Blog author: jcarter
Wednesday, September 4, 2013
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UntitledAmerican Samoa is an unincorporated territory of the United States located in the South Pacific Ocean. It has a total land area is 76.1 square miles, slightly more than Washington, D.C., and a total population of about 55,000 people. It also has 18 different minimum wages by industry, mandated and enforced by the US Department of Labor. Oh, and an unemployment rate of 29.8% (about 10% of the total population is out of work).

Minimum wage advocates would likely say that American Samoa is an anomaly since it has too small a workforce to draw any representative conclusions. And they might be right about that. But as Mark J. Perry asks, why wouldn’t proponents of the US minimum wage support an American Samoa style multiple wage structure:

If you support a single hourly minimum wage in the US, wouldn’t you show even more support for multiple, government-mandated minimum wages by industry? That is, if you trust the supposed wisdom of politicians to know what the “correct” single minimum wage is for the entire US economy (currently $7.25 per hour), shouldn’t you also trust those same politicians to know what the “correct” minimum wage is for America’s many different industries? If a single minimum wage is “good” for the economy, wouldn’t multiple minimum wages by industry be even much better?

If all work is worth either $0 or $7.25 an hour (the current federal minimum wage), why wouldn’t it make sense to have minimums based on the type of work involved? I’ve never heard minimum wage advocates argue for such a position, though. Why not? I’m genuinely curious to know how they might answer.


  • Michael

    The reason minimum wage advocates wouldn’t agree to this approach is not because they don’t believe in the infinite wisdom of politicians to discern the “correct” minimum wage in every industry, but rather because such an approach gives too much credibility, in their view, to the main argument against a minimum wage, namely that minimum wages decrease employment because not all workers are created equally productive. Thus, going from advocating a one-size-fits-all minimum wage to an industry-level minimum wage, presumably because the market wage in one industry is different to that of another, only raises the question of why one shouldn’t go to a firm-level or a job-level minimum wage – indeed why not go to a worker-specific minimum wage? The logic leads to abolishing the minimum wage and liberals will have none of it.

  • Curt Day

    A good friend of mine who owns his own business has suggested multiple minimum wages. He thinks that minimum wages should be based on the location’s cost of living rather than having one uniform rate. I think this makes sense but for some jobs, this could continue to move some jobs from the more expensive and already developed areas to the more rural areas and that carries a high cost to the whole country. That problem would have to be addressed.

    The objection that raising the minimum wage would decrease jobs shows, to a certain extent depending on the amount raised, the morals and values of business owners who place profit over people.

    • Michael

      The morals and values of business owners are largely irrelevant here. If business owners were “moral”, according to your understanding, and chose to forego some profit in order to pay their workers more than the market wage, then why would you need a minimum wage? If, on the contrary, business owners are not “moral” and choose to pay their workers the market wage, a minimum wage above the market wage would lead to workers being replaced by automation or workers at a less expensive location. Thus, a minimum wage will, at best, have no effect on employment and, at worse, decrease employment.
      The assertion that a minimum wage is moral, regardless of the actual consequences of enforcing one, shows how verbal virtuosity trumps economic reality among the left. The same goes for the blind pursuit of economic equality, no matter what this entails for absolute economic wealth.

      • Curt Day

        Michael,
        Your stated view here is exactly what is wrong with economics. Economics has been reduced to profit and when economics is then elevated in society, even life is reduced to profit.

        Your stated view here sees such economics as the pie rather than regarding economics as the slice of a larger pie, the pie of life. So, rather than divorce morality from economics, why not look at the necessity of such a divorce under our current approach to economics tell us that we need to change the kind of economics we are practicing?

        • Michael

          Curt, you misunderstand me and, frankly, economics. It is not within the purview of economics to discern binding moral rules; this is why we have philosophy. Rather, economics as a distinct social science is concerned with analysing the use of scarce resources. I would agree with you that economics divorced from morality is not particularly useful. But neither is economics the science of morality.
          In the case of the minimum wage, economics can tell us what its effects are in the economy, but not whether it is per se a moral or immoral policy. If the moral law tells us that policies should be conducive to human prosperity and economics tells us that minimum wage laws do the opposite, then we ought to oppose minimum wage laws on moral grounds.

          • Curt Day

            Michael,
            Certainly economics is a social science. It revolves around human behavior. But do you also know the Greek word from which we get the word, economics?

            Because economics deals with a part of human behavior, then, because humans have a moral side them, economics must also. The danger we have with today’s approach to economics is that of reducing it to profit. That carries ominous implications considering the importance our society puts on it and the pedestal on which economics has been placed.

          • Michael

            Yes, sometime economics will look to the moral values of people for explanatory power of human action. But you can’t possibly derive moral laws from economics.
            Now I do not understand what you mean when you say that today’s economics is reduced to profits. Economics does not dictate that people ought to be motivated by self interest, but if people are are then the homo economicus of classical economics is clearly a useful abstraction. The ominous implications you speak of are not the result of a failing of economics but of modern philosophy’s rejection of the natural law tradition.

          • Curt Day

            Michael,
            You still don’t understand. You can’t have economics without addressing morality. Why? Again, economics is a study of a particular human behavior and that behavior always carries with it morality. Thus, the ominous implications you recognized as possible comes from a failure of economics to include the moral dimension in the model that is being employed. Either economics is including morality in its model or it isn’t.

            The same can be said of the environment. Economics occurs within the biosphere. And when the economic model used excludes environmental factors, then the economic chosen is faulty and thus those who determine the economic model being used have proven themselves to be a threat to others.

            Finally, again, in your previous comment, you tried to measure morality with the dollar sign. Only, the design you established makes it impossible to critically assess the economic model du jour. Rather, what is being analyzed by your thought is the behavior within the model. And if the behavior in the model doesn’t produce prosperity, then the behavior is wrong and the economic model stands above all criticism.

            I hope from this discussion you understand why the Left looks at education institutions, this blog is part of Acton, as just some of many institutions of indoctrination to maintain the status quo for the benefit of those with wealth and power. BTW, the Left looks at the Church, and very legitimately so, in the same way.

          • Michael

            You’re conflating “morality” as a phenomena of human behavior and “morality” as that which is objectively good. Economics must take account of the former but not necessarily of the latter, unless it not only describes but also prescribes human action.

            I would be intrigued to hear the moral assumptions that you think economics ought to incorporate and your justification for them. I suspect that your rejection of the Church goes hand in hand with a rejection of the classical tradition and consequently any rational basis for maintaining that the particular moral code you hold to is objectively true.

          • Curt Day

            Michael,
            Are you unnecessarily dividing them? When people adopt a morality, are they not in touch with what is objectively good or bad and thus choosing? Again, those who develop the economic models and those who choose have their morality revealed by what they develop and choose.

            Which moral assumption are you asking for? Isn’t it the same moral assumptions we live life by? Again, just as economics lives within a biosphere and thus must, to be adequate, take environmental concerns into account, so it also lives within the human community and thus must take what is human into account to be adequate. This is why I asked you where we get the word economics from. I don’t believe you answered the question.

            Finally, because I criticize the Church doesn’t mean that I reject it. I just think it has been corrupted by the same thing that corrupts all institutions, the love of power and money. And people are responsible for their moral choices regardless of what the Church teaches. Why? Because there is a morality that God expects us to know so that if the Church fails, yes, they bear some responsibility, but it does negate the responsibility of the individual for doing what is wrong. Romans 1:18ff tells us about the responsibility of each individual.

          • Michael

            Do we unnecessarily divide chemistry and biology, psychology and sociology, physics and metaphysics? I think not. Distinctions and categories are indispensable to scientific inquiry.
            Economics does not live in a biosphere or live at all for that matter. Humans do.
            Your belief that economics is homogeneously invested in a profit-oriented “model” and your apparent unawareness of the vast field of economics that analyses the externalities of human actions, including the social costs to the natural environment, is telling. The economics you describe is certainly not the economics I am involved in.
            No, again, you cannot possibly derive moral laws from economics. I have never heard someone claim this before and I think for good reason. And no, humans who are not professional philosophers do typically have a inner moral compass. But when an economist asks, “What is objectively good?”, he isn’t engaging in economics anymore, but philosophy.
            As to my supposed measuring of morality by profit, note the “if”. In English this denotes a conditional sentence.
            Finally, please tell how you as an economist would incorporate objective moral truth into the analysis of how minimum wages affect employment and what effect this would have. Would an increase in the minimum wage suddenly have no or even a positive effect on employment? Obviously not.

          • Curt Day

            Michael,
            Morality is not a subject we study using the scientific method. Thus the same rigor in maintaining methodlogy does not come into play. And therefore your analogy doesn’t hold here. In addition, we don’t need to wait for the Church or Philosophers to conduct research to know the basics of morality. To say otherwise is to say that no human has an internal moral guide–something that is quite unbiblical. Romans 1:18ff tells us where that guide comes from and why it goes astray. This Biblical passage also tells us the source objective moral truths.

            The effort to push all moral responsibility for our behaviors in one specific sphere to another sphere assumes that these spheres in which we operate are disjoint. That, for the purposes of your point here, no one can know what is moral outside the expertise of the Church and philosophy. And thus, the responsibility for whatever morality is practiced, lies solely with those experts in morality whose job is to enlighten the rest of the world. We don’t even rely solely on the experts for Psychological and Sociological insights since each person is capable of making observations.

            Since economics is not this discrete sphere that does not incorporate other areas of life, and since the subject and object of economics is a moral being, whatever economists describe about the economic enterprises will have moral components.

            Likewise, if humans live in a biosphere and the same humans practice a specific economic model, then economics will have environmental components. But more can be said here because of the dependence that practicing a given economic model has on the biosphere. So yes, economics does live in a biosphere and when it excludes any reference to the environment, then it is inadequate.

            In addition, your premise in your conditional statement shows how you measure morality. According to your premise, morality dictates that policies should be conducive to human prosperity. How does morality dictate that? And why is it not the case that those who accept that premise are not revealing their morals and priorities in life?

            Regarding my belief about economics being “homogeneously invested in the profit model,” it is simply an observation of how the prevailing economic model of today is taught and practiced. In fact, the prevailing economic model employed has little regard for externalities. Think about how many economic measurements are used to determine the impact our economic practices have on the environment or on people. The externalities that you refer to are not part of the mix of the prevailing economic model. If you can contradict that, list the measurements that are being used today by the prevailing economic model.

            As for your conclusion of the premise, you never ask why there would be no positive effect on employment if the minimum wage is raised. And thus, aren’t you assuming that that there is either no adjustment to be made to the prevailing economic model to make it work better or that there is no criticism that can be made of the model itself? And the answer, obviously not was made based on what data?

            Finally, you never answered the question regarding the word from which word we derive our word “economics.”

          • Michael

            I admit defeat.
            “Such amazing knowledge is beyond me, a height to which I cannot attain.” (Ps. 139:9)

          • Curt Day

            Michael,
            My problem with your arguments is that what you gave with one hand, you took away with the other. That was my only problem until this last reply which was only meant to be insulting.

            We both believe that economics is interdisciplinary. But you shielded economics from all moral and environmental responsibilities.

            All of our discussions revolved around your conditional statement that refused to ask any critical questions regarding why increasing the minimum wage would hurt employment–that is if it would really hurt employment. And it is the unwillingness to ask critical questions that distinguishes indoctrination from education.

          • Marc Vander Maas

            And it is the unwillingness to ask critical questions that distinguishes indoctrination from education.

            That’s actually far more insulting than a man throwing his hands up and admitting that there’s no way to argue with you, Curt. A bit of humility is in order, I think.

          • Curt Day

            Marc,
            It isn’t insulting when the conditional statement spurs no questions afterwards. It was implied that we accept as fact that raising the minimum wage hurts employment. There was no asking why. So my comment was simply an observation

            Marc, all you are doing is deflecting from the need to critically question why raising the minimum wage hurts employment.

          • Marc Vander Maas

            Uh, Curt – you just said this:

            All of our discussions revolved around your conditional statement that refused to ask any critical questions …

            followed immediately by this:

            And it is the unwillingness to ask critical questions that distinguishes indoctrination from education.

            This after a very long exchange where Michael spent a great deal of time trying to hash out this argument with you. He wasn’t avoiding your questions. He just answered them in a way you didn’t like. So your response is to imply that he’s simply “indoctrinated,” unlike you, the educated dialogue seeker.

            Anyway here’s some data to throw in your hopper that may allow you to critically question your position that raising the minimum wage has no effect on employment.

          • Curt Day

            Marc,

            Michael spent much of his time divorcing economics from moral and environmental accountability. He asserted that raising the minimum wage would hurt employment. Suppose that assertion is true, he didn’t address why it would hurt employment. He neither questioned whether something in the system could be fixed to remedy this nor did he question whether a drop in employment that results from raising the minimum wage indicates that the system should be changed.

            The articles you provided do not address either question as well. It provides information about the current system but neither questions whether the system could be adjusted to accommodate both increasing the minimum wage while not decreasing employment nor does it question whether we should change the system.

            In addition, there is an avoidance of certain subjects such as, what effects does the current wage system have on the lives of the wage employee and whether executive pay and the pay of other salaried employees affects pay for the wage employee and employment rates. This points to something else, what is the source of the information you are using? You are providing articles from a pro-business perspective. Are there other perspectives that could challenge this pro-business perspective?

            So there is an absence of asking critical questions about the system in both yours and Michael’s position.

          • Marc Vander Maas

            What you simply can’t wrap your mind around, Curt, is that intelligent people can respond to your critical questions in a completely different way than you do. You believe the system needs to be overturned entirely. I think that would be disastrous for the very people you claim to be concerned with. It’s not an absence of critical thinking; it’s simply that we don’t agree with you. Please don’t assume that people who disagree with you are either thoughtless or morally deficient. You come across as terribly arrogant.

          • Curt Day

            Marc,
            You assume falsely. I know the many ways people in which people can respond to questions. But here you are missing my point. Neither you nor Michael are asking critical questions about the current economic system. This was evident in your last note and the articles attached.

            The difference between a critical question and a noncritical question is that the critical question looks to change either what is in the system or the system itself. Neither you nor Michael did that. Michael made an assertion for which you provided data, though it was data for the wrong age group, but neither looked at the relationship between raising the minimum age and employments rates in a way that either questioned whether the system could be improved or whether we should change the system. Rather, both of you took the status quo for granted.

            Finally, there are plenty of people with whom I disagree whom I respect because they ask critical questions. One of my closest friends owns his own business and we go through these kinds of talks from time to time, and I very much respect his position and thinking even when I disagree with it and he respects my input. So your personal problem with my disagreement with you is your personal problem.

            I never said that you were thoughtless or morally deficient. I just said that in this discussion, neither you nor Michael were asking questions that showed critical thinking. That implies nothing about intellect or morals because there are a number of reasons why people don’t apply critical thinking to a given system.

          • Marc Vander Maas
          • Elise Hilton

            Michael, I admire your tenacity. It was a valiant effort.

          • Curt Day

            Michael,
            Is it really true that one cannot derive moral laws from economics? Are humans who are not philosophers without any internal moral compass? And does not the current economic model reflect the morals of both the economists who developed that model and people with power who chose that model? And note that it is not like they didn’t have a number of moral choices or economic models to choose from.

            The division implied by placing the sole blame for morals of the economic du jour completely on another group are discrete, assume that only one economic model and moral code is available at any one time, and thus are too rigid to reflect reality. And your approach doesn’t take into account whether the morals of those with power in society who determined the economic model du jour represent the morals of the general populace or that of a fringe.

          • Curt Day

            Michael,
            Regarding your last point, again, what canon are we using to measure morality? Isn’t it profit? Isn’t it prosperity? What you say you are giving by asserting that economics without morality is not useful you take away by measuring morality by profit and prosperity. You attempt to measure morality by business success. And when you do that, you ignore the human and environmental costs that must be paid to produce your “morally” required prosperity.

          • Michael

            Note my use of the conjunction “if”. Where precisely did I assert that morality should be “measured” by profit?
            The point I was trying to make, apparently to no avail, is that morality comes from outside economics. If one is simply trying to explain why high minimum wages cause unemployment, then no assumptions on what is objectively moral are necessary. To argue that this is bad (i.e. that some people are out of job as a result), which I would, one needs to apply moral philosophy (e.g. that a job is conducive to man attaining his final end). When economics attempts to explain why GDP (yes, aggregated profits) is up or down, it is doing just that, attempting to explain why GDP is up or down. How that implies a measure of morality by profit is beyond me.

          • Curt Day

            You measured morality by profit by writing:

            If the moral law tells us that policies should be conducive to human prosperity and economics tells us that minimum wage laws do the opposite, then we ought to oppose minimum wage laws on moral grounds.

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