The Steel-Man Against Minimum Wage

Before getting started, I mostly agree with these words. I’m not this confident though.

Minimum wage is the correct moral intuition. Some make heaps, others not much. We should be more concerned with people doing it tough.

But good economics asks ‘and then what?’

Businesses like making money. So if coerced into paying workers more, there’s ways to try and stay profitable:

  • Fire employees. Reducing wages to $0.
  • Replace employees with machines. Reducing wages to $0.
  • Outsource work overseas. Reducing wages to $0
  • Cut hours. Reducing total income.
  • Increase cost of the product/service. Making the cash in everyones pocket less valuable (on the margins).
  • Make less effort to make jobs pleasant.

Some businesses can afford to pay minimum wage, others can’t. These businesses die and so do the jobs they created. These tend to be smaller businesses – unnecessarily helping the big guys.

This reduced competition means surviving businesses require less effort to please customers (price, service, quality etc). This means we miss out on great businesses who never get off the ground.

People get upset when big businesses pay low wages. This makes sense if you compare low wages with high wages. But compare low wages with no wages and big businesses are great for the poorest people.

Advocating for minimum wage makes people feel good. But think about it longer and it’s actually condescending. It assumes well off people know what’s best for the poor. It implies they can’t make adult choices (given their circumstances). So government must be paternal and dictate wages they can and can’t work for.

Put yourself in the shoes of someone whose been involuntarily unemployed for years. Remove minimum wage and they might finally gain employment. The pay sucks. But they learn things, become more confident and have something to put on their resume. This can lead to jobs where the pay doesn’t suck.

To learn things that might help future employment, people earn zero dollars and pay money. Compared to that, low wages are a good deal.

Minimum wage does help some people (at least in the short term). Namely, employable people sitting just below that number. But the correct moral intuition is empathising with the very worst off. The long term unemployed and refugees who never earn a cent.

Please tell me why this is wrong on Twitter.