Living WageWritten by Jim Blue | | email@example.com
One of the upshots of today’s economic turmoil is the loss in confidence in the markets — the stock market, the commodities market and the housing market. After the Reagan revolution, Americans came to expect that the market would magically distribute goods and services to the people who deserved them, the people who worked hard enough and were smart enough to choose the most profitable pursuits.
But now the stock market has crashed; the commodity markets have cratered, and the housing market has left millions “upside down” on their mortgages.
So, many Americans are looking to government to distribute the goods to the people who deserve them. And of course “we” are the deserving ones — not those nasty Wall Streeters or those hideously overpaid corporate executives or those fill-in-the-blank-with-your-favorite-villains.
This new world view has given fresh life to the notion of the so-called “living wage,” promoted in Lucas County by Commissioner Ben Konop. The living wage was first proposed in the 1800s by the Catholic Church, which tried to thread the needle between hands-off capitalism and heavy-handed communism. Pope Leo XIII said the living wage should be enough to provide for the worker (uniformly male), his wife and his children, and with a little left over so he could set aside a little savings. Pope Leo’s Rerum Novarum prodded politicians across the world to reform labor laws, including the establishment of minimum wage requirements.
Konop is proposing a living wage of $8.38 an hour for anyone who works for a county contractor or for a company getting tax abatements from the county. That’s more than the state and federal minimum wage.
Konop says most county contractors already meet his proposed standard. So, my question to him is, “Why bother?” And my question goes deeper. Why should we create the fiction that government can provide “fairness” when the market cannot? I’m not a neo-con nutcase who puts the free market on a pedestal. I’m just familiar enough with undergraduate level economics to know that wage and price controls will have unintended consequences. And those consequences will always be bad.
Econ 101 teaches us that the market price for any good or service is where the supply curve and the demand curve intersect. If government sets a price lower than that point, then you will have shortages. Think back to the gas lines of 1973 if you want an example. If government sets wages higher than the market would dictate, as with an artificially high living wage, then you will have unnecessarily high unemployment. The cost of labor will prevent employers from hiring as many workers as they would otherwise.
Now I’m sure Konop has taken an economics course or two. So he knows this. But he also knows that there are no votes in advocating a market-driven economy right now. Pushing for a “living wage” — well that’s a good plank in a successful campaign platform.
Back in the 1890s, the legislators in Indiana tried to pass a law setting the value of the mathematical constant pi to three. Now every geometry student knows that pi (the circumference of a circle divided by its diameter) is the irrational number 3.14159 … It cannot be changed by fiat to three or four, or any other rational number. It does not matter what lawmakers (or students with bad memories) may wish.
In the same way, it does not matter that county commissioners or members of Congress might like to change the laws of economics. They are what they are. A living wage should be dead on arrival.
E-mail columnist Jim Blue at Jim@JimBlue.com.