Because I’m sure he’ll appreciate whatever minimal traffic I can send him, I’ll comment on a blog post by Abdul suggesting that we use the free market to raise the minimum wage. In particular, he suggests that, if as a matter of policy, our individual preference is to see workers paid better, we should direct our business to those organizations that pay their employees well.
This is a fine idea, but not sufficient to address what amounts to a structural imbalance. Commercial efforts generate a certain amount of additional value. That additional value, the profit, gets split up among the people who produced the value — investors, management, and labor usually. The way the profit gets divided up is not necessarily in proportion to the value of the contributions of each party. Rather, it has to do with the bargaining power of the respective contributors as well.
The problem labor has in getting its share of the profit pie tends to be lack of organization and lack of leverage. An individual laborer lacks bargaining power because an individual laborer is usually easily replaceable. In addition, the individual laborer often has to have whatever he or she can get as a matter of necessity — to acquire or maintain food, shelter, and clothing. That necessity has a coercive effect on their bargaining position. It’s not quite a gun to the head, but it makes it much more difficult for the laborer to walk away from the table than it is for management or the investor who is much more likely to have his or her necessities squared away.
So, I think the minimum wage debate ends up being a decision. The policy decision is that, by fiat, we require a certain minimum to ensure that labor gets at least a certain baseline portion of the profit. The alternative, I suppose, would be to go a more socialist direction where more of life’s necessities were guaranteed whether a person worked or not. At that point, the negotiation between labor, management, and investors would be more of an arm’s length transaction and the price point of the wages would more accurately reflect the value of the labor.
I’m not necessarily advocating the more socialist approach. Culturally, we have a deep opposition to policies that condone idleness — our Puritan work ethic perhaps. But, I think that’s the policy alternative to the minimum wage if we want the free market to receive accurate signals about proper labor prices.