Minimum Wage II: Freedom & Coercion

As I noted in my previous essay on minimum wage, one stock argument against minimum wage is based on liberty and rights.

Money

Money (Photo credit: 401(K) 2013)

The basic idea behind this line of reasoning is that an employer should have the right to set wages and that the state is wrong to use its coercive power to compel a minimum wage. A rather key assumption here is that such coercion is wrong. This assumption should be kept in mind for what follows.

Those who oppose increasing (or even having) a minimum wage often like to appeal to the notion of the free market of employment. The basic idea is that businesses should be free to offer pay as they see fit. Workers can then consider the pay being offered by each employer and refuse to work for a low-paying employer and instead elect to work for one who pays more. For example, if Big Burger is paying $7.25 an hour and this is not to Sally’s liking, she can keep walking past Big Burger and find a job with better pay—perhaps the CEO position at Big Burger for $7.25 million a year.

Naturally, Sally will face some reasonable limits here—there will be jobs that she is not qualified for. For example, if Sally is fresh out of college with a degree in chemical engineering, she will not be able to get work as a lawyer or doctor. But, it is often claimed, she is free to find any job she is qualified for via the workings of the free market.

Alternatively, Sally can create her own business (Sally’s Sandwiches perhaps) and endeavor to get the income she desires. Naturally, Sally will also face limits here based on her abilities. She will also face the obstacles put in place by the government, or so the narrative goes. However, Sally is supposed to have a shot at being the next billionaire—or so the stories go.

On this view, the situation is rather rosy: Sally and her fellows are free to seek their desired employment and potential employees are free to offer what they wish, with no coercion being used against anyone. Alas, the government tinkers with this beautiful scenario of freedom by compelling employers to (generally) pay a minimum wage. Such coercion, as noted above, is assumed to be wrong: the powerful state is pushing around the weaker businesses and leaving them no choice in regards to the lowest wage they can legally pay.

While this tale is appealing to certain folks, it is not just the state that has coercive power. In the case of jobs, the employers often enjoy considerable coercive power. Going back to the example of Sally, it is true that she is free to walk on past Big Burger and other places that are paying the lowest wages. However, it would seem that she only has a meaningful freedom if there are other jobs available that pay better. Otherwise her freedom is a matter of wo

rking for the lowest wage or not working at all.

It could be replied that she is still free—after all, there would seem to be no coercion or compulsion at play here: she can take the job or not. If Sally is financially independent or is supported by someone else (such as her parents), then she would not be coerced—she would not need the job and is thus free to accept or reject employment as she desires. However, if Sally actually needs a job to pay for food, shelter and other necessities, then she would seem to be in a situation that involves coercion.

The obvious counter is that she is not being coerced by Big Burger or their fellows. After all, they did not create a world in which people need to purchase the basic necessities in order to survive. And, one might add, Sally could avail herself of welfare—at least until her benefits run out. Even then, there is always private charity. Sally could even attempt to create her own business, although this would be difficult and she would likely be competing against well established and well-connected corporations.  As such, Sally is still free and Big Burger is merely offering her one choice among many. So, since Sally can chose to be unemployed, it would seem to follow that she is not being coerced by Big Burger or their fellows.

If Sally elects to take the job, then she has chosen to accept the low pay and is thus not coerced in this scenario either. After all, it is her choice.

Interestingly, Sally’s scenario is analogous to that of the employer that is required to pay minimum wage. An employer is free to decide to not pay minimum wage. This could be done by deciding not to hire anyone, by deciding to not have a business or by deciding to simply pay below that wage. A business could also decide to leave and go somewhere that has no minimum wage—just as Sally could move away from an area in search of a job. So, employers are as free as Sally—they have choices, although there may be no good ones.

It might be countered that the employer is not free—there would clearly seem to be compulsion at play here. However, those who enforce the law could say that they did not create a world in which people have to pay a minimum wage any more than Big Burger created a world in which people have to pay for necessities.

So, since a business owner can chose to not pay minimum wage, it would be the case that she is not coerced. As with Sally, if a business owner elects to pay minimum wage, then she has chosen this and thus is not coerced. After all, it is her choice. Just as it was Sally’s choice to accept or not accept a low paying job despite it being the only sort of job available.

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  1. A key factor in the minimum wage debate is what the state deems necessary to do for those who are not earning enough to live on. If the state makes up the difference between what an employer pays and what the employee needs (however that is defined), there is a temptation for employers to pay as little as possible, as they know the state will ensure the employee has enough to live on. There is therefore a strong argument for a minimum wage so that employers pay more and the state pays less.

  2. Dennis Sceviour

    Congratulations for your 400th article. That is very prolific.

  3. “However, those who enforce the law could say that they did not create a world in which people have to pay a minimum wage any more than Big Burger created a world in which people have to pay for necessities.”

    I don’t understand this. Big burger is clearly not responsible for creating a world in which people have to pay for necessities but the people that create the laws are exactly the ones responsible for the enforcement of such law (maybe not practically but they are the ones that define in which cases this happens)…

    There is obvious coercion in imposing a minimum wage and there is no coercion in having no minimum wage imposed.

  4. Insofar as freedom is the key criterion in this discussion, why shouldn’t the state be free to impose a minimum wage?

  5. CHEAP SCREWS IN HIGH OFFICES

    Alberta is the land of four strong winds. As a block of land, it is geological diverse, quite beautiful. It’d be a much better place if it didn’t have so many nitwit conservatives. Point of fact: 42 years as a one-party democracy. I must add, though, I may not be a reliable commentator since not often I visit the place.

    News copy:
    ===============================
    EDMONTON – Alberta’s minimum wage is increasing by two dimes at the end of August and will remain the lowest in the country.

    Effective Sept. 1, the 29,300 workers on the lowest end of the pay scale will earn $9.95 an hour.

    The liquor server wage will remain unchanged at $9.05 an hour.

    Government figures show Nunavut’s minimum wage is the highest in Canada at $11 an hour.

    Minimum wage workers in Ontario and British Columbia make $10.25 an hour, while minimum wage in Saskatchewan is $10.

    The Alberta government says its overall wage may be the lowest, but it is the second highest — behind only B.C. — after personal exemptions and taxes are factored in.

    “We know that only 1.8 per cent of employees in Alberta earn minimum wage,” Human Services Minister Dave Hancock said in a statement.

    “After taxes, Alberta’s minimum wage is the second highest amongst Canadian provinces and provides a good starting point for entering the workforce. From this starting point, we want to see these workers obtain the skills and experiences to advance their careers.”

    The size of the increase is determined by a formula that considers average weekly earnings in the province and the consumer price index.

    The government says the weekly minimum wage for real estate agents, car salespeople and similar workers who are on commission will rise to $397. The monthly minimum wage for live-in employees, such as nannies, will rise to $1,893.

    From: http://www.huffingtonpost.ca/2013/05/30/alberta-minimum-wage-increases_n_3361983.html

    But does the law work as High Office Minister says it does? Does the law help labor force starters move up the economic ladder?

    Does His High Office track individual workers moving up into the upper region?

  6. When someone forces someone to do something they do not wish to do, that is coercion, plain and simple.

    You cannot, in any stretch of the imagination, tell me that the State enforcing minimum wage upon a business is not coercion. The argument “You can always leave” is not valid. You are simply using a argument loophole to prop up your failed path of reason because you realize that the conditions you set in the beginning of your post do not hold up at the end.

    To wit, if Sally does not wish to work for what the businesses will pay (sans min wage), SHE can always leave…. the workforce.

    Your argument does not hold up in that manner, either, considering there are, as you say, “[she has] choices, although there may be no good ones.”

    For your argument to be logically sound, both conditions must apply equally, and they do not.

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