Many people consider it a no-brainer that a higher minimum wage is a boon to all those at the lower end of economic productivity. But is this truly the case? If all raises are a gain, why not raise the minimum wage to higher than even a CEO; splendor and prosperity to all! Well, no, of course not. We all know that wouldn’t work. What, then, can we determine is a reasonable wage for these workers? Indeed, how do we even create a number?
A currency at its heart is merely a representation of labor. Double the money of everyone in America, and it won’t give anyone any more abilities than they had before. Prices will merely rise to match. The wealth of a nation should not be measured by the numbers of currency, but rather by the capabilities of an average worker’s salary. Inflation has caused prices to rise rapidly throughout its history, but those who brag about what prices used to be or those who feel entitled by what they used to accomplish on a salary scorned at today forget that these numbers rise together. Inflation is still a hidden tax by devaluation of savings and the initial off-balance from the source, but in the flow of exchange, more currency makes little difference once the prices and wages rise to reflect it. The numbers of wages and pricing should not then be compared to the past, but rather to each other. The “reasonable wage” for a job is not just a number, but a ratio to the others.
How can we define a job’s value? Maybe there are those that would like to take a list of all the jobs and arrange them in order of priority. Beyond the limitations of even Herculean effort, this would also result in an imbalance. There are many important jobs that are relatively easy to perform. If wages were determined only by the importance of the job’s completion, the job market would be flooded with cashiers and lifeguards. Monetary incentive is extremely powerful. With all “important” jobs getting paid extremely well, the easier important jobs will be overfilled, and the more difficult will simply be left behind. To incentivize more people to take these other jobs, those wages would need to rise again.
This is simply the concept of supply and demand: there are two opposing forces that meet in the middle. No worker wants to accept less money than he can get, but no employer wants to give more money than he must. The employer must pay enough money to be attractive to enough people, but those people must accept little enough that they aren’t put aside in favor of those who do accept it. If a hospital offers its nurses the same wages or even a little better than the store offers its cashiers, this would result in relatively few nurses. The many prerequisites and the more difficult work and hours would be too great for most to offset their sense of good and accomplishment. For a hospital to continue to perform, it must offer wages high enough to incentivize those who would go for an easier job. This, then, is the natural classifier. This is how wages can be determined.
Set a rate, then, and keep raising until the incentive has reached enough people to fill the position. To start with the more important jobs, if we already start high, we can accomplish much better wages. Working down the line, we create a new structure. And yet, now what has happened? Those easier jobs took less of a raise to reach that incentive than the more difficult ones. The more difficult but less important jobs could need a much higher incentive, even higher than those jobs that we may consider more important. These wages have already corrected themselves. Although our more important jobs have now reached a greater wage, so has everything else. It matters little what the numbers truly are; as established earlier, the important distinction is the comparison to the others. A McDonalds cook is still paid a third of an accountant. A cashier still works for a little over an hour to afford Thanksgiving turkey.
This hierarchy of jobs exists from a natural process. Without government intervention, the free market of supply and demand can naturally determine the value of goods and services. To alter the natural process creates again an imbalance. The values are proportional to each other. Give our cashiers a 5% raise, and now Thanksgiving turkey is also 5% more expensive. Rising prices means all workers require a higher wage to offset it. Their employers now need to make more money to pay their workers, and they charge more, and so it ripples. The proportions remain the same. Some things, however, would avoid this effect. If Netflix employees had some reason to require double their wages, and the price went to $20 a month to offset it, many subscribers would find a new way to entertain themselves. Without the ability to lower their prices and still make a profit, Netflix has now gone out of business. Those employees are now out of a job.
These unemployed workers are now looking for a job. In a free market, I can go to my local store and tell them I’ll do the same job for less than their current worker. In one case, the other worker is incentivized to work harder and accomplish more to justify the higher wage. Alternatively, I now have the job; my new employer can now afford to lower prices and undercut his competition. Of course, a single worker makes little difference, but as with so many other things, a little thing multiplied is a big deal. In another turn of events, I don’t take someone else’s job. I see a spot I can fill. I’d like to return customer’s carts to the stations for them. The store owner refuses. $15 an hour is not justified by this meager service. But no, I can offer less. Well, in a free market, that is. These three scenarios offer either greater value or a lower price to the consumer. In a free market, the consumer has gained and I have gained. With the minimum wage, I’m still without a job.
Those people who are most in favor of a higher minimum wage are likely also in the same circles of those who bemoan widespread unemployment. Yet they go hand in hand. A higher minimum wage can either remove jobs or hike the cost of living that warranted the raise in the first place. The minimum wage does not help those at the bottom of the chain; it’s a devastation to them, and a small help to those who are almost at the bottom. The greatest efficiency of conversion from productivity to living is achieved in a market untethered by the over-zealous constraints of emotion.