the capitol and began walking towards the gold-domed building. A man and a woman with teachers’ union placards were behind me discussing media manipulation strategy.
“We all came together at a red light and I asked them if in fact they were teachers. They both proudly said ‘yes’ and proceeded to boast about how dedicated they were to the children. I pointed out that they couldn’t be that dedicated if they were not in the classroom teaching the children but were out here denouncing the governor of Wisconsin and supporting collective bargaining rights for state employees.
“The man emphatically told me that he ‘had permission’ to be here. He didn’t say permission from whom—certainly not from the children he professes to be so dedicated to. The woman then quickly chimed in and explained that she was in fact working for the union and not actually involved in education. ‘So then you’re not a teacher,’ I replied. ‘Not right now,’ she said.”
Glass commented on the “vitriol they [some union supporters] showed to the Tea Party counter-demonstrators. They had the attitude that it was inconceivable that anyone could disagree with them and many of them for the first time in their lives had to look into the faces of people unafraid to oppose them.
“Amid their litany of ‘Tax the Rich’ and ‘The people united will never be defeated,’ they shouted their usual obscenities and flipped the bird. One hysterical woman even mooned the Tea Party. They accused the Tea Party people of being paid by Wall Street and told us to get back in our Escalades and go home. Suddenly my 1992 Subaru Loyale with 235,000 miles seemed woefully inadequate.
“They sent people into the ranks of the Tea Partiers shouting directly in people’s faces clearly trying to provoke a violent confrontation. As usual the Tea Party people showed incredible restraint and as the cops caught on to what was going on they became more vigilant about keeping the two groups separated.”
Anonymous commented March 2, 2011 at 1:48 PM
I was there, my first state capitol rally. It went down just as posted. The unions do not want to take there hand out of the candy jar. They are emotional and will attack anyone who has a different opinion. They are going to ride this horse (America) into the ground. Facts and common sense are two attributes union members lack. Gov Walker is right on target with his proposals. For the good of the country (everybody) I hope the tea party mentality wins.
Union supporters rallied in Denver February 22 to support unions under political pressure in Wisconsin; Tea Party groups counter-protested at the bottom of the capitol steps. I conducted a number of interviews from both sides.
One dominant theme from the union side was that taxes should be higher, especially on the rich:
In the next video, union supporters call their opponents fascists and “tea baggers,” all in the spirit of the “new civility,” of course:
Next, union supporters chant “USA!” — to a backdrop of the Soviet hammer and sickle and the Mexican flag:
The next video offers a sense of the competing signs and chants.
I also captured some substantive interviews with both sides that I will release in independent posts over the coming days, so check back.
mtnrunner2 commented February 24, 2011 at 8:20 PM
Thanks Ari, for going there first-hand and posting these.
I think it’s possible to see the types of ideas advocated by each side and draw a proper conclusion about each side, yet there is still a rather huge elephant in the room: EXACTLY what powers are at stake, and are those powers JUST?
The Wisconsin conflict is presented by most media largely in the terms defined by the major political players, as “unions exploiting government” vs. “unions leveling the playing field on behalf of teachers”. But those positions are only derivatives of more fundamental premises.
Based on what I know of labor law, the NLRA coerces employers into sitting down with unions whether they choose to or not, for “arbitration” during a stalemate. This is one of the things that give unions an unjust upper hand beyond the simple negotiating power of a group. So I wonder in this case: what exactly are the rights at issue, and how do they differ from simply getting together as a group and negotiating with the government?
I also wonder: are public job unions significantly different from private job unions concerning the type of rights they ought to have? I wouldn’t think so.
If you know of any such analysis, I’d be interested to read it.
Paige commented February 24, 2011 at 9:43 PM
mtnrunner… it is not that companies are coerced to sit with unions in an arbitration during a stalemate it is that the contract the company agreed upon with the union states that arbitration will be used in the case of a stalemate when negotiating.
In any case arbitration is not used to negotiate a contract.. simply the company puts an offer on the table and the members of that union vote to accept to deny the offer. If the offer is denied the company goes back to the bargaining table.
I think the biggest misconception here is that labor unions do not have the upper hand, and they haven’t for a long time.. This is not the 1950’s when 1/4 people were part of a labor union… statistics say now only 1/10 are union members. Further, in Colorado, union members only make up 7% of the work force.
People need to stop thinking of unions as this overbearing force. The union would be nothing without members… members are the working people who pay dues to gain representation against the corporation against otherwise they would be helpless. A union is not run on millions of dollars,private jets, political power, or a CEO… it is simply run by the working people… the little poeple, the ones who teach your kids, patrol your roads, give you electricity, pipe your buildings, and bag your groceries… not trying to buy an opinion, just trying to voice one.
mtnrunner2 commented February 25, 2011 at 10:28 AM
Paige – The issue I am raising has nothing to do with who runs unions, or how many members they have, but with the exact power that public unions have in Wisconsin, and whether it is just or not.
The fact of the matter is that the NRLA outlaws entirely legitimate activities on the part of the employer. For example, the following is forbidden by law: “to refuse to bargain collectively with the representatives of his employees” – Section 8(a)(5). This forces companies to the table regardless of what they choose to do. It overrides their judgment by force of law, which most certainly gives unions the upper hand. So, it is not merely a misconception.
Just because someone (not necessarily you, but anyone) claims this benefits “the people” does not mean it’s true, or that it is morally right.
mtnrunner2 commented February 25, 2011 at 10:42 AM
Paige commented February 25, 2011 at 11:03 AM
The glory of the union is that the power rests in the hands of those employed. The national labor relations act was created to protect employees and to encourage collective bargaining. The NLRB is who as you put it coerces companies to collectively bargain whether they choose to do so or not.
This system is no different than any average person going to their boss and asking for a raise, increased benefits or increased pensions, except that its done on a much larger scale. Its simple for a large company to ignore the needs and requests of one employee, where as it is not so easy to ignore the needs and requests of your entire staff. The union is just a voice, a group of people united together so they can get recognized.
The NLRB can coerce the company to sit down and collectively bargain but they cannot dictate what they company puts down as an offer to its employees.
As for the issue is Wisconsin specifically, those public employees represented by unions have already said they are willing to take the cuts in their pension and their health plans, so this isn’t about the money. If it were, the govornor would have been happy with the concession. All the poeple want is to keep their right to collectively bargain, which Gov. Walker refuses to allow. This is not about fixing the deficit, this is about union busting.
Maybe on fixing the deficit the politicians, such as Gov. Walker should offer to take a cut in his pay, and health plan… i think that would get more people’s attention.
I’ve decided to start issuing periodic “Whiner of the Day” awards. The first goes to Kim Pleasant, who shouted down Governor Bill Ritter yesterday. (I don’t get many chances to defend Bill Ritter.)
Jessica Fender and Allison Sherry of the Denver Post recount the story:
About two dozen members of the United Food and Commercial Workers Local 7 crashed the Capitol gathering, standing watch in the back and shouting challenges to Ritter regarding his recent veto of House Bill 1170.
The bill would have made it easier for them to receive unemployment benefits if grocery-chain management locked them out of their work sites and potentially improved their standing in ongoing contract negotiations.
Ritter spoke to the protesters from the podium, saying “certainly my heart is with the people who have to put food on the table,” but the state should not interfere with active labor disputes.
But his answers didn’t satisfy Commerce City resident and Safe way worker Kim Pleasant, who shouted, “That is a lie! That is a lie!”
Ritter’s veto of 1170 is one of the few things he’s done right. If you’re stupid enough to go on strike in the middle of a recession, when nearly one in ten people have lost their jobs and many more have taken pay cuts, the last thing you deserve is a tax subsidy for your stupidity. Just try to go on strike and see how much public sympathy you get.
The simple fact is that the typical job at the grocery store requires no special skills, training, or education. If you want a higher-paying job, then go back to school and work someplace else. But don’t shout down the governor for protecting taxpayers (for once). At least wait till Ritter lies before calling him a liar.
So, Kim Pleasant, I’m pleased to name you the recipient of the first “Whiner of the Day” award. Please e-mail me your mailing address and I’ll be happy to send you your award.
But don’t take this as any indication that I’m pleased with Ritter’s performance. While he did the right thing this one time, the general theme of his administration has been, “Screw the Taxpayer.” Ritter has helped increase taxes or fees on vehicles, hospital visits, properties, sales, and so on.
As Fender and Sherry write, at the same event Ritter signed bills interfering in mortgages and offering more tax dollars for people not to work. Because, you know, during a recession we want to punish people who are working in order to incentivize others not to work.
I can hardly believe the incompetent and anti-freedom Republican Party left me no choice other than to vote for this sham of a governor.