It is a conspiracy. Rich people (apparently that means…according to our president and liberal/progressive criteria…anyone not earning minimum wage) want the poor people (anyone earning minimum wage) to just die off…disappear from the face of the earth, or at best just hang around to mow the lawn, wash cars and serve up hamburgers…Right?

Congress will soon take up the issue of the minimum wage. President Obama talked about it in his most recent State of the Union address. Democrats rave over it. Republicans and others who oppose it are painted as hateful misers who want to give tax breaks to multi-millionaires.

So, you ask, this blog is supposed to be about Liberty and its relationship to personal lives, what does that have to do with the minimum wage? Bear with me. We will get to that.

Sounds good, doesn’t it? Everyone should be paid enough to support themselves and a family, no matter what job they have, as long as they have a job. My answer to that proposition is…bull…uh, dung?

There is a market value to everything, including the value of work performed. That value is measured by wages paid. Wages paid are a function of production and profitability. The more production and greater the profitability, the higher the wages.

I recently heard Bill O’Reilly, (you know, the guy who says the spin stops here…’cause he’s looking out for you) say that Republicans in Congress should just pass a $10.00 minimum wage. Every business can afford it, he says, and not doing it is just wrong.

I’ve said this before, but for those who don’t know, I am a liberty-minded independent. I hate labels, but do lean more often than not towards constitutional conservatives and libertarians because I find that they are much less likely to encroach on personal liberties than liberal progressives who have a centralized, collectively controlled, end-justifies-the-means world view.

Having said that and knowing that I am about to offend O’Reilly’s dedicated, sometimes robotic followers, I will just say to Bill…Are you out of your freaking mind? Stop your “bloviating”, as you so often caution your viewers, and get a clue, or at least understand the issue.

The point of mentioning Mr. O’Reilly is to emphasize that this issue is a political one, as O’Reilly, does correctly point out. I can almost hear the Republican stampede, thundering to the podium to speak about their concern for the “little people”, you know…you and me.

They will cave, come to some political deal on minimum wage and pass a federal increase. It is inevitable. Why? Because we continue to elect representatives who are not actually leaders. Most are simply vote panderers. But that’s another topic.

So for Bill and the Republicans that will be drawn to the dark side and will find it politically expedient to raise the minimum wage, I ask this question. How much is high enough?

Min Wage -Wallop

Can people really live on the proposed $10.10 an hour. That’s what they say…they want a livable minimum wage. $10.10 an hour translates into an annual fulltime income of $21,000 a year.

That is not much of a livable wage. Hell yeah, we all want more money, so let’s raise it to $35.00 an hour. That equals an annual salary of $72,800. Now we’re getting somewhere.

How about it folks? Raise the minimum wage to $35.00 per hour. Get on your phone to your congressperson today.

I speak tongue in cheek, of course. The concept of a minimum wage is ridiculous. Like everything else, wages are market driven. They are a function of employee production/profit, operation costs, and return to the investors who made the business possible.

And yes, profit is good. If you are from the liberal/progressive side you may consider profit to be evil, the outward demonstration of “corporate” greed. Well, here’s a little tidbit of information for you.

Corporations are people. Most are not wealthy. They are average folks with IRAs and 401Ks and savings accounts who have invested their hard earned money in the corporation and hope for a return so that they can grow their nest egg, live a better life, provide for their families, retire and so on.

I once worked for a corporation whose CEO made the point that we, the workers in the company, had a sacred obligation to return value to the shareholders who had put their money at risk for us to conduct business and collect our paychecks. That lesson has stayed with me.

Yes, but you care about the poor, you say. You hate that they earn a minimum wage of just $7.25 an hour. $10.10 may not be much but it is the least we can do.

Believe it or not, I care about the poor too. The greatest weapon against poverty is gainful employment…work. Put people to work and poverty diminishes. That fact has been demonstrated throughout human history. The minimum wage, despite numerous increases in the 75 years since Franklin Roosevelt had it passed through Congress, has done virtually nothing to take people out of poverty. Hard work has, and always will.

Here’s why.

Let’s say we take Mr. O’Reilly’s mandate to raise the minimum wage across the board to President Obama’s stated $10.10 an hour. That represents a 40% increase in wages to minimum wage earners. Oh, by the way…since you have just increased their wages, you will now have to increase the wages of every employee above them in the salary scale. You can’t have workers who are paid more because of experience and years of service making the same wage as the newly hired, unskilled person who just walked through the door.

By the way, along with wages, payroll taxes and insurance costs increase. So that actual cost of increasing wages 40% is actually 50-60%.

Now the business, as mentioned above, is really just people…investors like you and me. They are happy to keep the business going as long as they are able to receive some return from it…profit…the reason for having a business. To keep it going, they will have to make some changes. There are only a couple of ways to do this and remain profitable.

  • Increase the price of its services or products to offset the increase in wage, tax and insurance costs (not just for the minimum wage earners but for everyone who received a wage increase up the employment ladder)
  • Reduce the number of employees to only the most highly skilled and productive, in order to maximize the benefit each employee brings to the business.

Wage Increase 2- Wilson

So you increase the price of the product, the widget you sell to your customers, and guess what? You sell fewer widgets.

It’s a fact of life that everyone understands, or should. When things cost more, you buy less, which means the producer sells less.

Okay, so let’s go the other route. We will reduce staff, keep only the most experienced, efficient workers, and expect much more production from them. Let’s get the biggest bang for our buck.

Result? Entry level workers, learning how to work, provide for themselves and take pride in their work are eliminated from the workforce. Older employees, supplementing their income are eliminated. Women supplementing their income are eliminated. Anyone working a part time job to help improve their family’s quality of life are eliminated.

Part time job, you say in horror. The poor people working part time, extra jobs to get ahead. Oh, the horror of it all! How insensitive and uncaring can we be?

I’ll say it this time…Bullshit.

I worked extra part-time jobs for years…to put braces on my kids’ teeth, take a vacation, buy furniture, buy a house, put money in the bank. I may not know much, but I know how to work. Oh yes, and I started it all with a job that paid the current minimum wage of the day. I learned how to work and was happy to be paid for my efforts.

Wages, are not an entitlement for being alive. They are the fair exchange of your labor for money.

How much is fair? Whatever the market is willing to bear. The more productive an employee is, the more profitable the business is, the more the employee is worth and the higher the employee’s wages.

So, want to be wealthy? Want to earn more? Work hard, be productive. There is nothing wrong with hard work. Hard work, more than anything else, leads to wealth and financial security.

Here are a couple of truths about the minimum wage.

1- The minimum wage has never been a living wage for average people. It was never intended to be.

2- The minimum wage is a starting point, not an end point. If your goal is to have a minimum wage job and support a family then you might want to consider raising your life goals…or have a really small family.

Some interesting Statistics about the minimum wage in the United States:

Minwage Stats

Pretty cool, huh? What’s it mean?

  • 18.6% of minimum wage earners come from households that would be considered within the federal government’s definition of poverty…BUT
  • 81% come from households above that income level…AND
  • 48.9% come from households where the income is from $40,000 a year to above $100,000

So what does that mean? It means that most people earning a minimum wage are not living in poverty, but are working in entry-level positions, learning a skill, learning how to work, supplementing their income to do better. Yes, working part-time jobs, in addition to their full-time employment. Good for them!

So what is the minimum wage all about? It is a farce, a political tool. African American economist  and fellow at Stanford University’s, Hoover Institution, Thomas Sowell (I Mention his race only to avoid the implication that this is a black/white issue as Al Sharpton and the president would like us to believe) summed it up succinctly:

Min Wage Zero - Sowell

That’s right…zero…a big fat goose egg. You do nothing, you get paid nothing. that’s the baseline, the starting point. Simple as that. You do something of value, you get paid. The more productive your work, the more valuable you are, the more you get paid. It is not a complicated concept.

But it is a weighty political tool that has been used by politicians from both parties for generations now. It is used so much, that most Americans believe that there is a legitimate role for the minimum wage. They accept it as a part of life, one of the “good things” that government does for us.

So, how does it impact your personal Liberty? In two words, Government Control.

The minimum wage is a means for the government and politicians to pander to voters, irrespective of party allegiance or political agenda. everyone wants to be told that they are worth more, or that there is some arbitrary wage line the government can set that makes sense…that is fair to all. Really? Well, as I stated above, since you are going around raising wages, why not just raise them to a level that everyone can have what everyone else has, no matter the value or productivity they bring to their work.

Truth is, the politicians know that raising the wage in such a dramatic way, would effectively crush business and send the country deep into economic depression. But they are very happy to appease the mass of voters who feel underprivileged, or those who want to feel that they are doing something good for others, so they raise it just enough to say…Hey, look what we did. We care about you. Aren’t we grand people. Won’t you keep us in office?

They know full well that raising the minimum wage to $10.10 an hour will lift no one from poverty, will cost entry level and other marginal employees their jobs and will result in higher cost of goods, that the rest of us will pay. In short, they want your vote, they want to remain in office…and they want control.

When the government can dictate to business (remember, businesses, corporations, are just people) the wages they must pay, the healthcare they must provide, the manner in which they may conduct business, individual Liberty and economic opportunity are lost. Anyone who thinks government can do things better than individuals should go stand in line at the post office, or the DMV, or get on a phone call on hold with the Social Security Administration and be told that your call will be answered in six hours and then have the call dropped when they finally answer. Yes, it really happened.

People, when we give control to the government over our own lives, we are diminished as human beings. Reliance on a “benevolent” government to provide for our needs is tantamount to acquiescing to a form of bondage…slavery. The more we rely on government, the more we need it, the more we are controlled by it…they like it that way.

There is a market for everything. In a free society, the principle of the free market drives the liberty we experience in our daily lives. The absence of a free market, in anything, including wages, ultimately deprives us of freedom.

I have no expectation that Congress will show leadership and remove the minimum wage. They would be removing themselves from their publicly funded teat if they did. But free citizens should understand the implications of the constant chatter about minimum wages. It is not about helping others. It is about controlling them and ensuring their votes in the process.

Free Market Freedom - Friedman