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Minimum Wage and Public Policy

The need to set price floors as an alternative to more direct and judgemental regulation.

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 CO₂ 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.

Invitation to Regulate

The vote to scuttle the open internet rules is an invitation to congress: regulate. While there will be litigation over the FCC’s disregard for public comment, including potential violations of the Administrative Procedures Act, it is clear that leaving the rules up to the FCC is insufficient.

Expect that the battle lines will be drawn in 2018. Democrats will overwhelmingly support regulation. Republicans will have their stand-outs, but will generally not.

The Democrats can now run on a bevy of related matters, like the need for affordable broadband, the utility of the internet (Mr. Pai seems to believe it’s all memes and streaming video), and the ongoing problem of regulatory capture and anti-competitive actions by major corporations. That’s piling on other unpopular legislative actions, including the bizarre tax bills and the failed, sadistic attempts to change healthcare.

Once again, Republicans have shown themselves unaware of the risk of their choices. At each turn, they set up another trap for themselves.

But for the modern American netizen, that’s still a ways off. We will see how swiftly the ISPs begin to abuse their powers. We will await the leaks that show they’ll ignore the transparency requirements or try to be as vague as possible in their filings. “Blocking traffic that interferes with traffic,” or some other such idiocy (like blocking access to their own transparency reporting pages).

The basic bad bet here was that net activism won’t translate into votes and that the ISPs won’t piss off enough people to make a difference at the polls. But with the momentum for the Democrats, even if both of those are true, it may not matter.

The High Price of Non-regulation

The cost of slashing regulation must account for the cost of paying for the things that regulation would prevent.

The Republican Unified Government (RUG), high off the fumes of kerosene they have bathed over the regulatory state, should open a window and call their accountants.

Regulation has a cost (nearly $900 billion for the past eight years, according to one study). But burning the check on externalities and leaving consumers unprotected has a cost, too. The RUG should be wary of its plan to abolish the sensible regulation alongside the onerous.

Consider the concept of healthcare, of medicine. When doctors diagnose an illness, it incurs a cost. That worker may need time off to recover, or may suffer under the side-effects of their prescription. The business may pay out some money to cover treatments. They may have to make accommodations for the worker’s weakened state, temporarily or permanently.

But the alternative, a worker dying on the job, the fear of other workers that they will arrive in the same state, is untenable. Worse, to fire someone for an illness, undermines the argument that employment is a stable, dependable method for allocating value to the individual.

Or consider food regulations, whether from the FDA or the USDA. Those hard-won protections of food quality arose from public outrage at the contaminated foodstuffs that people were buying. Maggoty bread and spoiled meat may fit with the latest RUG-endorsed diet fad (“The That Food Looks Rancid Diet”), but most Americans want wholesome meals for them and theirs.

No. Slash-and-burn regulatory policy will result not in record gains, record wealth, but will instead only hasten the adoption of stricter regulation in the years that follow. It will hasten migration to the states that hold fast to their own regulations, as millions in places like Flint, Michigan start to recognize that it’s not worth it to live somewhere with poison water.

The cost of incompetent government is too high, and the Muralists are teeing themselves up to be a memory that will echo for generations against the emergence of any future RUG.

Things that are properly regulated stipulate a “pay me now or pay me (more) later” arrangement. Just like with health insurance, paying up front is cheaper and easier than paying in the rear-view. The RUG would do well to study the problem and only eliminate or recast regulations that fail the obvious test of appropriateness.