Swickard: Minimum wage laws destroy free markets

© 2016 Michael Swickard, Ph.D.  “Underlying most arguments against the free market is a lack of belief in freedom itself.” Milton Friedman
            America’s “free markets” are more free than markets in some other countries. However, our markets are not really free because our government controls so much of them. Know this: markets cannot be controlled and free simultaneously.
            Let’s use two terms interchangeably: free markets and voluntary exchange. Voluntary exchange is when people are free to trade with each other without government interference. When the government prevents voluntary exchange between citizens through rules and regulations, there cannot be free markets.
            In Venezuela there are daily riots because the Socialist Government meddled in their markets until those markets collapsed. Venezuela has gone from being one of the richest countries in the world to one of the poorest in just a few years of mismanagement. They have almost limitless natural resources. Without free markets their citizens get no benefit from those resources.
            The term, “profit” is seen by some Americans as being bad. Much of our political dialog is about businesses making too much profit so the government must intervene. Consider: if there is no profit, then what’s there to tax? Importantly, without profits, what’s there to continue the business?
            In free markets if there are high profits it inspires competitors who undercut prices to gain market share. So where do “obscene profits” come from? They come when our government protects one business over others so that competitors cannot compete. The “obscene profits” problem is too much government control in the markets.
            In Venezuela, with government control of the markets, the shelves are empty. In our country they are full but our government is moving towards the Venezuelan controls.
            One destroyer of free markets is the minimum wage. There should never be a minimum wage in a free market. Each person should trade their labor for an employer’s money as they see fit. How did we get the minimum wage?
            According to economist Dr. Walter E. Williams (and others) the minimum wage was created to further racism. (http://townhall.com/columnists/walterewilliams/2016/01/13/minimum-wage-dishonesty-n2102804)
            In the 1920s, Blacks would work for less money than Whites. Racist employers had a price to pay for being racists. If they only hired Whites, it cost them more money. Political leaders passed the 1931 Davis-Bacon Act to thwart Blacks undercutting Whites. It created the minimum wage so both Blacks and Whites had to be paid the same. Then there was no penalty for racism.
            For Americans, the ability to negotiate our own wages should be our right. But the government doesn’t allow me to work for what I think is right to get a job even though I am a free emancipated citizen. Many people caught up with progressivism do not believe in freedom. Also, with the rising minimum wage comes rising unemployment. How is being unemployed ever better than employed?
            If the government doesn’t like what someone is paid then reinstitute the 1973 Comprehensive Employment and Training Act where the government paid part of an unskilled person’s wages to get them job experience.
            Requiring employers to pay more than they think is justified, based on the return on investment in those employees, results in unskilled labor not getting hired. Those potential employees then do not get experience to get the next job. It causes discrimination against unskilled labor, mostly young people.
            The most ridiculous thing said is that some people are not making a living wage. If people can live and continue then it is a living wage. I have worked for very little money at times. I learned as much as I could and then stepped up to a better paying job.
            The government mandated minimum wage is neither compassionate nor kind. It leaves the most vulnerable Americans in perpetual bondage because they don’t get job experience. They need job experience to prosper.
            The government lives to control people and markets regardless of the damage it does to our people and the economy. For true prosperity Americans must have free markets. Otherwise our economy will descend into a Venezuela. To start we must abolish the minimum wage so young people get needed job experience.
            To believe in free markets, we must first believe in freedom.



Mary Spence said...

Astute! Remarkably well stated and insightful indeed.

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