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Kansas minimum wage

A group in Kansas is pressing for raising the state minimum wage. Will raising it help or harm low-wage earners? And are the policy goals — taken in their entirety — of the groups pressing for a higher minimum wage in the best interest of workers?

The great appeal of a higher minimum wage mandated by an act of the legislature is that it seems like a wonderfully magical way to increase the wellbeing of low-wage workers. Those who were earning less than the new lawful wage and keep their jobs after the increase are happy. They are grateful to the lawmakers, labor leaders, newspaper editorialists, and others who pleaded for the higher minimum wage. News stories will report their good fortune.

That’s the visible effect of raising the minimum wage. But to understand the entire issue, we must look for the unseen effects.

The not-so-visible effect of the higher wage law is that demand for labor will be reduced. Those workers whose productivity, as measured by the give and take of supply and demand, lies below the new lawful wage rate are in danger of losing their jobs. The minimum wage law says if you hire someone you must pay them a certain amount. The law can’t compel you to hire someone, nor can it compel employers to keep workers on the payroll.

The difficulty is that people with lose their jobs in dribs and drabs. A few workers here; a few there. They may not know who is to blame. Newspaper and television reporters will not seek these people, as they are largely invisible, especially so in the case of the people who are not hired because of the higher wage law.

If we are truly concerned about the plight of low-wage workers we can face some harsh realities and deal with them openly. The simple fact is that some people are not able to produce output that our economy values very much. They are not very productive. Passing a law that requires employers to pay them more doesn’t change the fact that their productivity is low. But there are ways to increase productivity.

One way to increase workers’ productivity is through education. Unfortunately, there is ample evidence that our public education system is failing badly.

Capital — another way to increase wages — may be a dirty word to some. But as the economist Walter E. Williams says, ask yourself this question: who earns the higher wage: a man digging a ditch with a shovel, or a man digging a ditch using a power backhoe? The difference between the two is that the man with the backhoe is more productive. That productivity is provided by capital — the savings that someone accumulated (instead of spending on immediate consumption or taxes) and invested in a piece of equipment that increased the output of workers and our economy.

Education and capital accumulation are the two best ways to increase the productivity and the wages of workers. Ironically, the people who are most vocal about raising wages through legislative fiat are also usually opposed to meaningful education reform and school choice, insisting on more resources being poured into the present system. They also usually support higher taxes on both individuals and business, which makes it harder to accumulate capital. These organizations should examine the effects of the policies they promote, as they are not in alignment with their stated goals.

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8 Comments

  1. James February 13, 2009

    It has been my experience that it isn’t necessarily a trickle of job losses but of businesses simply closing up shop. Most businesses that use low wage workers need a certain number of them to do a job. If they would be able to hire just one worker versus two, even at a higher wage, they would have done so.

    For example, in the case of the restaurant industry (although the chains don’t have this problem like the mom-and-pop stores), there is just a minimum number of workers needed and giving someone a raise isn’t going to allow them to place and fill orders any quicker than is already being done.

    So, while some places will simply absorb the additional labor costs, others who were perhaps already on the financial edge or considering closing up for other reasons will simply hit the close button and everyone is out of a job.

  2. John Todd February 15, 2009

    If one were to follow the pro-minimum wage argument to its logical conclusion, one would conclude that it is government’s responsibility to determine the proper price for food, shelter, clothing, and other goods and services. In other words, an economic system in which people must submit to state control of property, wages, and the distribution of wealth; that is, socialism.

    The top reason given for raising the minimum wage, and for that matter having one, is that a minimum wage assists the working poor. But while it is an appealing idea that everyone should earn a “decent” wage, it is misguided to think that increasing wages is as easy as passing a law. If it were, then why not pass a minimum wage law requiring an hourly wage of $100 or $1,000 dollars, and then, everyone would be rich.

    In his book, “How Capitalism Saved America” Thomas DiLorenzo suggests, “It doesn’t make economic sense for a fast-food restaurant to pay a sixteen-year-old more than, say, $5 an hour if he or she doesn’t produce at least $5 an hour in profits for the restaurant. If the minimum-wage law is set at $6.00 per hour, then the restaurant would lose $1 for every hour the teenager is employed. Since restaurants are not in business to lose money, they will not employ such teenagers.” The net result of the minimum-wage law in this scenario is unemployment and the missed opportunity for the teen to gain valuable on-the-job work experience and the skills needed for a better paying job.

    Nobel laureate economist Friedrich Hayek has written, “Socialism has never and nowhere been…a working-class movement.” and he suggests that anticapitalist ideas begin with the “intellectual” class that deals in what he refers to as “professional secondhand dealers in ideas”. DeLirenzo concludes that, “Despite the remarkable success of capitalism in alleviating poverty, raising living standards, expanding economic opportunity, and generally enabling scores of millions to live longer, healthier, and more peaceful lives, a large segment of the intellectual class has long been critical of it. Many intellectuals still advocate socialism even though it is well known that socialism has been economic poison everywhere it has been implemented.”

    Does anyone believe that governments are truly good at setting our wages and the prices we pay for goods and services? I believe people who cherish liberty are right to oppose governments attempt to infringe on their freedom to choose what they are willing to work for and what their employers are willing to pay. I believe freedom works!

  3. Pat O'Connor March 13, 2009

    Everyone is trying for an increase in their living standard. What do business owners do when their costs go up? They pass the increase along to consumers. Why not let the poor have more money? The costs will simply be passed to society at large. 20,000 Kansans whose wage is raised a total of $184.00 a week=more taxes paid and a slight raise in prices. Would you work for $2.65 an hour? The proposed raise in minimum wage would not be $7.25 for restaurant workers. This is a good business move that will reflect favorably on the state.

  4. Matt June 24, 2009

    $2.65…. That’s insane! I would laugh at someone if they told me they were going to pay me that…

  5. Chuck July 1, 2009

    I would think a small increase in the minimum wage would be a lot easier for a business to absorb and manage than a 40% decline in the value of the American dollar between 2002 and 2008.

  6. teresa thompson November 12, 2010

    I don’t understand how this state gets away with business paying waitresses $2.13 an hour. Not everyone tips. Where I come from (Oregon)I received minium wage (7.25 back then) I received a decent paycheck & tips (to insure proper service)We had to claim our tips just like we do here. I just don;t understand how this state can get away with the lower mininum wage for waitress. My paycheck for 2 weeks was 98.00. You can’t pay your rent with that & not everyone knows that waitresses make 2.13 an hour & not everyone tips. I work my but off & I know I am a very good waitress but it makes me sick that we get payed so little. look up wages for oregon & you would understand how I feel.

  7. Anonymous Mike November 12, 2010

    Hi

    Raising the Minimum wage will simply move the value of costs and services up. My father said that most laborers received $0.25 an hour during the depression. The blue plate special at the diner was $0.20, and coffee was $0.05 or a quarter total. The current minimum wage is roughly $7.25, check the cost (with tax) of a good sized McDonald’s lunch…

    I’m obviously against messing with the current value of the minimum wage, or for that matter having a minimum wage. There are other forces at work either allowing you to live well, or not to. One thing is that the average franchise fast food worker doesn’t seem to be around long enough to bother with name recognition. If you work at McDonald’s, THEY believe that they can replace you in say 20 minutes. Unfortunately, THEIR perception is what counts.

    We could raise the minimum wage to $20.00 an hour, then a Whopper with Medium Fries and a Medium Drink would cost $20.00. I’m sure you’ll all feel better now right?

    Mike?

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