As a presidential candidate, Joe Biden campaigned for a national minimum wage of $15 per hour to replace the currently moribund floor of $7.25. President-elect Biden has recently doubled down. With the Democrats also now controlling both houses of Congress, this may become law, subject to the whims of just a few key senators, such as Joe Manchin of West Virginia.
If there were a Hall of Fame for truly awful economic ideas, the minimum wage would be a charter member. As I have previously argued, it is clearly rights-violating in that it, in Nozick’s memorable words, “prohibits capitalist acts between consenting adults.” Moreover, to the extent that utilitarianism can yield determinate results, it flunks even under this standard, as it harms the most vulnerable members of society to benefit the better off.
From a practical perspective, since a few states and many major cities have already mandated a minimum close to, and even in excess of, $15/hr., the impact of this new diktat will be most keenly felt in our more rural and impoverished precincts. Given the great disparities in the cost of living in different parts of our diverse nation, what will be at worst a hiccup for most employers in deep blue states, may prove catastrophic for their counterparts (and their workers) in red ones.[1] I think it also no coincidence that a “generous” national minimum wage will eliminate the competitive advantage now enjoyed by low-wage states in attracting businesses to their jurisdictions.
This brings to mind the wisdom of the federalism cherished by our founding fathers, which we now largely scorn. As Madison put it in Federalist Papers, No. 45:
The powers delegated by the proposed Constitution to the federal government are few and defined. Those which are to remain in the State governments are numerous and indefinite. The former will be exercised principally on external objects…The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives of the people, and the internal order, improvement, and prosperity of the State.
The central idea is that the availability of different social models, coupled with the right of exit, will enable persons to select the environment most suitable for their flourishing. More recently, Justice Brandeis expressed this concept in terms of the value we derive from the various states acting as “laboratories of democracy.” Of course, the virtual doubling of the federal minimum wage is a dramatic move away from a robust federalism and towards an all-powerful, highly dangerous, Leviathan.
There is no principled basis for stopping at $15/hr. If that minimum is good, why isn’t $30 twice as good. I fear that an ever-increasing minimum wage is a powerful bad idea whose time has come.
[1] I will take this opportunity to voice another ill-effect of “exorbitant” minimum wage laws; that is, they will increase the duration and severity of economic recessions. This is the inevitable result of robbing employers of their ability to temporarily reduce wages beneath the legal floor in order to stave off bankruptcy, and of eliminating the option for employees to accept such wages in preference to being laid-off. Accordingly, more firms will close, and more workers will be unemployed. Of course, the state can “fix” this problem by simply printing trillions of additional dollars and distributing them as needed. What, as they say, could possibly go wrong?
That you have to make this argument is the result of the dismal state of education in this country, particularly in the fields of economics, political science and history.
You’re telling me! I would like to think that many of my blog posts are heroic attempts to overcome our population’s abysmal ignorance on such subjects as school choice, federalism, free speech, gun control, and our other efforts at central planning. But I fear I am losing…badly.