Don Boudreaux http://cafehayek.typepad.com/hayek/2006/06/testing_the_log.html likens arguments about the minimum wage to arguments about used car sales:
“The market prices of most used-cars are too low for sellers of those cars to support their families. This fact is especially true for poor people, who, when they sell their old cars, almost always have only old, high-mileage, often dilapidated used-cars to sell. These people aren't selling two-year-old Lexuses or BMWs. They're selling 15-year-old Chevys and 20-year-old Hondas. So let's enact legislation mandating that no used-car can sell for less than, say, $25,000. That way, anyone who sells a used-car is assured that he or she will earn at least enough money to support a family for a year.
I doubt that many people would argue that government should legislate a minumum price for used-cars. But why not? If merely identifying a problem with a low price (such as "At the current minimum wage, even full-time workers can't support a family of four") is sufficient to justify legislative action to raise that price, why won't such action work for used-cars as well as it will work for labor hours?”
He’s right; nobody would argue for minimum used car prices (except maybe used car dealers). That’s because it would be disingenuous to do so and because the analogy is so inapt. I might buy his argument that increases in the minimum wage would result in a loss of jobs for unskilled workers, but the used car analogy blows his credibility. I begin to doubt that his economics are sound when he displays such detachment from reality. Show me that increases in the minimum wage over the years have, in fact, caused higher unemployment among the unskilled. That should be simple enough since the data is available for several decades, but don’t insult my intelligence with the lame “wages are the same as used car sales” argument.
Wages are different. They are recognized in society as different from other types of income. The due process requirements for attaching wages are more stringent than for other types of property or income streams, and every state recognizes exemptions from garnishment for some minimum level of wage income. The fact is, that for most folks, wages are the sole attainable socially approved means of subsistence. Most folks find themselves structurally forced into employment for wages or salary.
If you are an average or below average schmendrick with a high school diploma or less, not cut out for college, you have almost no options other than wage earning as a subsistence strategy. You can’t forage off the wilderness, since the land is all claimed, and you don’t know how to forage. You can’t engage in subsistence farming since you don’t have land or money to buy land. Besides, you don’t know how to farm, so even sharecropping is out of reach for you. The road to entrepreneurship is full of obstacles and barriers to entry such as licensing requirements and regulations and a lack of capital or know how. If you enter the underground economy, society will lock you up or kill you. You can forage in the urban environment, I suppose, and be a homeless dumpster diver, but society will tolerate only so many of these foragers, and the carrying capacity of the environment is limited and doubtless all used up by other foragers.
Moreover, I am not convinced that there really is a free market in labor. Does not the Federal Reserve conspire to maintain a certain level of unemployment so as to suppress wages as an anti-inflationary measure? Isn’t immigration policy, at least in part, designed to keep wages from increasing by maintaining an increased supply of labor? Moreover, it isn’t at all easy for workers to relocate for employment opportunities. If you are a low wage earner, it might very well be insane for you to move away from your family and social support system in search of a few extra cents an hour. And God forbid you should be marked as a “job hopper”.
Maybe the minimum wage is a bad thing, but make the argument from compassion, not from ignorance of the actual conditions and circumstances of wage earning. Certainly, try not to appear that you don’t care about working men and women. Try to sound more like Commander Data after he installed his emotion chip.
I had a business client some years ago that wanted me to draft a letter to the government stating that an increase in the minimum wage would force them to cut jobs. When I asked what specific jobs would be cut, management admitted that there were not any superfluous workers and that nobody would really be laid off if the minimum were increased. Efficient companies don’t have a lot of expendable staff, especially at the low wage end of things. They will cut administrative or management costs before they will get rid of the folks who do the actual work.
Can some libertarian leaning economist craft an argument against the minimum wage that takes reality into account? Until they do, opponents of the minimum wage will always come off like corporate shills.