A good argument against minimum wage laws..

Great Debates
1

[QUOTE=The dissent in WEST COAST HOTEL CO. V. PARRISH , 300 U.S. 379 (1937) ]
'The law takes account of the necessities of only one party to the contract. It ignores the necessities of the employer by compelling him to pay not less than a certain sum, not only whether the employee is capable of earning it, but irrespective of the ability of his business to sustain the burden, generously leaving him, of course, the privilege of abandoning his business as an alternative for going on at a loss. Within the limits of the minimum sum, he is precluded, under penalty of fine and imprisonment, from adjusting compensation to the differing merits of his employees. It compels him to pay at least the sum fixed in any event, because the employee needs it, but requires no service of equivalent value from the employee. It therefore undertakes to solve but one-half of the problem. The other half is the establishment of a corresponding standard of efficiency, and this forms no part of the policy of the legislation, although in practice the former half without the latter must lead to ultimate failure, in accordance with the inexorable law that no one can continue indefinitely to take out more than he puts in without ultimately exhausting the supply. The law is not confined to the great and powerful employers but embraces those whose bargaining power may be as weak as that of the employee. It takes no account of periods of stress and business depression, of crippling losses, which may leave the employer himself without adequate means of livelihood. To the extent that the sum fixed exceeds the fair value of the services rendered, it amounts to a compulsory exaction from the employer for the support of a partially indigent person, for whose condition there rests upon him no peculiar responsibility, and therefore, in effect, arbitrarily shifts to his shoulders a burden which, if it belongs to anybody, belongs to society as a whole.
[/QUOTE]

I think it is a good argument. I am a small business owner. I have no guarantee of a minimum wage or a living wage. I might go bankrupt if my business fails. I might lose my house if my business fails.

If someone is willing to work for me, for say, $6.50 per hour, why should the government burden that free choice between the employee and me? Again, I am not guaranteed $6.50 per hour or -$100 per hour.

2

Small businesses in the U.S. tend to be protected by bankruptcy laws. You won’t lose your house if your business fails, unless you were so foolish as to put the house down as collateral on your business loan.

(Yes, some people are that foolish. But that isn’t the fault of the law or of society. You could also take out a mortgage and go to Las Vegas with it. We live in a country where people are free to be foolish in that way.)

The business owner is not in a position of need for the means of survival; he’s in the game to make a profit.

If it could be shown that minimum wage laws significantly interfered with small business profit, then that might be a case against such laws. Historically, no such evidence has ever been shown.

Meanwhile, the low-wage worker is in doubt for a roof over his head and food in his pantry. He has the “freedom” to be homeless…without having chosen it.

3

Here was me thinking that the supposed justification for the huge rewards reaped by some business owners was the fact that they, unlike their employees, had taken “risks” regarding their income. :rolleyes:

4

One has to remark again that that was the dissent, the main opinion should be looked at:

The argument made by the dissent lost, and IMHO if the OP wants to make it into a “good argument” be my guest, but the context is that a woman and then most women and servants were the beneficiaries of the ruling, they were people that were denied a fair wage that had already been established by the estate and their employers were not doing the right thing. The parties affected sleeked remedy for their employers breaking the law.

5

As a fellow small business owner, I understand where you are coming from, If I worked about a third the hours I do, I would come somewhere around minimum wage for myself, but I must disagree entirely with the premise of lowering or removing a minimum wage for employees.

To begin, why would I hire someone who agrees to work for $6.50 an hour, when there is someone else willing to work for $6? or $5.50 or even less. The race to the bottom can go quite quick. I would need to do this, because my competitors would be, and if they can cut their costs by reducing their labor to lower than the current legal limit, I would be at a disadvantage if I did not follow suit. As it is, I do hire on at more than minimum wage, so I would still probably pay better than my competition, but I would need to pay less in order to remain competitive at all. I don’t really want employees working for me who are impoverished, that tends to cause them to be inefficient at best, and thieves at worst, neither of which I would like to be forced into having work for me. Having poor employees has a much greater potential to drive me out of business than a higher minimum wage that my competition must match as well.

I have also worked minimum wage jobs. I never felt really all that motivated at them. I occasionally flat out told my managers that they paid me the minimum they legally could, I would do the minimum work to not get fired. That’s not an attitude I would like in my employees. I don’t really see all that much work you can get out of someone for 7.25 an hour, I don’t think it would be worth having someone “working” for less.

It’s quite simple. If I feel that someone isn’t worth paying minimum wage, I would simply not hire them, and hire someone who was. If the position you need to fill doesn’t generate at least $15-$20 an hour, then it’s not a position that needs to be filled. If a position generates $15-$20 an hour or more, then how can you possibly lose money by paying $8-$10 an hour to fill it? The only positions that generate less are the menial chores like cleaning, and I fill most of those positions myself, rather than paying someone else to do it.

Even with minimum wage, there is no minimum hours. I have part time employees who soak up hours when I’m busy, and don’t get too much when I’m not. I don’t pay them any less for the work they do for me, I just don’t have them do as much work.

I have agreed to take a risk in starting out on my own. I stand to make pretty good money if all goes well, I stand to lose a lot of money if it doesn’t. An employee that I hire does not have the same incentives. I am not hiring them on a profit sharing basis, they will not get rich if I do, so I can’t make them share in the pain when my costs are high.

Also, if you stand to lose your house if you fail, get a better CPA, or one at all. I’d be pretty financially screwed if my business folded at this point, but I wouldn’t lose my house or some key protected assets.

6

Oh boohoo.

If you can’t afford to pay an employee a measly $7.50/hr then the problem with the business plan is not related to minimum wage laws.

7

I’m not saying that I agree with the dissent insofar as the law is unconstitutional. State legislatures may make unwise policy to their hearts’ content. My argument is on the merits of these laws. If I (as an employer) am looking at my bank account and wondering how I will keep the lights on next month, then I’m not the same as Wal-Mart and certainly not exploiting anyone. I am personally losing my shirt and making less than minimum wage. Why is it “unconscionable” that my employees don’t make a certain amount?

8

That’s not correct as applied to the mortgage holder. When a small business fails, the owner may be unable to pay his debts, including the mortgage on his home. Bankruptcy can delay foreclosure, but eventually the clock will run out, and the foreclosure will proceed unless the owner finds a way to cure the default.

9

In sole prop. the owner is not seperate from the business. In LLC and S corp the owner is.

10

I see no reason why taxpayers should subsidize your small business by helping you pay for your employees. Why should I contribute my hard earned money for housing assistance, food stamps and medicaid to your employees because you don’t want to pay them a living wage. Jack up your prices, pay a living wage, and give me a choice on whether the true, un-subsidized price of your products are worth it.

11

Yes, this. The problem with the argument in the OP is that it rewards the owner both ways - succeed or fail - while damaging the worker both ways - succeed or fail.

Seriously, do we need to break out the Marx? This discussion was already had once on a global scale when the workers started suffering at the hands of a greedy capitalist system without regulations. While Marx’s solution turned out not to be necessary, it was only made unnecessary because Capitalism embraced the notion of safety standards and just compensation regulated by law. Take all that away, and suddenly Marxism looks like our next best option.

12

This is certainly true; both business owners and employees are in a heap of trouble when the business fails.

I don’t know much about small businesses, but, other than the risk of not being able to pay the mortgage payments, I’m pretty sure there are lots of protections that keep the owner of a failed small business from losing his house. There are ways to shield the risk. (Again, putting the house down as collateral is an exception to this.)

13

I agree with the argument completely. Market forces should determine prices, for the most part. If I value your services at a particular wage, and you are willing to work for it, your basic human needs are not unimportant so much as they are irrelevant to the transaction. If you are blamelessly in a situation where you cannot reasonably live on what you make, that’s a problem that requires a social safety net. If it’s so @#$%ing important to society, society ought to pay for it then. Put a referendum on the ballot to raise your and my taxes in support of all low-income workers who can’t live on their wages. Let’s see how popular it is then, how passionate people are in support of the “downtrodden” when they actually have to pay for it themselves.

IOW, if this wage is not enough to sustain you, “there rests upon [me] no peculiar responsibility” with regard to what you need–it has nothing to do with what value your services have to me. Forcing me to pay higher wages “therefore, in effect, arbitrarily shifts to [my] shoulders a burden which, if it belongs to anybody, belongs to society as a whole.” It’s one of those countless situations where the government gets to force what ought be a burden of the taxpayer onto someone else. People LOVE solutions like this–i.e., getting stuff that someone else has to pay for. They’ll vote for them all day long.

14

Well, we did not put it on the ballot, but we ran it through the legislature and we voted in the torn and frayed safety net of a minimum wage (along with food stamps, WIC, and a few other under-funded programs). So we already had the vote.

15

Yes, I already acknowledged that. People love laws like this, where some problem gets solved by forcing some other fellow to pay for it. It’s irresponsible, but legal by definition. But your comment did nothing to actually counter the basic point: someone’s needs are the province of society if society is offended by the circumstance. Society ought to bear the burden. It has nothing to do with what value that person actually brings to an employer.

BTW, before there’s another glib response, I realize this is not going to change. I’m just responding to the OP. That dissent makes perfect sense.

ETA: Food stamps are exactly what I refer to when I say society ought to bear the burden directly. That’s not analogous to a minimum wage in the sense I’m arguing.

16

No. You and jtgain are arguing that there is a special burden on the employer. However, the burden is passed directly to society in terms of the cost of the products or services. Since the minimum wage prevents one employer from using slave labor to cut costs below that of his competitors, there is a level playing field that all of society pays through the purchase of services and products provided by employers using minimum wage labor.

17

I think hkepotat gave a good argument for the MW, from the point of view of the “race to the bottom” in wages. MW isn’t exactly a social welfare kind of law, as it is a workplace regulation law. You can’t have an unsafe workplace, or employ very young children – but without regulations, those would happen (they did!) because competition would knock out any company that didn’t engage in such practices.

In the same way, then, businesses can’t be allowed to prey on desperate workers who would take a very low-paying job just to feed the family.

This would all be counterproductive if the MW actually did result in lower employment rates, but, historically, this doesn’t happen. That’s the real miracle of the MW law: it benefits people without creating a harmful burden on either businesses or society overall.

18

However, they, unlike their employees, can see a significant upside to their risk, making lots of money if their business is successful. Their employees, on the other hand, might see a small promotion and raise if they are lucky.
If you can’t stand the risk, stay out of the kitchen.

19

I don’t know what you do, but would you think it is proper to avoid environmental regulations (such as dumping your hazardous waste in the river) in order to keep the lights on next month? In this case and the MW case you’d be spreading your costs to society. That’s wrong.

20

It’s one aspect of the tragedy of the commons. If everyone is free to abuse a common resource then nobody can afford to not abuse the resource.

In this specific case, you’re running a business. Let’s assume there’s no law on how much you can pay your employees. But you appreciate your employees and you decide to pay them ten dollars an hour.

But you don’t own the only business in town. You have competition. And your competitors are dicks. They only pay their employees eight dollars an hour. How are you going to compete with people paying eight dollars an hour to their employees when you’re paying ten dollars an hour? You either need to drop down to their level or you’re going to end up going out of business.

And it doesn’t stop at eight dollars an hour. To restore their edge, your competitors drop their wages to six dollars an hour. You have to follow or go out of business. And the race to the bottom continues. Every business will eventually end up paying its employees an hourly wage that’s just sufficient to keep them alive through the end of the shift. Let’s call it fifty cents an hour.

But your business is doing okay, right? No, actually you seem to be missing something: customers. Because your business isn’t unique. The same laws of economics cover every other business in town. They’ve all been driven down to paying their employees the same minimum living wage of fifty cents an hour.

And who, in a town full of people making fifty cents an hour, is going to form your customer base? You have a business in a town full of poor people who can’t afford to buy anything. Within six months you and every other business is closing its doors for lack of customers.

So business people like yourself need a society of people with some money to patronize their businesses. That’s the commons you all most make a living off of. And minimum wage laws are what prevents individual business owners from starting a downward wage spiral that would destroy that commons.