Wednesday, November 5, 2008

On Minimum Wage

Law is fundamentally about what is fair – what is equitable for our society, as it exists now. However, the strict application of the letter of the law in a changing society may not always be equitable although the “law” is correctly applied but the desired end result remains unconsummated in a particular instant in time.

Hopefully, new law can prescribe an old policy – what is good for society - but is required usually due to gross inequities created by the application of the old policy in a changing environment. In turn, as the letter of the law strives for equity, economic policy should strive for efficiency – making a better product for less money – with the overall good of providing the best product at the least cost, hence, the perennial term, “best value.”

Free market principles are fundamentally inefficient at the extremities of society – that is – the lowest wage earners and those who have the most wealth. The lowest wages are set not by market principles but presumably by the lack of knowledge of low paid workers and the tendency of employers to seek employees who accept the least wages - with the end result works against the society and community as a whole.

Generosity must emanate at all levels. At the other end, the highest earning groups or individuals can create inefficiencies in the market by inequitably using capital as a leverage to create monopolies. America has fairly well-defined, effective anti-trust laws – the corollary being that we should have a threshold or balance at the lower level.

Higher costs of goods/services inherently create market forces where the best goods/services will persevere over less efficient, best-value goods. This subtlety of human nature – trying to get the most out of limited resources - forces the consumer to be more discerning.

A higher minimum wage sets a higher standard for all of society – higher pay at the lowest economic level/pay scale means that the lowest-paid individuals can afford more that society offers. And, is not this goal good for all?

Furthermore, lower minimum wage create a greater burden on the Federal Government – where the Government picks up the tab for individuals at the bottom of the rung. Simply, a minimum wage, which results in an annual salary below the poverty line, actually hurts society – where workers in minimum wage jobs suffer the indignities of their station, and thus, the result creates an environment for rampant crime (i.e., Brazil).

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