Why Increasing the Minimum Wage Hurts Employers and Employees Alike.

Recently there has been a push by many unions and some politicians, including the use of ballot initiatives at the local level, to raise the minimum wage. In the City of Seatac, Washington, a suburb of Seattle, such an initiative passed raising the minimum wage to $15/hour within the City Limits, though the Airport has been exempted judicially. Other proposals range from raising the minimum wage a couple of dollars to raising the national minimum wage to $15/hour or more. Some of the more radical proposals have even suggested imposing a "living wage" and forcing employers to pay no less than $50/hour. Such extreme proposals obviously have no chance of being implemented, but the fact that certain elements in society are shifting the economic debate to focus on wages demonstrates a fundamental change in how our culture now views economics and people in general.

Economics used to be viewed in terms of businesses being collaborative and cohesive, benefiting employers and employees alike. This is somewhat idealized, but bear in mind, people are imperfect and they sin. The more successful companies in history, however, strive, and have sought after this ideal, and usually come pretty close. Think Hobby Lobby, Starbucks, and Microsoft, among many others.

For many years in this country, the economy had been looked upon as an arena of competing interests, full of opportunity to achieve. The arena was composed of various markets, where goods and services were sold. Each participant sought to “make a living” in order to provide for a family. Creativity and inventiveness were rewarded, often by creating new markets and industries filled with even more opportunity. We have seen throughout our nation’s history that as we shifted from a primarily agricultural society to an industrial and now and information driven one, opportunity to achieve has also increased. This often required parties to work together, and the vast majority of successful enterprises begin by a simple act of cooperation toward a common goal.

Starting with agriculture, the farmer grew what he needed for his family, and either saved or sold any surplus. Then the farmer sought to improve his lot in life by growing more of a surplus, and diversifying crops, growing not just food, but things that could be used for making other useful goods, seizing opportunity and hiring more farm hands. Gradually, as the textbooks point out, Eli Whitney and his cotton gin were just the beginning of new and growing markets and changes to the economy. Farmers began improving how they farmed, rotating crops, using and improving fertilizers and pesticides. People like Whitney began a new mechanized market by developing farm equipment. This led to the increase in wealth, which led to the need for banks, land, lawyers, etc. As operations grew, more people had to be hired as contractors or employees to do more jobs. People thought up great ideas to improve life for everyone, such as the train, the car, the ability to make ice to keep food from spoiling without having to cure or pickle it. All of these developments took cooperative ventures.

This is not to say there were exploitative situations, cheating, or other injustices; there were, and there will continue to be so long as people remain imperfect. The driving force was to improve one’s position, though; to work hard, and to serve your fellow man. People sought out opportunity. Henry Ford once noted that he could make more money if he made his cars more affordable. If he could build and sell cars for $500 to a million people, instead of $5,000 to only 10,000 people, he would sell more cars to more people and make more money as a result. The same concept has been applied to virtually every major product that is mass produced for public consumption, just look at computers and TV's. The point was that if you did a good job and the public loved your product, you could be rich too.

But this concept also applies on the small scale too. Work is not bad, or evil. It is something that is good for you in many ways. Laziness is not good, and overworking is equally not good. However, work in and of itself is not bad at all. For Christians, we recognize that even before the fall of man, God had created work for us in the Garden of Eden. God himself worked when He created everything. God showed us that it is not good to be lazy, but He also showed us to stop and enjoy the fruits of our labors and not overwork when he rested on the seventh day. Similarly, Man worked in the garden for God, and was rewarded with his every need provided for.

After the fall, however, work became more difficult. It required more of a focus on working together, helping others, and serving others. Throughout human history, we can see the benefits of teamwork in our survival, and in doing business. The key is working to serve others. In economic terms, this means that labor, skilled and unskilled alike, have the potential to become commodities like any other raw material. Labor, however, is a unique raw material in that is it derived directly from people. This means that such a “commodity” must be valued differently, and on more than one basis. It also means that labor should be considered more than just a raw material, but a special asset as well.

First the employee as asset. Labor is valuable for what the person providing it can do for you, but also for the relationships that form, and the sense of community that develops. For instance, it is not uncommon for friendships at work, and even romances, to develop. The employees at large factories would think of themselves, and indeed often refer to each other as part of the family (Welcome to the XYZ, Corp. family!) As many who study social interactions will tell you, businesses with a strong sense of community tend to be more productive, and the employees tend to be more productive. However, when that sense of community is broken down, moral suffers, and sometimes the business closes down.

Examples of this include the recent demise of Hostess prior to its resurrection, (possibly a topic for another day) the labor dispute between Boeing and the Machinist Union, Chevy and the United Auto Workers, and now the possible unionization of fast food workers. The breakdown in these situations involved wages and benefits. While it is important for businesses to care for their materials and assets, and employees are certainly an asset since we know they are more than mere commodities, it is equally important for employees to recognize their role too.

Businesses provide goods or services to the public, but they also provide jobs and the ability for a person to earn a living. The goods and services cannot be provided, however, if the employees do not perform their duties well. Again, teamwork and mutual respect are the key. When an employer views their employees solely as a commodity and not also as an asset, the employee becomes indistinguishable from an object, inhuman. That hurts moral and productivity. When the employee sees the business as something exploitative and monolithic, the employee also no longer sees the business owners as human. This breaks the necessary connection and collaboration needed for the business to run effectively and efficiently. The result is a constant battle between employer and employee. 

The employee as commodity. We see how an employee is an asset, but as we know, labor is also like a commodity. This means that labor is subject to the law of supply and demand. It would be great if we could hire as many people as we could put to work. Unfortunately, we cannot realistically do this. Not everyone is sufficiently skilled, and the skilled positions are more scarce than non-skilled positions. Also, an overabundance of labor drives wages down. We cannot hire a million people for 1000 jobs without driving the pay down to levels no one who accept, and we couldn't pay what everyone wanted without exhausting available resources and forcing the business to close.

There are also artificial forces affecting wages too, such as employment taxes and benefits. Providing benefits means resources must be used that might otherwise go to profits, or to higher wages. If I pay someone $10 per hour plus a retirement benefit and medical and dental coverage, I can only afford to hire so many people before I have to raise prices. If I raise prices and sales decline, I take in less in profits and may have to either cut wages, cut employees, or keep things the way they are and eventually close the business down. This also forces the employer to think of the employee solely in terms of being a commodity, and less human. Employees also lose the drive to achieve and improve their position, to fulfill their ambition. Whether this is climbing the corporate ladder, starting a new business, or earning prestigious awards in their profession, employers and employees alike have ambition and a drive to improve one's lot in life. If this ambition and drive are removed, it contributes to a view of employees being objects instead of people.

If the government forces the minimum wage up equally artificially, the employer is coerced to think of the employee as inhuman and purely as a commodity only. The tension between the employer and employee also increases, destroying the collaborative cohesion that could, or might have once, existed. The employee wants more money but doesn't want to do more for it, to which the employer believes is unjust, and the employee believes he or she is being exploited, feeling used and unappreciated, and also believes this is unjust. Thus the push for increasing the minimum wage hurts employees and employers alike by distorting the purposes behind work in the first place, and the necessary cohesion and collaboration needed for a business to properly function.

If the drive to seek opportunity is removed from the economy, ambition to improve one's lot in life, and the drive to serve others and to work cooperatively, the economy and indeed whole communities break down leading to disastrous consequences. People begin to see others not as valuable lives but as burdens, as incapable for caring for themselves, and focused only on satisfying base and immediate desires. Such communities are as short lived as the attention spans they foster. Will a $15/hour minimum wage cause such a disaster on it's own? Of course not, but such an artificial imposition on human relationships in the economy certainly contributes to it. People are more than mere commodities. They are inherently valuable, having been creating in the image and likeness of God. Ambition and the drive to improve ourselves promotes dignity and respect. Taking this drive away robs people of their dignity and sense of self worth.