This week’s “Daily Journal” guest columnist is Jon Sanders, Policy Analyst and Research Editor for the John Locke Foundation.
North Carolina’s State Treasurer is talking about it. So is this new coalition with the question-begging name, “North Carolinians for Fair Wages.” It’s been John Edwards’ idée fixe ever since the ink was dry on the UNC press release announcing that its Center on Work, Poverty and Opportunity he would head was going to offer “innovative and practical ideas.”
They all want to raise the state’s minimum wage, and they want to do it to help the poorest people in the state. And they couldn’t have chosen two more opposing positions if they tried, because while raising the state’s minimum wage might help a bunch of people, the one group it won’t help is the poorest, least employable people in the state.
Their problem is that they have a fundamental misunderstanding of what jobs are. It’s the same misunderstanding that causes people to oppose Wal-Mart and outsourcing overseas. They see jobs as discrete units, which they can manipulate.
Consider the rhetoric of what my colleague Travis Fisher calls the “anti-Wal-Martarians.” Invariably you will hear them say, “Wal-Mart is shipping American jobs overseas.” The next time you hear that statement, ask: What kind of crates do they use to pack up American jobs to ship overseas? How many jobs fit in a crate? Are they specially made crates with air holes so the jobs can breathe en route? Are there special protocols for running the crated jobs past those Foreigners Running Our Ports? How are jobs shipped overseas?
Jobs are obviously not discrete units that can be packed and shipped. But can’t the government just raise the money attached to them so that their owners can live more comfortably? No, because jobs are not discrete units that are owned or not owned, either.
Instead of being a pre-existing entity, a job is a transaction. It is an agreement that exists between a seller of labor and a buyer. The employee sells labor, and his buyer is his employer. The agreement exists only so long as it is wished to exist by both members of the transaction. Both members will continue to wish the agreement to exist as long as this agreement, this job, makes both of them wealthier than if it didn’t exist.
If one party of the agreement thinks that the job is making him poorer, then he will take steps to end the agreement. That is, either the employee finds another job or simply quits, or the employer finds another employee or simply quits offering the job altogether. Or the two parties may renegotiate a different agreement via a change in wages.
If the government steps in and tells the two parties to renegotiate to a higher wage, that could upset the balance. Many agreements will be successfully renegotiated. Presumably any employee will be happier with more money in the same job than with less money, so any time an employer regards a new, higher-wage agreement with a minimum-wage employee as still constituting a money maker, he will allow the agreement to persist.
The other times, however, will end the labor/wage transaction. The government can set a limit on how low an employer can go in seeking a seller of labor, but it cannot force the employer to buy. When the government-set price (the wage) is more than the employer wishes to spend, there is no job. It is not an unfilled job, it is not a job collecting dust on a shelf or being crated up, it does not wind up on an Island of Unfilled Jobs — if there is no purchase of labor at the higher price, there is no job.
Every uptick in the minimum wage prevents an untold number of agreements from coming into being in the area affected. If it’s an uptick in the minimum wage in North Carolina, then fewer jobs will come into being in North Carolina. If it’s the federal minimum wage, then fewer jobs will come into being in the United States.
The effect of an increase in the minimum wage will be fewer purchases of labor. Fewer jobs will come into existence. Those jobs that would have come into being under a lower minimum wage, don’t. Employers who might have earned wealth staffing those jobs, can’t.
More importantly, employees who might have earned wealth filling those jobs, can’t. And there’s the rub. Because the very people who are on the margin of minimum-wage jobs are the ones that advocates for raising the minimum wage think will be helped the most.