Crossville Chronicle, Crossville, TN

December 11, 2013

SCOUT REPORT: Getting what you pay for

By Clinton Gill
Glade Sun editor

CROSSVILLE — Few things draw the ire of progressive scorn like “income equality;” after all, class warfare is a central tenet of their ideology. It is a tool they use to manipulate the masses into ceding their own self-determination. For the idealist, everyone should make the exact same amount – regardless of qualifications, skill level or work ethic, for that matter – because every individual is a unique little snowflake designed to be celebrated. In a perfect world, no one would have to work for a living, leaving them free to spend their time traveling the globe, playing the African drums, writing poetry and making love. Sadly, our world is not perfect.

President Obama has had his sights set on increasing the federally mandated minimum wage for quite some time, and now that Obamacare is running ever-so-smoothly [cough], it appears as though he's about to pull the trigger.

Minimum wage is a progressive construct – devised, promoted and simultaneously scorned all by the same flawed brand of thinking. The Fair Labor Standards Act was passed in 1938 under about as much contention as the Affordable Care Act. Anyone who has read The Grapes of Wrath understands that there must be some level of oversight in the private sector. But anyone who understands business must also realize that there really isn't a way to legislate a “fair” system of pay. Businesses will always outsmart regulations, because staying in business requires innovation. Businessmen and women are, have been and will always be smarter than the politicians trying to control them. Therefore, the only way to ensure fair wages is through the invisible hand of the free market system. In a free market system, wages should not determined by fiat; rather, they should be governed by the laws of supply and demand. Wages should be determined by the amount of value that an employee creates for the employer.

Let's be honest, everybody wants to make more money, but not everyone deserves to. In a world of special little snowflakes, it's not surprising that so many have an egocentric mindset that leads them to believe employers exist to cater to them. In reality, businesses hire people for the sole purpose of creating value for their company. Competition drives people to be at their best. Wages are at their highest when businesses have to compete for the best people. So the key to this puzzle is competition. 

Let's, for a moment, think of business in terms of a party, where fun is the currency. The host (employer) wants their party to generate as much fun (money) as possible. In order to maximize these profits, they need fun partygoers (productive employees). Nobody wants to throw a party with a bunch of lame-os. So, it's a symbiotic relationship: the more fun a party is, the cooler (more productive) the people are who attend, which in turn makes a party generate more fun. If the party is lame, the productive people aren't going stay, they'll leave to find a better party. If everyone leaves, then the host has wasted lots of time and money, has a damaged reputation, and is left alone to clean up the mess. The point being, there's much more risk and responsibility involved with throwing a party than there is in attending one. Higher risks deserve higher rewards.

There are several negative consequences that result from determining wage values artificially. For one, businesses have a whole slew of costs. The costs of operating determines the prices of goods and services. Payroll is a cost of operating. If payroll costs go up, the prices of goods and services goes up, which, in effect, nullifies the gains made by increasing wages. That's pretty simple economics, though apparently too complicated for progressives to understand. The same thing applies when you increase the taxes a business has to pay, but that's a topic for another discussion.

Another consequence is that, contrary to popular belief, a minimum wage can actually depress wages. It sets a low bar whereby employers can coordinate low wages rather than having to compete for workers. Moreover, by trying to protect workers, law makers have raised barriers that hinder entrepreneurship and cripple talented workers who seek better opportunities through their own self-employment.

I can sympathize with those who want to increase the minimum wage. I've worked for employers who pay the bare minimum and don't give raises no matter how much extra value their employees create. It can be demoralizing. However, it can also be the motivation one needs to seek greener pastures for themselves. Eventually, good people will find an employer that appreciates them, or they will strike out on their own. If they don't, that's on them. Work is a necessary evil of life; having a job that satisfies you is a personal responsibility. It's not up to the government to make you happy.