Other Peoples’ Money and the Minimum Wage

Money Puzzle

[Editor’s note: This article was originally posted Dec. 17, 2014]

Milton Freidman is known for saying, “That no one spends other peoples’ money well”. Meaning we all watch out for how we spend our own money, but seldom give much thought when that money is not ours. The truth is, we’ll shop for bargains when it’s our money at stake—often spending hours to do so. However, when the money we are spending is not ours, who cares if we get the best deal. We have a great example of this in the way government—federal, state and local—spends taxpayer dollars. It’s not the governor’s or state legislator’s money; therefore their only concern is whether it will help them get re-elected.

In the most recent election a number of states had referenda on the minimum wage. Political leaders like President Obama, Governor Pat Quinn and Chicago’s mayor Rahm Emanuel all touted the notion that we need to raise the minimum wage. Unfortunately, even some Republicans, who should know better, began to sing the very same tune.  Putting forward the minimum wage on the ballot is a nonsensical. Who doesn’t want a raise? Who wouldn’t vote others a raise if they could? It’s not their money. It’s tantamount to spending other folks’ money without permission. Most would call that looting or plunder—taking what isn’t yours. It’s kind of like what happened in places like Ferguson, except more dignified. Many are in favor of stealing legally by proffering laws that makes it illegal for businesses to higher a person at a lower wage, even if their skill set is only worth a lower wage.

In a capitalistic free market economy, a person opens a business and then negotiates with employees to come work for them so that employee and employer can make a living/profit. Generally speaking, the employer makes more than his, her employees because he, she assumes most, if not all, of the risk. The employees’ risk would generally include not being paid for their labor, or not on time, if the business itself experiences financial problems or at worse folds. Mandating a minimum salary invariably prices people out of the market place and makes it more difficult for potential employees to negotiate a salary—especially those who have no skills or are trying to acquire new skills through on-the-job-training.

The Congressional Budget Office has said that about ½ million people will lose their jobs if the minimum wage is raised. Economist Dr. Walter Williams mentions in his book, Race and Economics: How much can be blamed on discrimination, that in 1990 more that 80% of economist believed that increases in the minimum wage caused more unemployment “among the youth and unskilled.”(p. 40). So why do politicians push for the minimum wage? Because first of all those who are affected most by the raise don’t vote, or are too young to vote. Most people working minimum wage jobs are between the ages of 16-19: with those 16 to 17 unable to vote; and those 18-19 who generally don’t vote, or are uninformed voters.

Dr. Williams also mentions that arbitrarily raising the minimum wage doesn’t increase productivity or the employees’ skill sets. It only gives the employers more incentive to “substitute machines for labor; change production techniques, relocate overseas and eliminate certain jobs altogether.” (p. 46).

As a matter of fact, the raising of minimum wage does nothing for income inequality. Many people lose their jobs because of the extra cost to their employer who can’t absorb or pass on the cost to customers. So they’re worse off. Those who receive the raise are still at the bottom of the income scale and the inflation of prices (because of the increased production costs) means their purchasing power is the same, or worse. The real problem is skill set inequality and education inequality, which prepares people for the work place as well as the opportunity to earn a decent living. Let’s not forget motivational inequality, which motivates a person to get out of bed and take a job that is “beneath them” so they can climb the latter of success in hopes of obtaining the job they really desire. Then there is also moral or principled inequality, which keeps a person from lying, cheating and stealing their way through life. You know taking what doesn’t belong to them.

This brings us back to the issue of other peoples’ money. No one has the right to tell a business owner how much he must pay his, her employees. That is a contract between the owner and those hired. They negotiate the price based on supply and demand for their particular services and/or skill sets. That is why Michael Jordan could negotiate a thirty million dollars a year contract back in the 1990s. It was Jerry Reinsdorf’s money—and Jordan had the skill sets to demand that kind of salary.

To further the point, this is also biblical. Jesus uses a business concept to illustrate a spiritual concept. In Matthew 20:1-16, Jesus tells the parable of the workers in the vineyard. The owner hires workers for his vineyard through out the course of the day, from morning to evening. At the end of the day he pays them in reverse order. He pays the last hired first, and pays them the same amount he pays those who were hired in the morning. Those hired first have an issue with the owner. You see in the story the last hired have only worked one hour, while those hired earlier have worked all day. They call the owner out as being unfair. The owner replies in verses 13-15, “…Friend, I am not being unfair to you. Didn’t you agree to work for a denarius? Take your pay and go. I want to give the man who was hired last the same as I gave you. Don’t I have the right to do what I want with my own money? Or are your envious because I am generous?”

The spiritual lesson here is that God is generous. The reward of the Kingdom is not based on time worked but on the generosity of the Father. The “last will be first and the first last” (v. 16) and they will all receive the same reward—the Kingdom of Heaven. The parable illustrates the generosity of God who gives Kingdom access to whomever makes the faith commitment, regardless of when it’s made. This spiritual principle only makes sense if the business illustration is solid. The owner of the vineyard has a right to pay whatever he pleases to those who agree to work in his vineyard. It is his money and in the parable he decides to be generous with it. He is thus an illustration of God’s generosity.

Thus, the minimum wage argument is a nonsensical and unbiblical idea used by liberal politicians to, among other things, further their agendas. They are generous with other peoples’ money, giving raises without the owner of the vineyard’s (business’) consent. When they use other peoples’ money they are plundering those resources without permission from the owner. We’d be arrested if a private citizen did that. So why do we allow our government to get away with it? Because it’s not our money, so we don’t care. I think the better thing to do is to put the salaries of the politicians on the ballot, whether they get a raise or reduction in salary. Don’t forget, their salaries are paid with our money!

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