The minimum wage is in the news again as a putatively respectable policy option among some on the alternative right, in particular for Donald Trump, who recently said he’d be willing to consider the idea. It is an odd thing for him to have said, given his emphasis on the necessity of reducing immigration from the Third World.
Is the prevailing wage for entry level jobs too low to live on? That’s a way of saying that there is an oversupply of labor. So, don’t raise the minimum cost of labor; that will subsidize the oversupply, increasing and exacerbating it while reducing demand for US workers (and increasing demand for robots and Chinese workers). Instead, remove the artificial factors that generate the oversupply to begin with.
Immigration of millions of unskilled workers reduces the price of labor. So for that matter does the entry of women into the workforce. Men used to be able to earn a wage sufficient to support a wife and children. It stands to reason that if you double the supply of labor by adding to it almost all women, you will cut the prevailing wages for most jobs – not perhaps by half, but to such a degree that it will thenceforth take almost two workers to earn the income that had once taken only one.
On the demand side, the regulatory and labor environment in the US is so completely whacked, irrational, cumbersome, and costly that it is better, easier, and cheaper, all things considered, for a manufacturer to produce in China than here. So the jobs are going to China. To the far side of the planet, where they speak a different and unrelated language, use a completely alien and wildly inefficient form of writing, and are culturally comfortable with fraud and corruption and cheating and adulteration – with harming their customers.
This is nuts.
All these massive distortions in the labor market that crush wages happened as a result of stupid government policies. The solution is not to add another layer of policy to correct them, but to delete the problematic policies, root and branch – and, where necessary (not very often) replace them with something rational – so that the labor market can right itself naturally in such a way that the minimum wages anywhere being offered ad libitum suffice for a family to live dignantly thereon.
This is simply done:
- Enforce immigration laws and deport aliens. Crack down hard, relentlessly and sensationally on a few thousand cases pour encourager les autres, and most aliens will depart under their own recognizance, post haste. No wall will be needed. A single Spartan concentration camp in the Mojave for processing deportees will do. Reduces labor supply.
- Replace all taxes on Americans (by all their governments) with simple flat consumption taxes (that are cheap and easy to collect at point of retail sale). Reduces cost of living and doing business, thus the price of the living wage.
- Impose an optimal tariff on all foreign goods. Set to maximize the revenues it generates, it would far exceed ((all annual American taxes on GDP)/annual GDP)(retail price of goods imported). Increases domestic labor demand.
- Impose an optimal annual tonlieu on all foreign workers. Set to maximize the revenues it generates, it would far exceed average annual American labor compensation (because much of what immigrants want from America – and would pay to obtain – is, not money per se, but … life in America). Reduces alien labor supplied.
- Rip up most of the regulations that hamstring industry – that hamstring *life.* Let the plaintiff’s bar have the whip hand when it comes to regulating malfeasance and malpractice. Focuses (immensely profitable, motivated, and skillful) enforcement activity on true malfeasors for real torts; eases compliance burdens on ethical businesses; reduces cost of living and doing business (for the ethical), thus the price of the living wage.
- Allow employers to discriminate in every way among employees as they see fit. They do this anyway, because they must; we might as well make it legal, and cheap. Employers prefer and will pay more for long term employees (who have support at home and are unlikely to quit on account of babies) who are fluent , literate, numerate, ethical, hard-working, cooperative, trainable, and intelligent. Improves motivation, quality and compensation of labor force; reduces cost of doing business; increases efficiency; as a sequela, reduces cost of living, thus the price of the living wage.
- Eliminate the cost of the immense regulatory burden of employment – discouraging outsourcing to robots at the margin (i.e., where such outsourcing makes little or no true economic sense). Reduces cost of doing business, and, as a sequela, of living, thus also the price of the living wage.
- Pay (much reduced and simplified) cash welfare benefits only to fathers married to and living with the mothers of minor children they have begotten or legally adopted. Improves family formation, reduces divorce, reduces welfare costs, etc.; too many ancillary benefits to count.
If these things were done, women and (a fortiori, and much more quickly) aliens would leave the labor supply at the margin, wages would rise, family life would quickly begin to cobble itself together again, and the social dereliction, moral bewilderment and personal ruin caused by bastardy, irreligion and promiscuity would begin to abate.
The margins we are talking about here are actually quite thick. We are talking deciles. And the compounding effects would be substantial. The fewer the workers, the greater the wages; the greater the wages, the easier it is for a family to live on one income, and the greater the number of families who decide to try it. Pretty soon, fashions change; then, customs; then, morals.
None of this is complex or difficult, either to understand or to implement. Mostly it would involve doing far less than we are already doing. Mostly it would involve simply stopping doing what we have started doing only since about 1960. It would be easy. We still have the Federal Code circa 1960. It could be made the whole of the Federal law again, by a single Congressional vote. Four more acts of Congress – to establish the tax, tariff, tonlieu and welfare policies set forth above – and it would mostly be done.
If we did all of it, and the entry level wage was still too low to live on, then it might make sense to think about some sort of minimum wage.