The Minimum Wage

I'm in favor of raising the minimum wage, at least to the point where someone working 40 hours a week can raise a family an be above the poverty line. It's one of those situations where the free market advocates will say that we should not even have a minimum wage, yet we can easily see that having millions of workers working full-time and still needing food stamps is dysfunctional, but hey, free markets, yay!

As I wrote earlier this month, free markets have their limits. Let's consider a case that has no direct connection to minimum wages. Put two tire factories side by side. They both make tires that are the same quality; however, one dumps chemicals into the water and puts smoke into the air, and the other runs a reasonably clean "green" plant that produces much less pollution. The "dirty" factory sells tires for $50 each, and the cleaner factory sells them for $60 each. The residents in the area generally agree that they would rather pay $60 for their tires and have a clean factory than pay $50 and have a lot of pollution.

So what tire do they choose? Well, in reality, a lot of them will choose the cheaper tires. Why? Because they know that their individual decision won't shut down the dirtier factory, and that if they choose the more expensive tires, their neighbors can undermine their good environmental intentions by buying cheap tires. They just don't have the power individually to change the situation.

What to do?  The answer is, you write some laws (otherwise known in Republican-speak as burdensome government regulations) that say the factories have to minimize their pollution. In other words, the people collectively make a decision as consumers that they cannot practically make on an individual basis.

Companies like McDonald's and Walmart make billions of dollars, and they have executives and stockholders who are making tons of money, while their workers get paid so little that they have trouble affording food and housing. Yet nearly every worker for those companies is essential to the process; you can't sell a billions burgers unless someone cooks them, and someone runs the cash register. You have to wonder if the free market is just giving out the wrong answer, if the contributions of the lowest-level employees to these multi-billion-dollar profit machines are so paltry that they don't deserve to be paid a living wage, or if, maybe, they are just getting screwed, and someone else is being overly-rewarded.

So people get together and decide that, if people are going to work, they should be paid enough that they can eat. If companies cannot afford a decent wage, their business model is broken.

The free market true believers will tell you that this is interference in the free market, and it will hurt the economy, but I think we have to look at it differently.  It seems to me that people getting together and making decisions collectively, as a society, that they cannot reasonably enforce as individuals, has to be considered a part of the free market. It just doesn't make any sense that people should not get together and agree on some rules to put restraints on enterprises simply because those restraints cannot logically be instituted through individual transactions. Certain limits have to be enforced by society as a whole, by government, because it's the only means to enforce them.

The idea that all restrictions on business are bad just handcuffs us as all, keeping us from trying to make things better. I think someone is trying to fool us with their free market garbage.  Raise the minimum wage, give the workers a bigger piece of the economic pie.  Americans who do the work to make other Americans rich should not have to live in poverty.