It is desirable for us all to live in a society where everybody can be financially comfortable but for a variety of reasons that doesn’t always work out, mainly because we cannot predict the economic activities of people, and how wisely or unwisely they will spend their money. All people are free to choose how to live for themselves, and we are not in the business of controlling what people do with their money (not yet at least, the socialists haven’t taken over yet).
Wanting fairness in our society will lead many to dictate what they feel is right, directed by their emotion rather than faculties of logic, and call for higher wages for all workers. To the economically illiterate, and/or those on low pay, this will seem like the most attractive solution, and there will be nothing that stands in the way of justifying it to them. But, like many things in life, this situation and its proposed resolution are just not as simple as they seem. Hopefully I can explain why in this article.
“You know what ‘minimum wage’ means? It’s your employer saying ‘I would pay you less if I could.’”
If I had a penny for every time I’ve heard some smarmy little comrade say this I’d have, well, probably one hour’s worth of the minimum wage in my pocket. But the thing about it is this; they’re not exactly wrong. The fact of the matter is that if I earn the minimum wage, my boss is being generous in the amount they are giving me (albeit, not voluntarily, but by force). It means that the product of my labour does not create the amount of wealth that I receive in return for doing it, otherwise my labour in our market would be valued higher by employers, and you would get more (as Capitalism works on a ‘Supply & Demand’ basis). This means that the efforts of superiors, with more duties and responsibilities and thus higher paid workers, are being sacrificed to accommodate for my pay.
Those on the bottom of the pay scale generally receive the duties that require the least amount of skills to execute them- most menial jobs in our communities don’t require a degree or certificate of achievement, just somebody able-bodied to carry them out or receive training on the job. A minimum wage for minimum responsibility.
The case has become now, however, that most degree-holding people in the UK go back to working a minimum wage job as there are not enough jobs in their field for them. Consequently, competition for even lower skilled jobs is becoming tougher.
I personally have had to work many jobs receiving minimum wage before, during, and after finishing my degree, and had to make a living from it. I am a rather frugal person thankfully, so I always ensure my financial responsibilities are met, and savings submitted, before working out my available spending, and *if* I can treat myself at all each time I get paid. Unfortunately, many live the reverse of this system, where their leisure will be met first, then worry whether or not bills can be paid.
My first job was in a local shop when I turned sixteen, where I worked for almost a year until my GCSE commitment took precedence. I earned £3.20 an hour to stack shelves, serve customers, keep tills tidy and… that was about it. The three or four shifts I did a week earned me roughly seventy pounds. Many will cry “extortion” and “slave-labour” at this, and that I ought to have gotten more. Well, I did, eventually.
I did such a good job, and being prepared to work hard for less money, my efforts were rewarded after several months and I received a raise, to a fairly decent amount too. Along with this, my responsibilities grew, and I gained more skills and perspective of service. This experience has served me immeasurably. I didn’t mind the lower pay either as I knew it went towards hiring four young people at the same time, and that more people could benefit from this.
Let’s imagine I went for that same job and the employer was being forced to pay all their employees a minimum of £8.50 per hour. Well, I highly doubt that an inexperienced sixteen-year-old would be seen to be worth that to a boss. It’s much more likely that my chances of finding employment in those circumstances would have been slim anywhere at all. So what would that have meant for me?
I wouldn’t have a chance anywhere else, and would likely go through my teen years on the same scope. This puts young people at a huge disadvantage, as they cannot compete to gain financial independence with anybody else who has much more experience. In its own way, it is indirectly discriminatory.
This kind of discrimination doesn’t only affect young people; it affects those who perhaps haven’t had the best start in life. Somebody with a troubled upbringing who would like to set their life on the right track will find it hard to get an employer to invest in them if the employer is being forced to invest so highly with such a risk- not only does this person have less experience and skills, perhaps less education as well, or even mental-health problems, but they could be considered a risk to the business. In this way the minimum wage acts as an elitism of the Left, purging the undesirables from society like a modern eugenics project.
If we were to visualise employment and following a career as climbing a ladder, raising the minimum wage would be the equivalent of sawing off the bottom rungs. Every time there’s a rise, another rung goes from the bottom. It soon becomes harder and harder to get a foot on at all for the young and inexperienced, and those already on it are the only ones able to progress.
This is not doing any favours to those unemployed and searching for work either. It becomes the case that a person with a job is more desirable than somebody who has already left. This adds more pressure of those looking to change careers as they have to balance their current responsibilities at work while attempting to attend and prepare for interviews.
Not only does raising a ‘minimum wage’ create less jobs for young people and the inexperienced, but it creates less job altogether. First of all, employers trying to run a business with huge overheads already in taxes and rates, ever-squeezing profits in order to improve and grow their business, will have to accept even further loss. They can react in different ways- they can hire less employees and make them work even harder; they can close down if their outgoings grow too much for the business to sustain; or they can raise their prices and hope to carry on successfully and compete in the market.
Either way, this creates more unemployed people, becoming more reliant on state benefits, and with growing prices for commodities. With less people in employment able to pay tax, and a stale environment for businesses to open and trade means meaning fewer companies to tax also, then the amount that can be afforded to those dependent becomes less and less. So, with the unemployed receiving less, and the employed receiving more, the gap widens and becomes unbalanced. In this way, raising the minimum wage drastically can create an impossible living situation for a growing amount of people.
We would also see a huge decline in our independent businesses, the ‘backbone of our economy’ as we like to say. How can a small independent shop or chain compete with the corporate giants when their profits are being squeezed so tightly? Tesco can afford to pay its employees more, and they are usually the first to report that they approve of any rises being put through. Their approval is two-fold; firstly, to appear as if they care for their staff to become popular among the populace and grow their trade, but also because they know that it will create an unfair playing field for their smaller competition that will likely be forced to hike prices or close down.
Having spoken to many small to medium business owners in my area, every one of them has told me they dread when wages have to go up, because they know they’ll have to eventually fire a member of staff or stop trading.
This issue also brings about a particular problem for people like me, which many in our society perhaps don’t value just as much; the undermining of Private Property. A business belongs to nobody but the owner(s), therefore decisions regarding such should be made solely by the them. Milton Friedman puts it best for me:
“Nobody spends somebody else’s money as carefully as he spends his own. Nobody uses somebody else’s resources as carefully as he uses his own. So if you want efficiency and effectiveness, if you want knowledge to be properly utilized, you have to do it through the means of private property.”
An employer knows the best way to run his business, so will utilise their resources in such a way. That includes paying for it. Nobody but he or she will know what the cost of a person’s labour is better… they have the receipts. How can a worker know their worth without an insight into the company’s finances? Also, to believe you should be paid a specific amount of money is presuming your own worth, which is rather vain.
Any decision should be between the employee and employer. That’s as complicated as a getting a job should be. When the government interferes, it obstructs the ability for that business to be run to the best of its ability. The better the company does in its beginning, then the more people can be taken into employment as it grows, to give them the skills to move on to something better later.
In essence, the “National Living Wage” does more harm than good, no matter how many good intentions are behind it.
Dan is an English Literature graduate from Queen’s University Belfast, where he is the Chairman of the Libertarian Society. Dan is an enthusiast of Political Fiction, Philosophy, and Economics, citing Anthony Burgess as a catalyst for his love of individual Liberty, Ayn Rand for his Objectivist outlook, And Milton Friedman for his staunch support of Free-Market Capitalism.
The views expressed in this article are that of the author and do not necessarily reflect the views of Conservatives for Liberty