The Minimum Wage – the Triple Sin of Statism

Like so many other “Progressive” governmental economic policies, the federal minimum wage can be traced back to FDR and the New Deal, certainly one of the most expansive government programs in the history of the United States. Wildly popular amongst the left and supported by the Republican Party for political points, the minimum wage was first established in 1933 and has continued to plague the American economy ever since, the brief span between 1935 and 1938 in which the Supreme Court ruled it unconstitutional notwithstanding. No longer are business agreements between employer and employee sealed with a handshake; instead, they are determined by a lawmaker’s pen and enforced by the barrel of a gun.

In short,  the minimum wage should be abolished, but before moving into the moral and economic reasons surrounding why the minimum wage should be $0.00, the first and most obvious reason resides in jurisprudence – namely, the correct interpretation of Article I, Section 8, Clause 3 of our Constitution: the Commerce Clause. As it reads, “[The Congress shall have the Power] To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” Careful observers will note that within the Commerce Clause, there exists only one power delegated to Congress: the power “To regulate Commerce.” It is one power which is equally applied to three separate spheres of authority, not three spheres each with their own particular powers.

Moreover, this clause merely gives Congress the power to regulate commerce between sovereign, political entities, not within them. (If there is any objection to the States being considered sovereign under the Constitution, I will direct the reader to The Federalist No. 40 in which James Madison declares, “I ask what are these principles [of opposition to the Constitution]? do they require that in the establishment of the Constitution, the States should be regarded as distinct and independent sovereigns? They are so regarded by the Constitution proposed.”) The regulative power itself is further clarified by Madison in The Federalist, No. 42 in which he states that Congress is to serve as “a superintending authority over the reciprocal trade of confederated States.” Regulating commerce was never meant to mean, and constitutionally still does not mean, granting Congress the ability to control the operations of private businesses; from food and drug safety to false advertising and the minimum wage, Congress has no jurisdiction over these affairs.

Still, if one is to say that those powers are, indeed, implicit within the ability to regulate commerce (as far too many individual politicians and judges do), then one must apply those powers equally to the other two spheres of authority, foreign nations and Indian tribes. Seeing as it would be noticeably ridiculous to attempt to determine a minimum wage in Mexico or within Inuit villages, it is equally absurd in a constitutional sense that the federal government asserts authority to do the same within the States. Congress possesses no extra authority over the economies of the States that it does not have over the economies of foreign nations. In fact, it has less authority, citing such restrictions as Article I, Section 9, Clauses 5 and 6 that essentially order Congress to ensure a laissez-faire system of trade amongst the States, an order that has long since been disregarded. And to those of you who claim that the interpretation of the Constitution changes over time: you’re correct. The Constitution does change over time – when two-thirds of Congress and three-fourths of the States say it does. The perils of transient, subjective laws and interpretations of them shall be reserved for another discussion.

With the unconstitutionality in mind, one can examine whether the minimum wage should be a valid extension of the government’s authority on moral grounds. To answer quite frankly, no, it should not. Like everything in the free market, people only enter into associations with one another based on the value decisions that they make by choice. For example, say that a baker sells his bread to a customer for $2.00. The reason that he does not keep his bread for himself is because the $2.00 is more valuable to him than the loaf of bread, and the reason that the customer does not keep his $2.00 is because the bread is more valuable to him than his $2.00. The same principle applies in labor – people sell their labor and employers consume it based on the independent value judgments of each. Both are free to agree upon a wage or reject it at their will – it is their choice, their free will, and their right. However, some “enlightened” officials in Washington in an ever-active crusade to bestow their self-proclaimed “wisdom” to others would rather deny those individuals that right, proclaiming, “We know what you want better than you do.” What right does Congress have to tell individuals who would be willing to choose lower wages (giving them a competitive edge over others based on their efficiency, i.e., their ability to produce at the same level at a lower cost) that they cannot accept that wage? Furthermore, what right has the government to tell employers that they are not allowed to hire such individuals on such terms, should they so wish? The answer to both questions is that the government does not possess that right. Just because some are unwilling to work at such wages does not mean that the government should infringe upon the rights of those that are, taking away both their ability to set values for themselves and their competitive edge of efficiency in the job market, bringing them down to the level of their less efficient competition. “It isn’t fair otherwise,” the wise ones proclaim. However, to this I ask, “Fair – by what standard?”

So the moral rights of employees and employers are infringed, but what about the economic ills such a policy brings about? Well, as with all economic price floors, a surplus is created. In this particular case, it is a surplus of laborers. The quantity of laborers demanded by employers necessarily decreases as the price of each laborer increases (not to mention the demand itself decreases as employers are put out of business, most likely small businesses which both sides of the aisle are so quick to claim to defend), meaning that the number of workers hired is reduced. Unemployment, in turn, goes up – and stays up. So long as the cost of hiring each laborer is above the market price (the aggregate agreed-upon wages between employees and employers), there will be individuals unemployed as a result.  Additionally, the input costs to each business that hires employees will increase which, as stated earlier, could either drive them out of the market or force them to raise their prices. The increased prices then fall on the last victims of the minimum wage, the consumers, forcing them to either to pick a substitute good or spend more of their money to maintain their same, desired standard of living. Now the three-tiered injustice of the minimum wage can be seen fully – employees willing to work at lower prices are pushed into bread lines, the employers’ abilities to earn a profit from his work is reduced (or eliminated), and the consumers pick up the difference. “But it increases the standard of living!” Yes, for the few workers that get hired (ignoring, of course, the increased prices of goods that they will have to pay), but for the laborers that do not get hired, the employers who have to provide the higher wages, and the consumers who have to pay the higher prices, it decreases. Greatest good for the greatest number? Decidedly not – only individuals seeking their own self-interests without obstruction can achieve that end.

So, in the spirit of a long-forgotten French businessman explaining to a government official (Jean-Baptiste Colbert) how the government can assist in running the economy: “Laissez nous faire!”

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4 thoughts on “The Minimum Wage – the Triple Sin of Statism

  1. I would support repealing the minimum wage as part of a wholesale economic reform package (sound money, no income tax, no illegal immigration flooding labor markets & driving down wages). But as a general rule, there would be NO less popular move than to advocate repealing the minimum wage under present day circumstances. You could probably make today’s minimum wage panhandling!

    1. John Stossel, a libertarian TV personality on Fox Business, actually created a documentary called “Freeloaders.” In it, he does a bit where he dresses like a homeless man and panhandles for change. According to him, actually made more than the minimum wage. While the minimum wage is a product of statist political doctrine, panhandling is more the product of altruistic moral doctrine. Rather than rewarding productivity, people reward depravity (the difference between charity and altruistic giving should be noted).

      If you’re interested, here’s a link to the first part of his documentary (albeit, it’s from YouTube, so the quality is not the best): http://www.youtube.com/watch?v=j9cWCRn64Ak&feature=related

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