Thursday, April 06, 2006

Oppertunity egalitarianism: In defense of minimum wage...

Here are some of the arguments raised against minimum wage and repeated so often they become postulates: “minimum wage is equivalent to legislating unemployment,” “creating prosperity ex nihilo,” and “it only benefits those who want to be seen as to be doing good…regardless of consequences.” But, there's no evidence for any of these arguments; besides the arguments are cynical. Most Western industrialized capitalist nations have some for of minimum wage.

“Nearly three-quarters of EU Member States have some form of statutory national minimum wage, with sectoral collective agreements playing the main role in setting minimum pay rates in the remainder of the countries.” Most advanced industrialized countries understand that, if given the chance, all business will arbitrage labor, that is buy labor for the cheapest price. While minimum wage doesn’t prevent a business from running “an efficient, well-run business with satisfied employees,” it does prevent a business from putting up labor to the lowest bidder. But why is minimum acceptable to most Western industrialized capitalist nations.

First, minimum wage is part of classic capitalism. You are allowed to run your life as you see fit, but with rules. For example, a man can switch jobs as often as he wants, but he can’t steal a former employer’s clients. No rules lead to “bare knuckle” economics – survival of the economic fittest. That’s why there are anti-trust laws, rules against price fixing, etc.

Second, minimum wage is part of the American tradition. In Agrarian Justice, Thomas Paine – “founding father”- presents the best argument for minimum wage, social security, income tax, estate tax, and other aspect of this “social contract” we call America. All the people at the bottom make the accumulation of wealth possible. Warren Buffet, one of the richest men in the world, knows he didn’t make his fortune by himself. Buffet would not have become wealthy were it not for all the people below. When Buffet was presented with the idea of cutting taxes and social security, he told Lou Dobbs:

LOU DOBBS: That's a progressive idea. In other words, the rich people would pay more?

BUFFETT: Yeah. The rich people are doing so well in this country. I mean, we never had it so good.

LOU DOBBS: What a radical idea.

BUFFETT: It's class warfare, my class is winning, but they shouldn't be.

LOU DOBBS: Exactly. Your class, as you put it, is winning on estate taxes, which I know you are opposed to. I don't know how your son Howard feels about that. I know you are opposed to it.

The illusion is, “I do it without government, you should do it without government.” But, the entire reason America’s social contract works is because of government, otherwise it would be a free-for-all. Every company would use the Enron business model and every individual would use word or fist or guns, etc., to get what he needs. Most people object to rules that limit them, but have no objection to rules that limit others.

In Road to Serfdom, F.A. Hayek, the liberal contemporary father of capitalism, gives one of the best arguments for minimum wage: because we can afford it!


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