E-M8 Entrepreneurial Management for Eternal Mission

One of key economic for Obama is Dr. Robert Reich , and while I like most of his ideas and policy considerations I am baffled by him liking minimum wage laws. I will use Obama’s (and Dr. Reich’s) argument regarding their pro choice views (while neither endorsing or oposing them) to illustrate what I believe to be an inconsitency with the minimum wage views.

The argument goes like this: Instead of forbiding abortion is it not better to create a loving and supporting environment where people would have no reason to every have one done. Nice argument.

Let’s apply it to minimum wage laws: Instead of requiring business owners to pay minimum wages is it not better to create an environment where people have skills and the job market is competetive enough to ensure that the employers will pay wages that are way higher than a minimum wage and more in line with the living wages.

Please somebody explain to me how the same logic cannot be applied to the question of minimum wages. Most importantly, the practical aspect of it is that small businesses either will find ways to ignore this PRICE FLOOR (creating a black market and generating a surplus of minimum wage seeking workers); or they will compete more agressively in automating their processes and hiring specialists that can replace the need for manual labor; finally, if they can, they will ship the work to places that do not have minimum wage limits, like China.

The consequence of all of those actions is that people at the bottom of the wage scale will be constantly underemployed. Since many of the people on the bottom of the scale are either young, or disabled in some way, they will never have an opportunity to receive the on the job training necessary to transition to better compensated positions.

Whereas, a businessman would love to hire a 14 year old gofer (a kid that I can send to fetch stuff) for $2-3 an hour and allow him/her to just hang out, watch over their shoulder and learn the trade, today that is not possible. As a result, many 20-25 year olds have never worked a day in their life and never got the experiences that would aid and motivate them to get anything out of their formal education.

The consequence of the current system is precisely the thing that Dr. Reich works so hard to oppose: it is the separation between the skilled and the unskilled, the rich and the poor, the elimination of the middle class and semiskilled workforce that are both the heart of a sustained economic performance and strong democracy.  

If we are serious about increasing the quality of life for everyone, we should help people become valuable enough that the employers will want to pay them above minimum wage. Everything else is just another wa to force inefficiency and inflation.