Decency Requires a Minimum-Wage Law?
Proponents of Minimum-Wage Laws Commit Logical, Economic and Moral Fallacies
MARCH 01, 2004 by AEON SKOBLE
Filed Under : Demand, Morality, Supply and Demand
The libertarian cliché that “at least the Republicans are right on economic policies” suffered another setback on the August 11, 2003, Los Angeles Times op-ed page, where Republican Douglas MacKinnon argues that anyone who cares about the poor should be ashamed of the failure of the Senate to raise the minimum wage. His essay is a model not only of economic illogic, but of moral illogic also. (Actually, the two are connected.)
The economic fallacy MacKinnon commits, familiar to many readers of this magazine, is the failure to acknowledge that prices for anything, including the cost of buying someone’s labor power, depend not only on aggregate supply and demand, but also on the economic priorities (“values”) of individual buyers (and sellers). In other words, “demand” refers not only to the number of people who desire something, but also to the (variable) intensity with which a particular buyer desires it. Based solely on aggregate supply and demand, I could have someone else mow my lawn for around $30, but for the most part I am content to mow my own lawn. If it cost 30 cents, however, I would surely hire someone else to do it. The act of mowing my lawn has no fixed, predetermined “worth.”
All prices are like that. A good or a service is worth, in economic terms, whatever someone is willing to pay for it. In other words, if someone is forced to pay more for something than he thinks it is worth, he will be less likely to buy it. I like chocolate, but if the price were $20 an ounce, I would surely buy a lot less of it. If a storekeeper finds it is worth $50 a day to have someone sweep in front of the store, he will pay it. But if he were told that it must cost $60 a day, he might decide it is not worth it, or not worth it as often. That is why forced increases in wages (meaning legislatively imposed increases as opposed to increases due to supply and demand) lead to layoffs at the margins. MacKinnon asserts that this is false, on the grounds that many employers already pay more than the minimum wage. But that’s a non sequitur. It is precisely the ones who do not (the ones “at the margins”) who will be forced to reduce their purchases of labor.
Economic logic aside, MacKinnon is also not reasoning well in terms of moral philosophy. One moral objection is that forcing a purchaser (in this case, the purchaser of labor power) to pay more than he feels something is worth is what we would call in any other context “extortion.” That’s immoral in a straightforward way, although this is perhaps obscured because the purchaser “obviously” can afford it.
But perhaps I won’t impress anyone by urging compassion for the bosses. MacKinnon’s main theme is that we must have compassion for the workers, so let’s examine that aspect more closely.
He claims that compassion dictates that we care most about those most in need, and that’s why it is imperative to raise the minimum wage. But since a forced increase in the cost of something means that less of it will be purchased, and therefore minimum-wage increases mean layoffs at the margins, it is precisely these “most in need” who will be unable to find work; they will either get laid off or be unable to find entry-level positions, of which there will be fewer. So MacKinnon’s attempt to be compassionate (paying Smith more money so he can get out of poverty) has a tradeoff: Jones is unemployed and sinks deeper into poverty. From Jones’s point of view, this is hardly compassionate.
MacKinnon is right when he says that most employers actually pay more than minimum wage anyway. So maybe it’s only a small number of workers who will be laid off as a result of the increase. But so what? Is there some number of Joneses who can be made to suffer to help any number of Smiths? That is the crudest form of utilitarianism, an approach to moral philosophy that fails to take seriously the dignity and self-worth of each individual person. In this context, it would mean it’s moral to make some poorer so that some others can make an extra dollar an hour. That’s not my idea of compassion.
Compassion Only for Some
MacKinnon makes the (essentially correct) point that the poor have hopes and dreams, that they have integrity, that all they lack is enough money to care for their children and themselves. Are such people deserving of compassion? Of course, but all of them are, not just some of them. MacKinnon’s solution shows compassion to some, but at the expense of others. Don’t the ones who get laid off also have hopes and dreams?
Ethics quiz: is it better to have ten people making $5.15 an hour, or nine people making $6.65 an hour and one person making nothing? Answer: it’s not up to you, and it’s not up to MacKinnon. The way to respect the equal dignity of all is not to treat some as dispensable for the sake of others.
Speaking of poor reasoning, MacKinnon commits common logical fallacies as well as economic and moral ones, and this is worth noting because they are the sorts of fallacies that proponents of minimum-wage laws typically make when framing their arguments. MacKinnon commits the “ad hominem” fallacy when he claims that the senators won’t pass the increase because they don’t know what it’s like to be poor. Whether that’s true or not, it’s neither here nor there with respect to whether it’s sound public policy.
The bulk of MacKinnon’s argument commits what logicians call the “ad misericordiam” fallacy: he expounds on the fact that he himself used to be poor, that it is terrible to live in poverty, that it is hard for the working poor to make ends meet, that many poor people are poor from birth, and that the poor are people too, equally deserving of dignity. All the things he says on these subjects are true. But they don’t constitute a refutation of the economic principle explained above. (It is as if one tried to refute the law of gravity by describing how awful it feels when a piano falls on one’s head: it is indeed awful, but that’s what falling pianos do.) And they don’t address the real suffering of the real people who will be made worse off by these misguided attempts to help people.
Department of Philosophy
Bridgewater State College