Do Minimum Wage Laws Help Either the Poor or the Overall Economy?

from Mar 02, 2013 Category: Articles

No, on both counts. Our labor is a service. Its value is determined neither by law nor by wish but by the market. All of us, I suspect, would love to be paid $1,000 an hour. Given that all of us would want this, why don’t we pass a law stating no one could be paid less than $1,000 an hour? Were we to do so, I suspect that some athletes, some rock stars and perhaps a few actors would still be employed. The rest of us, however, would be out of work. There is no employer out there willing to pay me that much. (If you disagree, by all means, let me know who they are.)

I would, of course, also have to let go my butcher, my baker and my candlestick maker. As much as I like them, and value their services, I would rather keep $1000 in my pocket than hire any of them for even an hour. This, is it not, is pretty easy to see? The question is, why do we think dropping the number down to $9 an hour would make any difference to the principle? The concepts do not change simply by plugging in different numbers. I’m grateful my employers value my labor more than $9 an hour. That is, they gladly give up more than $9 in exchange for an hour of my labor.

But what if they didn’t? Anyone whose services are not valued by any employer at a rate of $9 an hour will be out of work. Any job not deemed important enough to pay $9 an hour to have it done will not be done. This, of course, hurts those on the lowest economic rung the hardest. I might have to do a job myself, or leave it undone if I don’t want to trade $9 an hour to have it done. But the fellow who would love to make $8 an hour is out of work and out of luck, all because the federal government thinks it can suspend the laws of economics.

Do people really think in these terms, valuing certain jobs at certain rates? Yes, we, in a manner of speaking do. We all make decisions whether to buy this or that. And this or that can and often does include the labor of others. As I write I am on an airplane. When I got to the airport I could have paid a porter to take by bags at the curb. I didn’t, but schlepped them to the ticket counter myself. Why? Because I would rather carry my own bags and the few dollars in my pocket than to give someone else my bags and my dollars. I don’t know how much it costs to have a porter take your bags. I don’t know exactly how much I’d be willing to pay. I do know, however, that I am not willing to pay what it cost, or I would have hired one. I’ve never stopped to figure it out because I know it’s not even a close call.

Economics on the small scale matches economics on the large scale. That is, my decision not to hire the porter is the same kind of decision we all make, the same kind of decision countless employees will make when the federal government declares it a crime to trade labor for money at $8.99 an hour. Minimum wage laws hurt those they claim to help, and the rest of us too. The only thing they help is politicians who win votes from the economically illiterate with such dangerous demagoguery. This issue is so simple, so basic, I cannot help but conclude that those who propose and vote for such laws do so knowing they are hurting the poor. They are not that stupid. They may be, however, that heartless.


Until the end of March, watch R.C. Sproul Jr’s new documentary, Economics Has Consequences, online for free.


Do Minimum Wage Laws Help Either the Poor or the Overall Economy? was originally published at RCSproulJr.com