April 11, 2014
With most DFL legislators lining up behind another hike to the state’s minimum wage under the guise of helping the working class, the Libertarian Party of Minnesota is speaking out to defend the very same working class who would be harmed should this legislation pass.
By a vote of 7-0, the LPMN Executive Committee approved a Resolution: We call upon the DFL to end its push to increase the state’s minimum wage and to instead pursue methods that would help, rather than hurt, low-income workers and the public at large.
On the surface, raising the minimum wage seems like an easy way to boost the fortunes of the poor and working class. Legislators simply decree that wages must be higher, and low-income workers would instantly be better off. Or would they?
To begin, it’s important to note that working people do have justifiable reason to be unhappy. Not long ago, the minimum of $6.15/hour was seen as sufficient. But not anymore. What happened?
The answer is that the dollar has been eroding in value. Since just the year 2000, the dollar has lost 25% of its purchasing power. It has lost an incredible 96% of its value over the past 100 years. It’s no wonder that many feel squeezed. This unstable valuation has put America’s financial system on a foundation of quicksand and jeopardized the living standard of every person, as employees find out that their earnings don’t buy as much as they once did, and as savers and seniors discover that their rainy-day funds and retirement accounts aren’t worth nearly as much as when they had worked to earn that money.
Democrats are focusing on a symptom of the problem by calling for increased wages, but Libertarians prefer to attack the problem itself. Libertarians have been calling attention to the Federal Reserve for years, especially its inflation of the money supply, which dilutes the value of the dollars that people have already earned. While Democrats frequently claim to be advocates for the working class, their actions have not backed this up. Janet Yellen will continue the inflationary policies of Ben Bernanke and Alan Greenspan, yet every Democratic Senator voted in favor of her appointment as the new Fed Chair without a single vote of dissent.
Taking on the Federal Reserve is a long-term effort, so would raising the minimum wage be justified even as an interim measure?
The answer is that wage and price controls have a nasty history of unintended consequences, “solving” one problem by creating another. France is well-known for its “worker-friendly” laws, which include high minimum wages, mandatory vacations, and legal barriers making it difficult for employers to conduct layoffs. At first, France might seem to be a panacea for the working class. But it is not. The overall result has been a consistently high unemployment rate, now at over 11% and with youth unemployment of 23%.
As one editorial aptly pointed out, “establishing a minimum wage is the same as establishing a maximum price for bread and cars” for the purpose of attempting to assist low-income people. President Nixon’s gasoline price controls led to the infamous shortages and long lines at gas stations in the 1970s. During hurricanes, higher prices play a key role in rationing demand and encouraging those outside the afflicted areas to rush in new supplies so that goods remain available, while supplies quickly run out in states which have prohibited price increases. In New York City, rent control has counterintuitively led to a shortage of affordable housing.
Wage and price controls are always harmful. Hardest hit are the low-wage earners, who have the fewest options available to them
Proponents of the minimum wage make a fundamental error: Low-wage jobs are not meant to become lifelong careers or family-breadwinner positions. Yet these jobs serve an important purpose by providing startup income and experience to youths still living with their parents. Low-wages also provide a foot in the door for the disadvantaged, who have no work experience or a questionable background, who are less likely to be hired otherwise. Raising the minimum wage effectively prevents the most disadvantaged from taking their first step up the economic ladder!
That is why a minimum wage hurts the poorest and disadvantaged. The least-skilled, lowest-wage positions are the ones most likely to be eliminated, with those responsibilities thrust upon higher-wage workers who will need to work harder or with longer shifts. Those still employed after a minimum wage increase will undoubtedly be pleased to receive a raise, a story that will be reported on the evening news. But there will be no coverage of those who are stuck at home, looking through the want-ads and not finding job openings that would otherwise be available.
Where do Minnesota’s other parties stand on this issue? The Republicans appear resigned to an increase and have capitulated … as they so often do. And the Independence Party is in lockstep with the DFL, with 81% of IPers supporting government manipulation of wages.
That leaves Libertarians as the only clear voice in support of an open marketplace. Libertarians also recognize that employment is a voluntary agreement between one individual who needs another’s labor and another individual who is willing to work for income. Both should be free to make their own decisions, without interference from politicians who claim to know what’s best for everyone.
Rather than cosmetic and counterproductive tactics like manipulating the minimum wage, here are real steps that legislators can take to help the poor and working class:
- The Fed’s inflation of the money supply is the root cause of the sinking value of wages and savings. A gallon of milk still contains the same volume it did 100 years ago, and a mile is still the same distance as 100 years ago; why should a dollar not also have the same value? Minnesota’s DFL officials should press their Democratic colleagues in Congress to repeal the Federal Reserve Act of 1913. Furthermore, since it was created, the Fed has presided over three extraordinarily severe crises (in the 1930s, 1970s, and 2000s) and it has been stunningly incompetent at identifying serious problems as they’ve unfolded. It’s time for the Fed to go!
- The economy should be liberalized (i.e. made more free). Repealing wage controls, restrictions, bureaucratic barriers to entrepreneurship, and welcoming high-paying industries (such as mining) with minimal hurdles, can help low-wage workers by creating ample opportunity for them to move up to better positions.
- Reducing or repealing taxes would give individuals more breathing room at their existing income levels. In particular, Governor Dayton’s punitive tobacco tax should be repealed, which disproportionally impacts low-income people. While some may feel that tobacco is not the best use of one’s earnings, people should be free to buy this product if they choose, and it’s nobody’s business to tell them they should not.
Libertarians advocate a world not of mandates, force, and decrees, but of voluntary agreements, opportunity, and freewill. It’s possible for all to get ahead, not by a tug-of-war against each other, but by pulling in the same direction. No matter where an individual may be on the socio-economic ladder, the most prosperous society will be one where everyone is free to take their next step upward.
Concerned about the expansion of government control and the erosion of individual liberty? Please consider joining and becoming active with the Libertarian Party of Minnesota. Libertarians support liberty on all issues, all the time. Libertarianism is a philosophical and political movement to promote personal freedom, strong civil liberties, a genuinely free marketplace, and peace.