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    Economics in One Lesson {Week Four, Part I}

    January 29, 2008 by Brandy Vencel

    There is a lot packed into this week, and so I’m going to break this into smaller posts. I admit to losing a bit of steam here at the end. It is also Book Week for me: I had committed to finishing up Secret Believers and Economics in One Lesson all at the same time. I was having momentary delusions of inordinately obedient children {who were also very clean and required less laundry than ever} and spare energy and time.

    January was so much better back when I was imagining it in December.

    Anyhow, this week starts out with a discussion of minimum wage laws. Actually, this brings it full circle since I insisted on discussing the minimum wage during my week one post. Here we are again, in greater detail.

    …a wage is, in fact, a price.

    This is a great place to start off. Now we can think of the minimum wage as a form of price-fixing, which we already know doesn’t work. The minimum wage is the government-as-benevolent-dictator ordering businesses to pay a minimum price for a certain job. And the government has decided that, no matter what the job, they, in their omniscience, know for sure that the price is always appropriate at a minimum of $x.

    The first thing that happens, for example, when a law is passed that no one shall be paid less than $106 for a forty-hour week is that no one who is not worth $106 a week to an employer will be employed at all. You cannot make a man worth a given amount by making it illegal for anyone to offer him anything less. You merely deprive him of the right to earn the amount that his abilities and situation would permit him to earn, while you deprive the community even of the moderate services that he is capable of rendering. In brief, for a low wage you substitute unemployment. You do harm all around, with no comparable compensation.

    Cindy already picked out this quote, and I think her thoughts are well-worth the time spent reading. However, I couldn’t resist quoting him here as well.

    When such consequences are pointed out, there are those who reply: “Very well; if it is true that the X industry cannot exist except by paying starvation wages, then it will be just as well if the minimum wage puts it out of existence altogether.”

    Part of why people reason this way is because of the argument that starvation wages are not a family wage. A man cannot raise a family on such a wage! This is the real, underlying objection.

    And here I feel the urge to step back and think a bit.

    I have always considered minimum wage to be payment for entry level jobs. It baffles me that a man would earn minimum wage for a long period of time. Does this sort of thing really happen? It must, I suppose, if we are making the argument. But my question is why? Are these men unmotivated? Are they poor workers? Do they lack the ability to think strategically?

    When I was a teenager, I lived in a town where there was a potato shed. The pay was minimum wage. The hours were long and hard. And many of the teen boys did this as their summer job. These boys grew up, and got jobs that paid more. The minimum wage job was entry level. Does this make sense? Moreover, the push to make such jobs pay a man’s wage is completely denying the facts: a sixteen-year-old boy is perfectly capable of doing the job.

    Hazlitt says we cannot make a man worth more. I say we cannot make a job worth more.

    This bring me in my mind to a wonderful book Si and I read a few years ago: Business By The Book by Larry Burkett. At the time, we were considering a business idea {one we decided we couldn’t afford due to government’s heavy hand in the form of minimum wage laws, disability insurance laws, and the like}. One of the most profound thoughts in that book was the idea of who a businessman should hire. The idea was that, if he couldn’t afford to pay a family wage, he shouldn’t hire a family man. We toyed around with trying to hire homeschooled teenagers. We knew they would be good employees who valued a Christian work environment. The job was only worth a certain amount, and so we were determined that if we opened our business {which we didn’t}, we would hire folks that could afford to and would benefit from working for such a price.

    There is no escape from the conclusion that the minimum wage will increase unemployment.

    There is also no escape from the fact that a minimum wage hike makes the value of every dollar above the wage worth less. Let me try to explain using some basic math. Let’s say, for the sake of argument, that minimum wage is $6 per hour. And let’s say that I am paid $10 per hour. That means that I make about 66% more than minimum wage.

    Now, some savvy politician tries to buy votes by promising a minimum wage hike. He’s elected, and he succeeds in keeping his promise {astonishing for a politician, I know}, and now the minimum wage is $8. But I still make $10. Which means that I now only make 25% more than minimum wage. Suddenly, my job isn’t as bright and promising.

    When a great majority of citizens suddenly get a wage increase, spending will go up, which will cause inflation, which will make my dollar worth less. This is a basic economic principle. So my $10 becomes worth less {worthless??} in both the short and long term.

    Now, I can see one possible criticism of this argument being that my approach is comparative. I admit that it is. But this isn’t born of a desire to keep another person down. Not at all. This is simply doing the math and revealing a fact about the situation.

    After all, I actually earn slightly more than zero dollars per year, and I highly suggest other mommies do the same.

    But if I was a grown woman working for $10 at a somewhat-skilled job, and this goes back to my entry level argument above, I wouldn’t expect the pay for a teenager folding burritos at Taco Bell to creep up on me like that!

    A nice problem, moreover, will be raised by the relief program designed to take care of the unemployment caused by the minimum wage law. By a minimum wage of, say, $2.65 an hour, we have forbidden anyone to work forty hours in a week for less than $106. Suppose, now, we offer only $70 a week on relief. This means that we have forbidden a man to be usefully employed at, say, $90 a week, in order that we may support him at $70 a week in idleness. We have deprived society of the value of his services. We have deprived the man of the independence and self-respect that come from self-support, even at a low level, and from performing wanted work, at the same time as we have lowered what the man could have received by his own efforts.

    This is such a great point, I just had to paste it in. Now Hazlitt is looking at things in a more spiritual light. He is acknowledging that there is greater dignity in a man working for a low wage than there is for him to live in state-subsidized sloth.

    We cannot distribute more wealth than is created. We cannot in the long run pay labor as a whole more than it produces.

    And this, my friends, is the next disaster headed our way. There are many industries that simply must phase out, for instance, defined benefit plans for retirees {this was the precursor to the 401K, where workers and companies together save actual money in the present to be used at a later date in the future}. Defined benefit plans typically depend on current employees paying for current retirees. The idea is that future employees will return the favor. But all ot that is dependent upon the industry’s growth which is not a future certainty. So the entire plan is first of all risky and second of all, if the industry contracts, cause for the bankruptcy of the industry itself, which threatens not only former employees, but current employees, potential future employees, and customers alike.

    Secondly, this the danger of Social Security. Because Baby Boomers decided they preferred having fun over having children {plus they were told that there were “too many people”}, we are coming upon a time when there will be more old people than young people. This means the young people must work double–once for themselves, and once for an older person who has a legal claim on that younger person’s money.

    Real wages come out of production, not out of government decrees.

    Again, I emphasize the danger of Social Security and other programs, both public and private, that run on such principles. We cannot, as a nation, afford to subsidize people who do not work. And yet this is done in many forms every day.

    How Does the Church Respond?

    Okay, so this is the first time I have added such a section at the end, but I really feel compelled. After all, all this talk about money and wages can make it seem like there aren’t actual people who are working for low wages, who are struggling. I already admitted that, in an ideal world, the lowest pay would be given to our youngest members, and as those members increased in maturity and skill level, they would begin to earn more.

    But what if there is a man in my own congregation who is working for minimum wage, and trying to raise a family on it? What then? If it is not the government’s job to help, it is because this jurisdiction {caring for the poor and needy} was given to the Church.

    I think that, first of all, we need to say there is no simple answer. Perhaps the first thing a church must do is find out the cause of the situation. Is the man disabled? The church should offer assistance. Is he illiterate? Teach him to read. Does he need better speaking skills? Teach him English. Is he computer illiterate in a technical world? Give him some training. Did he simply grow up in a family that never challenged him, never taught him how to reach a goal, and never helped him identify his own gifts and talents? Then the men of the church must exhort, encourage, and lift him.

    Also, some financial counseling might be in order. After all, when money is scarce, there are two approaches: make more…or spend less. In our family, my husband is in charge of the former while I manage the latter. Some folks have no idea how not frugal they are, and the church can help them here as well.

    The churches are full of people who can offer all of this help and more. What makes this solution beautiful is that, unlike a government program, it will deal with the man as an individual, real person who has a body, a mind, and a soul. It will deal with sin, character, and real, physical needs all at the same time. It is not just a superior solution, it is the only real solution, and it is the solution that best aligns with God’s Word.

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    3 Comments

  • Reply Carmon Friedrich January 30, 2008 at 12:25 am

    Brandy, that concept you noticed in the Burkett book ought to apply to churches hiring pastors, too. As Cindy noted about Christian schools, many churches willingly hire pastors with families while offering them a wage that is not enough to support a family, and their wives are forced to work. This is supposed to be okay because it’s a “ministry” or “calling from God.” Bunk. Steve once had a woman work for him at a large computer company that begins with “A” who was the wife of a youth pastor in this situation. She was very good at her job, and Steve told her so, but he put his neck on the line and suggested (as a Christian friend) that she should find a way to stay home with their little girl. Instead, she left her husband for another guy at the company.

    Ideas have consequences, right?

  • Reply Brandy January 29, 2008 at 6:52 pm

    Oh, Cindy! Your comment reminds me of a couple years ago when my husband had applied to work for a certain well-known Christian nonprofit organization. The job description sounded like a perfect fit for him, and we were thrilled when he landed an interview.

    In the interview, he was asked a couple questions about how he would know if he was “called” to a job. After we ran the numbers, it became apparent that being “called” meant that you were willing to work for less than your family could survive on. I was so proud of him when his answer was that God would make His calling known through a number of means, not the least of which was providing a wage that would allow his wife to remain at home and homeschool his children!

    Needless to say, he didn’t get the job. We later learned that many employees have both spouses working at that organization. That has always been hard for me to swallow–an organization that tries to support wives remaining home, and even homeschooling, making it a financial burden for their own employees to do so…

  • Reply Dominion Family January 29, 2008 at 6:05 pm

    Excellent, Brandy. I often think of Christians schools that can only afford to hire mothers and yet so desperately need men teachers. It is one reason why I believe homeschooling will continue to be the best choice economically for a long time to come.

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