Libertarian Thoughts on the Minimum Wage

With Obama proposing an increase in the minimum wage from $7.25 per hour to $9.00 per hour, it has become a topic of discussion.

One thing that I always find interesting is how the minimum wage debates come up.  There is a lot of Republican opposition to Obama's proposal right now.  But where were they yelling and screaming when Bush was president?  While the last increase to $7.25 occurred in July 2009, it was because of legislation that was passed in 2007, while Bush was president.  Overall, that increase was bigger than what Obama has proposed.

And if Democrats are so much in favor of the minimum wage, why didn't they pass it when they had the majority in Congress?  They could have passed legislation in 2009 or 2010 making it as high as they wanted.  Yet they waited to bring it up when the Republicans controlled the House.  You have to wonder if they understand that it is bad for employment, but just bring it up when they know it is harder to pass, so they can just blame Republicans for hating the poor.

I don't want to rehash all of the libertarian arguments against a minimum wage, at least from an economic standpoint.  There has been a lot written by libertarians and conservatives that explain why a minimum wage is harmful, particularly to employment of low-skilled workers.

One important point to remember regarding the economics of the minimum wage is that an increase will not always cause higher unemployment.  If the minimum wage is low enough that most workers can still work and be profitable to the employer, then it may not matter much.  In other words, what would happen if we set a minimum wage of 10 cents per hour?  In some poor third-world country, it might cause an increase in unemployment.  In America, where there is much greater wealth and capital investment, a minimum wage of 10 cents per hour would affect virtually no one.

I would be willing to hire someone for a dollar a day to be my personal assistant.  I'm sure there are many people who would be willing to pay $20 per day for a personal assistant, assuming the person was competent and willing to work.  Since almost nobody would be willing to work for less than 10 cents per hour, the law would have virtually no effect.  I suppose it is possible someone might want to work for 5 cents per hour or for free just to gain experience.  But ironically, while you can't get a job for $7.00 per hour, you can get one for $0.00 per hour.  It is called an internship and people do it so they can gain experience.

While most of the focus tends to be on the economic effects, I think it is important for libertarians to argue the moral side too.  Like most laws, the minimum wage is interfering in the voluntary process of the marketplace.  It is using the threat of government force to punish someone who offers a job to another person for less than the stated minimum wage.

There might be some people who simply can't find a job in today's market.  It could be a teenager or a mother who wants to work part time while the kids are in school.  It could be anyone.  But this person is forbidden to get a job that pays less than $7.25 per hour, unless it is an internship.  You could have someone willing to work for $6 per hour and an employer willing to pay it, yet they are forbidden because of the threat of government violence.

There are two questions you can ask  a supporter of the minimum wage.  The first question is an economic one.  If the minimum wage is good and will help people, why not raise it to $20 per hour or even $100 per hour?

The second question (or questions) is a moral one.  If someone desperately needs a job and finds a potential employer who can only pay $6 per hour, what would you do to them if they agree to these terms?  Would you send in police officers with guns?  Would you be willing to throw the people in jail?  Would you shoot them if they didn't comply?

It is always important for libertarians to point out the government guns.  After all, virtually all laws are backed by the use of government guns.  At some point, if someone doesn't comply with the law, then government guns will come out.  We must continually make people aware of this.