Minimum Wage and Public Policy

There’s the Fight for $15, and there’s always been a push and pushback around minimum wage laws. It’s a good example of the problems and failures with public policy debates.

Some jobs should be destroyed

An important problem that the minimum wage deals with effectively is work that should not be done or cannot be done in a way that sustains a worker. We can’t pay someone to cut grass by hand (with scissors), for example. It’s a job that’s not going to happen. Even for a modestly sized lawn, you would have to work seven days a week, using ambidextrous scissors with both hands, working 12 hour days, and you still wouldn’t the the lawn cut before it grew higher still. The wage that would be required, as you would need at least four or six ambidextrous lawn cutters, would be so low that nobody could afford to do the job.

So, any discussion of minimum wage must deal with this first issue. That minimum wage effectively (and graciously) rules out some jobs that we must either find alternatives to accomplish or leave undone or make subsidiary to more pronounced jobs that are economically sustainable.

To put it another way, when an opinion or study talks about “job destruction” from minimum wages, we must not immediately light a candle, but ask if those jobs that might be destroyed (and, one imagines, eviscerated, mutilated, and dumped without a proper burial) are jobs that anyone should be doing. They aren’t economically productive enough to pay someone the minimum wage!

Are there non-economically-productive jobs that should be done? Yes and no. There are jobs that aren’t directly producing revenue, like school teachers and firefighters, but they are either investments or protections against loss. They are very important and those workers, often public servants, deserve at least a minimum wage. Often they are underpaid precisely because of the imbalanced mindset of work, where jobs that aren’t moneymakers are seen as inferior and undeserving of better wages.

The same problem in carbon

We see the same problem in carbon that we see in the minimum wage. You have what is effectively a negative externality to nonregulation—that in the case of minimum wage is the allowance for undesirable work to be performed at a substandard wage. In the case of carbon, you allow for the release of COâ‚‚ for industrial processes that don’t merit the release (this also extends to other forms of pollution).

But then you start getting into what constitutes useful work and what doesn’t. People say they don’t want the government to pick winners and losers. Instead of gatekeeping, though, the beauty of a price floor is that it makes no moral or aesthetic judgements. It simply lets things that can’t cross the boundary bang their heads and fall down. They could either become efficient enough to cross the boundary, or they could be subsidized by charity or other arrangements (e.g., through advertising or alternative monetizations).

This sans-judgement approach is one of the reasons so many people see value in UBI or freedom dividends or whatever you’d like to call them. They similarly come without strings, and they supplant a lot of other programs (which either come with strings by their nature or because nanny-state Republicans seek to impose their morals on the poor).

The same problem in prisons and detention centers

The costs of holding people is already high, but often the conditions are lousy. Overcrowding, in particular, is a chronic problem. If the standards of conditions were higher, and if the costs of holding people were higher, it would force society to make smarter decisions about who should be imprisoned and for how long.

In lieu of prison or jail, some crimes would be decriminalized, or some sentences would be curtailed. In other cases, rehabilitation would be improved to lessen the chance of recidivism. But when conditions are poor or the costs too low, society tends to overincarcerate.


The bottom line is that for capitalism to work, it must have guard rails. If you don’t have minimum wage, fine, but then you need some alternative that basically sets down an ante that firms have to meet to hire people. (In poker, antes and blinds are used to make playing cost something so that action is forced; it can and should have similar effects in other capitalist systems.)

In general, one would prefer to find ways to make the basic flows and forces of capitalism work to the advantage of the whole system. The current regulatory systems often fail to do that, but the Republicans tend to take the wrong approach to redress this: simply eradicating regulation (while their other hand puts up regulations, but only on things they don’t like that benefit the poor or other groups they dislike, including women). Until we have a party that both recognizes the necessity of guard rails and the existence of in-built forces to erect those rails, we’re stuck in a limbo of misregulation or nonregulation.