Libertarian Nonsense About the Minimum Wage

In the comments section, Libertarian Robert Taylor continues to humor us with fact-free tidbits from the Libertarian faith-based community, this time about the Libertarians’ favorite bogeyman and font of evil, the minimum wage:

Robert, don’t you see who it is you are actually benefiting?? If you raise the minimum wage, you only hurt poor people and small businesses! Why do you think companies like Walmart in the US back the hiking of minimum wage? Because they can handle the hike, but they know that their small mom and pop competitors can’t. You ultimately favor big business that’s in bed with the government.
As for your claims that hiking minimum wage creates inflation, you are wrong. While it may raise demand of goods in the short term, raising prices, it ultimately results in job losses in the long term. Inflation can only occur under the power of a central bank/federal reserve that can print money.

I’m amazed that Walmart backs the hiking of the minimum wage.
Hey, if Walmart pays people better than Mom and Pop Ripoff Mart, all the power to em.
Unfortunately, there is no correlation whatsoever between rises in the minimum wage and the destruction of small businesses in favor of large businesses, the formation of monopolies, or consolidation in industries. These are normal trends in capitalism. And the monopolists and large firms tend to pay their workers worse and treat them worse than small businesses.
Many very small businesses treat their workers very well for some reason. I think it is because they are part of the community – you know, the corner store – and everyone goes there, and they want to be on good terms with the community, so they treat workers quite well. There are a lot of very small businesses around here, and my observation was that they tended to treat their workers quite well. As businesses get larger, my observation is that they don’t treat workers so great anymore. I guess they don’t have to?
Europe has high minimum wages, and there are small businesses swarming all over the continent. Even in Sweden. Go to Sweden sometime. So many small business it would make your socks fall off. The 3rd World is full of small businesses, and there is no minimum wage there. There doesn’t seem to be any correlation between the number of small businesses and the presence of absence of a minimum wage, nor its height within reason.
Rising wages don’t cause inflation? This is some Libertarian revisionism, right? I thought that this is a pretty clear trend in Economics, and there’s a good, solid theory to back it up, too.
As unemployment drops, the labor market tightens up, and workers start getting more choosy about jobs. They refuse to work at crap jobs with lousy pay and terrible conditions. Firms start raising pay and bettering conditions to attract workers, increasing the costs of business. In addition, workers at firms start getting bolder, demanding raises and better working conditions on threat of strike or leaving. The reserve army of labor that keeps labor meek and mild is gone, and the working man is standing up. Firms start to raise wages and better conditions in response to strikes and workers threatening to take off, raising the costs of doing business. Firms pass on rising costs to consumers in the form of higher prices.
It’s simply incredible that neoclassical idiots don’t believe in this most basic of economic concepts.
Appealing to small businesses is a great way to tug at your heartstrings, but Libertarians like Taylor are promoting the philosophy of the Rich and Big Capital, not the philosophy of small business. Every time big business goes up against small businesses, Libertarians, neoliberals and the Republican Party always back big business versus small business. This is a philosophy of the rentier classes, not Mom and Pop’s Struggling Whatevermart.
So when Libertarians, the enemies of small business, try to sell their ideas to us by appealing to the interests of small business, we need to listen hard. Why would the enemies of small business promote a theory supposedly to better small business?
They would not.
Taylor also tries to stand up for the poor here. The Libertarians and neoliberals hate the poor. There’s probably no one they hate more than poor people, except maybe Leftwingers. Libertarian theory is a theory of the rentier classes whose ancestors were the landed gentry and monarchists of Europe. These are the “natural rulers of mankind.” They’ve been pissed off at progress since the Enlightenment, and Libertarianism is their way of fighting back. Why would the enemies of the poor try to sell us their theory on the grounds that it benefits the poor?
Surely they would not.
A commenter earlier quoted an article on LewRockwell.com, an extremely racist anti-Black website associated with Ron Paul, saying that if we got rid of the minimum wage, we could put all these unemployed inner city Blacks to work at $4-5/hour. Hell, why not $1/hour? So much more “efficient.” Interesting argument that seems to make intuitive sense, however, inner city Blacks won’t work for $4-5/hour. Neither will I. Neither will just about anyone. They will tell the owner to fuck off and walk away. Who will work that low? Illegal aliens, maybe?
The minimum wage is great for poor people, as long as you don’t raise it too high. If you raise it too high, it’s true that you can cause some job loss. It puts a lot more money in the hands of the poorest working people, and they spend every nickel of it and then some.

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14 thoughts on “Libertarian Nonsense About the Minimum Wage”

  1. LOL Walter Williams, who wrote that article, is black and would be very surprised to learn that hes a racist. How is LewRockwell extremely racist and anti-black? can you give some examples please?

    1. LewRockwell.com supports Rand Paul and Ron Paul, Libertarians. Libertarians want to get rid of all anti-discrimination laws. Ron Paul is on record wanting to chuck all of these laws, and Rand Paul is too, and no, he did not backtrack recently. He is still saying that. That’s why the White nationalists supported Ron Paul last time around. He wants to get rid of anti-discrimination laws, and that’s what the White nationalists are all about.

  2. Robert,
    Before commenting on your beliefs on minimum wage, I’d like to step in defense of Lew Rockwell’s website. I am not a regular reader, but I do know the majority of the writers. They are not anti-black (whatever op-eds were published three decades ago withstanding). Furthermore, the original champions of the notion that minimum wage has hurt the black worker were Thomas Sowell and Walter Williams, black neoclassical economists. This is not a scholarly source, but see this video (interview with between Sowell and Williams): http://www.youtube.com/watch?v=2jv1Zae0sgo
    Now, minimum wage is no different from any other price floor. If it set above the market price (which, admittedly, is dynamic and non-uniform, even amongst workers of the same skill level) it will create a surplus of labor. We live in a society with such an extended division of labor that fortunately most employers pay well above minimum wage. But, where minimum wage has dire effects is in the lowest caste of unskilled workers (I may be an economist, but since there is no economics-related job I can currently successfully get, I work for minimum wage, by the way).
    This is why the heaviest unemployment is faced by young teenagers, minorities, and I would probably venture to guess women (I’m not sure if one could make the claim that minorities are discriminated against, because according to my birth certificate I am a minority [I am from Spain, so I am classified as a Hispanic] and I have a minimum wage job. Rather, in poorer areas [where more minorities tend to live] there is less of a probability of a firm developing that can afford to pay minimum wage).
    As aforementioned, I am a European, and your rendition of the European labor market is a bit off-base. Even prior to the recession, most European countries have relatively high “natural unemployment” (by the way, our “natural unemployment” rose from 2% to 5% in the past sixty years). For example, my Spain (where minimum wage varies, but can be relatively high — for example, minimum wage in Madrid for a full-time employee usually tends to be around €1,300 a month, I believe) has always tended to have high unemployment, relative to other countries. It is also one of the most labor-oriented countries in Europe. Surprise, surprise, most unemployment is in the unskilled labor pool.
    It’s surprising to me that most people still ignore the a priori effects of price ceilings and the empirical evidence to support the notion that minimum wage prices unskilled labor out of the market. One can call it a necessary evil (but, obviously, nobody wants to call it that, because having incomeless individuals is more evil than having more less-income earning individuals).
    Also, the take on Walmart is correct. For the most part, Walmart pays well above the minimum wage. Its competitors, like Kmart (which earn much less revenue) and small local stores, cannot afford to pay more than minimum wage, and so minimum wage effectively disallows these firms from hiring an optimum amount of workers for the size of the firm. The consequence is less efficiency. Of course, this may not be universally true for all small, local firms. For example, my grandfather owns a bookstore, and he pays his one employee $10 an hour. Of course, for him the optimum amount of workers is one, so it’s not much of an issue. But then, these type of firms don’t add much employment to the labor market, anyways (his bookstore is also not very profitable, in any case).

    1. There are many US states that have no minimum wage. Wages and working conditions are quite poor in those places. The 3rd World has no minimum wage. Wages are abysmal and actually unemployment is quite high. Here in California, we have extremely high unemployment in the Central Valley. 80% of those workers actually are paid less than the minimum wage. Yet we still have very high unemployment.
      If you set the minimum wage too high, then it can have adverse effects on small businesses and workers due to business closures and worker layoffs.
      It’s hard enough to get young Blacks to even work for the minimum wage. Most think it is chump change. I can’t imagine any of them would work for less than the minimum wage.
      Around here, Walmart pays its workers $9/hr, unless I am mistaken. Walmart has low prices because it buys in quantity. Labor has nothing to do with it. If Walmart’s competitors can barely afford to pay above the minimum wage (dubious) then how does it hurt them vis a vis Walmart, who supposedly pays well above the minimum wage? Your argument makes no sense.
      You really ought to be able to survive on the minimum wage. That’s the whole idea of raising it. I don’t know any workers who hate the minimum wage law and are dying to get rid of it, except you, I guess. Raising the minimum wage, to a certain point, helps workers. If you don’t raise it much, there is little benefit, but if you raise it high enough, many workers surely benefit from increased wages.
      What would be the point of jobs paying so low below minimum wage that no one could even survive on them? Why even bother to work at such a job? I don’t understand these Libertarian arguments. They seem so nutty.

    2. There are many US states that have no minimum wage. Wages and working conditions are quite poor in those places. The 3rd World has no minimum wage. Wages are abysmal and actually unemployment is quite high. Here in California, we have extremely high unemployment in the Central Valley. 80% of those workers actually are paid less than the minimum wage. Yet we still have very high unemployment.
      If you set the minimum wage too high, then it can have adverse effects on small businesses and workers due to business closures and worker layoffs.
      It’s hard enough to get young Blacks to even work for the minimum wage. Most think it is chump change. I can’t imagine any of them would work for less than the minimum wage.
      Around here, Walmart pays its workers $9/hr, unless I am mistaken. Walmart has low prices because it buys in quantity. Labor has nothing to do with it. If Walmart’s competitors can barely afford to pay above the minimum wage (dubious) then how does it hurt them vis a vis Walmart, who supposedly pays well above the minimum wage? Your argument makes no sense.
      You really ought to be able to survive on the minimum wage. That’s the whole idea of raising it. I don’t know any workers who hate the minimum wage law and are dying to get rid of it, except you, I guess. Raising the minimum wage, to a certain point, helps workers. If you don’t raise it much, there is little benefit, but if you raise it high enough, many workers surely benefit from increased wages.
      What would be the point of jobs paying so low below minimum wage that no one could even survive on them? Why even bother to work at such a job? I don’t understand these Libertarian arguments. They seem so nutty.

      1. Robert,
        It’s true that wages, as compared to wages in the United States, are poor in the third world. But, those are societies with a much less extensive division of labor, and much less invested accumulated capita per worker. Those economies produce much less. A dynamic market process ensures that over time the wages of the workers of those societies rise (viz., through a rise in productivity — competition between firms and an increase in the supply of goods [therefore, a decrease in their cost]). Case in point, during the boom years, the wages of the average Chinese worker doubled. It’s also worth considering that those countries, despite having no minimum wage, suffer from heavy government intervention in other areas, which effectively handicap market growth.
        Regarding California, California is a perfect example of the above, where excessive government regulation has handicapped market growth. In fact, it has led to capital flight, as job-providers go to more profitable geographic and political areas (California has been suffering from capital flight for some time now). That there is high unemployment is a testament for to the lack of business opportunities (relative to other areas), more so than anything else. By the way, I live in San Diego.

        If you set the minimum wage too high, then it can have adverse effects on small businesses and workers due to business closures and worker layoffs.

        How do you know if minimum wage is too high? It seems to me that your definition is entirely arbitrary, because if it was not you would have agreed with what I wrote above (which basically says the same thing — it is too high when it is above the market rate). Furthermore, yes, wage floors above the market rate lead to business closers and worker layoffs (due to the lack of profitability). But, I’m a little confused why your acceptance of this fact leads you to disagree with me (when I, effectively, said the same thing).

        It’s hard enough to get young Blacks to even work for the minimum wage. Most think it is chump change. I can’t imagine any of them would work for less than the minimum wage.

        This is so detached from reality that I’m not sure if it’s even worth contesting in depth. What about the poor blacks who live in very poor areas, who turn to the sale of drugs and other illicit activities for the purpose of making an income they are otherwise barred from making (due to minimum wage)?
        I recommend listening to and reading texts by Walter Williams, a black neoclassical economist who looks at the effects of minimum wage on poor black communities.

        Around here, Walmart pays its workers $9/hr, unless I am mistaken. Walmart has low prices because it buys in quantity. Labor has nothing to do with it. If Walmart’s competitors can barely afford to pay above the minimum wage (dubious) then how does it hurt them vis a vis Walmart, who supposedly pays well above the minimum wage? Your argument makes no sense.

        What does their low prices have to do with wages? I never said there was a relationship between their wage level and their prices. I said that Walmart can afford to pay their unskilled laborers at rates above minimum wage (because of their high profit rate).
        Companies like Kmart, which currently cannot afford to pay an optimum volume of workers based on existing minimum wage laws, would depreciate wages to increase productivity (increase the amount of workers employed — up to the point where they would experience diminishing marginal returns).
        The wage differential between Kmart and Walmart doesn’t matter, because Walmart can only offer a limited supply of jobs (so, most unskilled laborers would still have to opt for alternative employment).

        I don’t know any workers who hate the minimum wage law and are dying to get rid of it, except you, I guess.

        How many minimum wage workers are economists? How many unemployed workers realize that if they could offer themselves for less money they would have a better chance of garnering employment? How many unemployed workers care about this, because they receive extended unemployment benefits?

        Raising the minimum wage, to a certain point, helps workers.

        Yes, it does, at the expense of others.

        What would be the point of jobs paying so low below minimum wage that no one could even survive on them? Why even bother to work at such a job?

        This is why wages are always above sustenance level, “nutty” Marxian doctrine aside. I would suggest reading George Reisman’s Capitalism, specifically pp. 613–618. A free pdf version of the book can be found here: http://www.capitalism.net/Capitalism/CAPITALISM_Internet.pdf

    3. Anyway, as a Libertarian, you guys don’t care about unemployment. Libertarianism is a theory of the capitalists, and the capitalists could care less about unemployment. The only people who care about unemployment are workers and the Left. It’s irrelevant to Capital. What Capital cares about is lowering wages as low as they can possibly get away with. This is why they send their hire hands, the Libertarians, out to make fake arguments against the minimum wage “to fight unemployment” LOL. But see, Capital cares nothing about unemployment; actually, they like it. Libertarians make this argument to help Capital pay lower wages and to sucker the enemies of the Libertarians, the workers, in with some fake argument against unemployment, which Libertarians don’t care about anyway.

      1. Robert,

        Anyway, as a Libertarian, you guys don’t care about unemployment.

        Unfortunately, you have a very narrow and skewed view on libertarianism. In any case, libertarianism is a political doctrine.
        Free-market economists are very keen on unemployment, for exactly the reason that the greater the supply of labor the greater the productivity. Furthermore, no human being likes seeing others destitute. In any case, the arguments I bring forth here are economic, not moral (but the outcome of free-market economics is largely utilitarian, in any case).
        I agree that anybody would pay lower wages “if they could get away with it”, but the fact is that competition disallows capitalists from doing so. It is exactly the competition for labor that you aptly describe elsewhere (but, astonishingly forget here) that not only maintains wages, but leads to their rise.

  3. @Catalan, are you the same Catalan that posts alot at the Mises Community Forum? LOL@anarcho-capitalism, I enjoy that site. I like the ideas that float around there(but dont agree with them), like anarchy, and then completely privatizing the courts, the schools, the roads, the clouds and bodies of water(!), the police, and prisons. @Robert Lindsay- If black conservatives are race traitors, doesnt that make white liberals race traitors as well?

  4. More “Econonists’ nonsense” than “Libertarian nonsense”, surely? Supply and demand isn’t some crazy libertarian dogma no one else subscribes to.

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