A person truly concerned with helping others have a duty to make sure that their plans actually help them.
– Alonzo Fyfe
Alonzo Fyfe is doing thoughtful writing about issues at the heart of disputes between progressives and conservatives. In this article he argues that minimum wage policies intended to help low wage earners actually hurts them in a number of ways, such as by:
- Forcing companies on the edge of viability into closure, leading to layoffs;
- Forcing companies to increase their prices which, in turn, will result in them losing customers and subsequently laying off staff. I would add that this will also increase the cost of living, which could have a disproportionate effect on people near the bottom of the income distribution;
- Incentivizing investment in automation. Low-wage positions are often the ones most amenable to automation. By increasing the cost of hiring a person to do a job, a minimum wage policy inadvertently supports the case for investment in automation.
- Attracting more people to the labour market, thereby increasing competition for jobs.
- Disincentizing education, as artificially high wages can be earned without education. Of course, minimum wage is far from high, but a teenager living at his parents’ home making $8/hr may feel less need to pursue educational career advancement than if they were making $5/hr. Relatedly, one alternative to minimum wage offered by Fyfe was to provide educational funding assistance such as loans to those making below a certain amount, thereby incentivizing and aiding them in acquiring skills that will benefit them and the broader society.
Fyfe’s line of reasoning is not intrinsically liberal or progressive, as the title of this post might have implied. But it’s the kind of reasoning capable of speaking to those who want a society that lends a helping hand to those on the edge of subsistence.
What do you think?