Minimum Wage Hypocrisy

This post is a response to an opinion piece by Michael Coren that was published in the Toronto Star. I have kept the text of the original article in black and added my comments in italics.
The hypocrisy of opposing a minimum wage hike
One key rallying cry is that the wage hike will kill profits and lead to job losses, but where is the indignation when bonuses are added to already astronomical executive salaries — we never hear that this will lead to inflation or the need to reduce the number of bosses.
The difference between the two scenarios is that one situation is the result of government regulation (taking away choice), the other is the result of the choices of private actors. We can still criticize the compensation policies of these corporations, but to do so we should be able to demonstrate that value these executives produce is less than their compensation, something difficult for someone who isn’t privy to the inner workings of these corporations to do.
The Ontario government is committed to increasing the minimum wage to $15 an hour by 2019. It’s still hardly a livable income but at long last something is being done to remedy the insultingly low current level of a little over $11.
A wage that Mr. Coren finds “insultingly low” isn’t necessarily viewed the same way by someone whose employment options are more limited than his, such as a high school student, an unskilled immigrant, or someone who is partially disabled.
Of course it’s partly a political decision intent on winning votes, and it may well be argued that consultations have been inadequate and the jump relatively sudden. But none of this justifies the hysteria, anger, and seemingly constant barrage from critics convinced that Armageddon is just around the corner.
Vote buying must be a major motivator for those legislators who want to raise the minimum wage, but I agree that hysteria isn’t called for and that the aggregate effects probably will not be disastrous. However as I’ll get to later, I’m most concerned with how they affect particular individuals—something that tends to get lost if one only looks at averages.
The economic arguments are various and often at odds, and while there are competing precedents the consensus is that the economy will be boosted and not blasted by the change. More to the point of course, it will give countless people more of a chance to pay the rent and feed themselves. Any society that regards itself as civilized should surely allow its lowest paid citizens at least a modicum of hope and dignity.
I’m not sure Mr. Coren has made much effort to understand the economic arguments. Wage controls amount to fixing the price of labour. There was a time when many economists thought that price controls were a good idea. However the experiments with them in the interwar period were not a success, and it has been argued that they helped prolong the great depression.
What about the claim that the economy will be boosted? It’s safe to assume what is meant here is the national economy as a whole grows or becomes wealthier. To answer this, we first need to understand how wealth is created; here are a few examples: a deposit of ore is discovered and mined, an engineering process is devised that allows the ore to be extracted more efficiently, a train engine is manufactured that allows the ore to be transported using less fuel, the metal is fashioned into a fence that keeps the deer from eating someone’s garden. In all of these examples, the value of the manufactured output is worth more than the sum of the inputs, and both parties of each transaction consider themselves better off for having made the deal. In other words the economic exchanges are win-win.
The same can’t be said of the following exchange: A restauranteur hires a bus boy at $11 an hour. The next month, the provincial government raises the minimum wage to $15 per hour. The restauranteur’s expenses have increased, but there is no additional wealth created (no increase in sales). If the restauranteur considers the value of the bus boy’s work to be below $15 per hour, then the transaction has become win-lose: the bus boy’s gain is the owner’s loss. But this isn’t sustainable. If the owner isn’t able to boost sales or cut other cuts to cover the increased wage cost, she may just decide to lay off the bus boy and clean the tables herself.
It’s possible that economists who support the minimum wage do so mainly because they believe it will affect a wealth transfer from the rich to the poor. But if that’s their goal, why not advocate a more direct method like raising taxes on high incomes and reducing them on low incomes?
Small business owners are worried that they may have to fire people and that’s not a fear that should be dismissed. What should be dismissed, however, are the outlandish and offensive claims being made by corporations, who in fact hire the majority of minimum wage employees.
Their line seems to be that if governments increase the minimum wage their vast profits will slightly diminish so as a response they will fire people, such as cashiers. And if anyone believes that being a cashier is easy they certainly have never done it. Nor will a minimum-wage increase make a devastating dent on corporate profits. Do we seriously believe that investors and owners will suddenly be going hungry or — God forbid — have to send their children out to work at minimum wage jobs?
Nobody is saying that minimum wage jobs, such as working the cash register, are easy. Nor is anyone saying that all high paying jobs are difficult. What we’re saying is that real wages, like other prices, are a function of supply and demand. Mr. Coren is correct that a minimum wage hike will not destroy the profits of large corporations. They are in a much better position than their small business competitors to adapt to such changes by automating low-skill jobs, outsourcing the work, or covering the loss with profits from unaffected sectors. In fact, large corporations are one of the main beneficiaries of minimum wage hikes because they cripple their smaller competitors.
My wife is a minimum wage worker. She has an MA, is an experienced educator, but after the children left home she found it difficult to find work. Frankly, we need the money. We’ve done OK financially and are much luckier than some but neither of us came from wealthy families. She’s often at work before 5 a.m. and on her feet the whole time. Some of her colleagues are young but not all — only around 18 per cent of minimum wage workers in Ontario are teenagers and up to a third of people who use food banks are working adults.
My wife is a minimum wage worker too. She made a good salary as white-collar worker in Japan before coming to Canada, but like many immigrants she had to start at the bottom and work her way up. But we don’t blame the government for her low wage, or the owners of the small restaurant where she works. If we want to point the finger for our struggle to make ends meet in a very expensive city like Vancouver, there are other places we could look. For instance, we could have stayed in suburban Tokyo, where our cost of living was lower.
Reality is a swift and harsh teacher. Those on minimum wage often have partners earning the same, are frequently educated but perhaps not born in Canada, simply can’t find other jobs, have been laid off in early middle age without a pension, or have not had the opportunities enjoyed by others.
Yes life is harsh and not everyone is lucky. But raising the minimum doesn’t help those who are worst off. In fact, a recent study on Seattle’s minimum wage hike has shown that it resulted in fewer hours for minimum wage workers, translating to an average of $125 less per month in take-home pay.
But there’s none so condemning of them and knowledgeable about their situation as those who have never been there, have no genuine involvement in the debate, yet embrace the propaganda of the conservative and the corporate like it was some warm, comforting safety blanket.
So here Mr. Coren is painting a mental picture of Monty Burns, ensconced in wealth and out of touch with regular working folks. The idea of a heartless fat cat opposing any economic gains by the poor has been a mental safety blanket for the left for generations.
The response seldom has anything to do with economics but is about control and even humiliation. Critics believe that those earning minimum wage somehow deserve to go without, need to pay a price for some imagined sin of failure or lack of ambition. Minimum wage is in their eyes punitive. Listen to talk radio, read right-wing columnists and we see a contemporary Calvinism, a perverse form of predestination where the undeserving poor need to know their place.
It’s about humiliation? That’s a very strong claim for Mr. Coren to make, and he could have at least provided a quote or two from right-wing columnists so we can verify it.
It’s also about self-perception and self-regard. The “other” has to be marginalized in this visceral need to prove that those who don’t work for minimum wage are somehow superior. It’s a vulgar mantra: I am well paid therefore I am. Nothing else seems to explain the almost obsessive opposition to what is an ethically robust as well as economically compelling argument.
When, for example, it’s revealed that business leaders are to receive bonuses on already astronomical salaries we never hear that this will lead to inflation or the need to reduce the number of bosses. On the contrary, the same types who oppose minimum wage increases explain that only such munificence will attract the best, even though the evidence indicates otherwise.
People certainly do compare themselves others and make judgements to make themselves feel superior, however unfair those judgements may be. But are we supposed to believe that wealthy corporate executives are comparing themselves to fast-food workers to feel better about themselves? That isn’t how human psychology works. Instead, we compare ourselves to our peers, and perhaps those who are a perch above and below us on the social hierarchy—whatever we perceive that hierarchy to be. We save our scorn for those we feel threatened by—our peers and those slightly above our station—not those at the bottom.
In many ways this is a pivotal moment. Stand up with those who earn little and deserve more, or sit down with those comfortable with the status quo. Thanks but I’ll stand.
Mr. Coren may think he’s being quite brave and standing with the downtrodden. In fact, he’s doing nothing of the sort. He’s advocating for using power of the state to limit people’s choices. He’s saying to the labourer who has lost an arm in an accident and his prospective employer, “I don’t care if you’re willing to work for $14 an hour and someone is willing to pay you that much—I know better than you what a dignified wage is and I’m prepared to see those who disagree locked in cage.” He’s saying to the owner of the little noodle shop who makes less than minimum wage herself, “you’re exploiting your workers—you should be paying them a living wage, and I’m willing to see you bankrupted to make that happen.”

He is saying to the bright young man with autism who is eager to work but socially awkward enough that few employers would risk hiring him, “It’s best that you make a career out of receiving disability payments from the government, even though the local used bookstore owner would be willing to give you a chance to fill your days with work you’d enjoy for $7.50 an hour.” He’s saying to pretty much all the minimum wage workers at big retail chains, “You’d be wise to quit now and study robotics engineering or software design, because raising the minimum wage means your jobs will be automated sooner rather than later.”

Mr. Coren is attempting to support the working poor, not by reaching into his own wallet, but by using the coercive force of government to reach into the wallets of others. There’s nothing noble in this. And if he is willing to scratch the surface of this issue, he may just find that minimum wage hikes haven’t delivered the benefits they promised. Actually there’s no good reason to think that the government interfering in any agreements between consenting adults can have better effects than doing nothing.
Clayton Welwood
BC Libertarian Party Leader