Ed note: Pick up Wolfram’s new book today, “A Capitalist Manifesto: Understanding the Market Economy and Defending Liberty.”
President Obama, in his State of the Union Address, called for increasing the minimum wage to $9 per hour because “a family with two kids that earns the minimum wage still lives below the poverty line. That’s wrong.” There are a number of problems with the president’s suggestion, both economically and philosophically.
Is it really wrong that a person who works full-time at minimum wage earns almost $15,000 per year? The president might think so for his own personal reasons, but is it wrong from some well-founded philosophical sense? Should the federal government make it against the law for you to sell your labor at anything less than $9 per hour because President Obama thinks it is wrong?
Why should it be the role of government to set the price of labor and not the price of capital? Or land? If we accept that the federal government should set a minimum wage, why not a maximum wage as well? Tiger Woods earned over $58 million last year. Is that wrong? If the president thinks so then should we have a maximum wage? And what should that maximum be?
While we are at it, why should the minimum wage be $9? If we are going to make a minimum wage that “would raise the incomes of millions of working families” why stop at $9? Let’s make the minimum wage $300 per hour.
We could eliminate Social Security and Medicare, since we would all be making more than enough to save for our own retirement and health care. After all, isn’t it wrong that a family with two kids that has a full time worker cannot afford to send all their kids to college? And pay for private pre-school? Drive a decent car? And take a vacation every now and then?
A minimum wage of $300 per hour would solve a number of problems.
Of course we will not pass a $300 per hour minimum wage because lots of us would lose our jobs. If you are an employer you can’t pay your labor $9 per hour unless you add at least $9 per hour to your bottom line. Companies that pay labor more than what labor brings in do not stay in business.
Not everyone will lose their job – just those who cannot make $9 an hour worth of product. And who will those be? The unskilled, the young, the less-educated. And where will they go? In to the government welfare system or the underground economy.
How many families are really in the situation the president talks about? We know that only 2 percent of married workers earn minimum wage and many of those are the second earner in the family. Rather than take away entry level jobs from black teenagers (who face a nearly 40 percent unemployment rate) to raise the wages of a tiny fraction of the population, the president should deal with the 12.3 million unemployed and the 8 million who are working part-time but would like to be full-time.