To Protect the Defenseless We Must Abolish the Minimum Wage
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To Protect the Defenseless, We Must Abolish the Minimum Wage

by Don Watkins | March 27, 2013 | Forbes.com

A few years ago, I was in need of some extra cash so I decided to sell my laptop on eBay. A few days later, I got an offer. It wasn’t great, but then neither was my laptop. But before the payment went through, I got a call from the government. 

“We have decided that the offer you got was too low. We’re not going to let you sell your laptop for anything less than three hundred dollars.” 

“But no one is willing to pay me three hundred dollars,” I said. “I’d rather have two hundred bucks than nothing.” 

“Oh, no, you can’t do that,” I was told. “That would be unfair to you.” 

Far fetched? Maybe — it didn’t actually happen to me. But the fact is it happens to defenseless victims every single day, albeit in a somewhat different form: through enforcement of the minimum wage.  

Right now there is a campaign underway to raise the federal minimum wage from $7.25 to $9 or more, and polls indicate that Americans overwhelmingly support it. And who wouldn’t? Who could object to making sure that everyone can earn a living? Who would oppose guaranteeing that every American is paid fairly? 

Well, the problem is that the minimum wage doesn’t ensure everyone can earn a living — it ensures that many of us can’t earn anything. And it doesn’t guarantee that everyone is paid “fairly” — it unfairly denies us the freedom to decide for ourselves what pay to offer or accept. 

I remember when I got my first job. I had just turned seventeen and after a bit of a search — I think I submitted three applications at the local mall — I got a call to interview for an entry-level position as a ticket taker at the mall theater. I sat down with Michelle, the theater’s hiring manager, and after going over my work experience — “I once helped my dad wash his car” — Michelle offered me a starting position at $5.35, just above the minimum wage at that time. I remember thinking: it’s not much, but it’s better than anyone else is offering me, and it’s certainly better than being out of work.

And that’s how employment should work. Employment is a contract — an arrangement between a person who wants to work and someone who wants to hire him. But under minimum wage laws, Michelle and I weren’t the only ones who had a seat at that negotiating table.

Had Michelle only offered me $5 an hour and had I wanted to accept it, Mr. Minimum Wage Enforcement Goon — I picture him as Bluto from Popeye — would have crossed his arms, sat back in his chair, and shook his head. And had he tried to enforce today’s minimum wage of $7.25, well, then, it’s very likely I would have never gotten the job to begin with. 

The question is: Who invited him? Why was my employment agreement anyone’s business but mine and Michelle’s?

Here’s one answer: “But it’s not voluntary! You needed the money, while the movie theater could have afforded not to hire you.”

But the fact that someone badly wants or even needs something doesn’t imply that his efforts to get it aren’t voluntary. I may have needed a job, but it’s not like Michelle could have zapped me with a cattle prod to stop me from going to work at Subway.

Michelle’s only power was the power to offer me a better deal than any of her competitors. We sometimes forget that companies have to compete for employees the same way they have to compete for customers. When I interviewed with Michelle, I was no more powerless than a consumer shopping for condiments: Heinz is free to charge a thousand bucks for a pint of mustard, but it’s not free to keep you from buying a jar of Grey Poupon instead. 

Did I wish I could have gotten more than $5.35 an hour? Sure, but no one was offering me that, and as an ambitious but inexperienced worker eager to get my start, I understood why: I wasn’t worth more yet. I wasn’t just getting the paycheck — I was building the skills and resume that would make it possible for me to make a whole lot more than $5.35 some day.

That’s the logic behind internships, which few people object to. Young people regularly work for low and even no pay in order to build their resume, learn useful skills, and make networking connections. If you forced companies to pay interns significantly higher wages, you would achieve only one result: you would prevent young people from realizing those benefits. By the same token, if the government had stepped in and forced the movie theater to pay a wage higher than what my ability justified, it wouldn’t have magically made me more productive — it would have made me unemployable.

Those who don’t think the world owes them a living understand that they can’t expect to get paid more than the worth of their value to an employer, and that to earn more they have to become worth more. Such people know that a low-paying job can be the best path to a high-paying job. Contra the minimum wage cheerleaders, it isn’t low pay that’s unfair — it’s preventing people from offering and accepting jobs that’s unfair. 

Then again, maybe it’s not those who believe in individual responsibility that the supporters of the minimum wage are trying to appeal to.

About The Author

Don Watkins

Former Fellow (2006-2017), Ayn Rand Institute