A mandated minimum wage does more damage than good.

I feel confident that my previous points are sufficient to convince the majority of readers of the truth so I will limit my response to a rebuttal of my opponent and a few small clarifications. Con begins by asking how to determine a "satisfactory profit level" for businesses. He claims that "[b]usinesses cannot justify paying workers as low a wage as they wish simply because they do not feel their profit margin is adequate." He is simply posing a question of greed in different terminology. The fact is, a business owner is an entrepreneur. The only reason virtually every business is run is to make a profit for the owner. Profit, in this matter, is simply another term for wages. The business profit is the entrepreneur's wages. One does not hesitate to condemn an attack on "regular" workers' wages and yet assists on the assault of the entrepreneur's wages. More on this in a moment. Going one step further, Con suggests that "businesses sometimes have to take a hit for the greater good of society." Unfortunately, if the entrepreneur cannot make enough profit in order to keep a roof above his own head and clothes on his family's back the only alternative is to reduce costs by the methods mentioned in round two or close the business. This is a poor option for all involved. "Regardless of what the minimum wage is, companies will hire the number of minimum wage earning workers necessary for the business to function or they will suffer greater costs in reduced productivity. … [B]usinesses will need to hire workers regardless of the rates so the loss of employment is not great." With this logic, would it not be more beneficial to raise the minimum wage to $25 or even $50 an hour? Faced with higher labor costs, a business is more likely to hire experienced workers at rates above the minimum wage since these workers have higher efficiency and productivity levels than entry level workers [1]. Con then neglects a few key issues when he proposes "[b]usinesses are more likely [to] reduce the effect on customers by increasing efficiency than the government because of their need to make a profit." This is the same profit which he earlier lambasted as being unjustifiable. However, my opponent fails to recognize that much of this efficiency is found through robotics and technology increases which reduce the need for human labor. In addition, unskilled labor is generally replaced with skilled labor, as mentioned earlier, due to the increase in productivity. This obviously hurts unskilled employees. The quoted study at UC Berkeley can be easily countered by three independent studies all reporting that minimum wages correlate with unemployment of unskilled workers [2, 3, 4]. All three contend that minimum wages primarily hurt those the measure is intended for by placing employment emphasis on skilled workers. "Adding minimum wages to the model implies that [unskilled] workers have a more difficult time finding their first job. This, in turn, makes it more difficult for them to become connected and find better jobs" [3]. My opponent then alleges that Hazlitt's quote "suggests that paying a man more than he deserves is somehow a violation of his rights." This is contrary to Hazlitt's intent. In a free society, people must have the right to offer their services in the marketplace for whatever price they choose, whether they are workers serving employers or businesses serving consumers. If a person is willing to wash dishes for $3.00 an hour in order to gain employment history and business skills it should not be within the government's powers to deny him this right. Con grasps the concept that business costs are transferred to the customer and I applaud him for this but he fails to see "how this is a negative effect." If a business is forced to increase the expenditure for labor due to a minimum wage, Con agrees that this cost is transferred to the customer in the form of higher prices. However, when a customer is forced to pay higher prices for items he commonly purchases this leaves less available for repaying debt and increased saving. The amount required for normal goods and services is referred to as the cost of living. An increase in minimum wage can affect an increase in the cost of living. This is a negative effect. Finally, he brings in the ultimate excuse for a mandated minimum wage: "The minimum wage ensures that those who work are paid enough that they are able to maintain a decent standard of living." This is a common fallacy which is unable to bear scrutiny. Contrary to the popular belief that minimum wage earners are primarily single parents supporting a family, fully 80 percent are either not the primary earner in their family, a single adult, or they have no children. One study mentioned previously points out that only 14 percent of the benefits of a minimum wage go to families in poverty. In contrast, 59 percent of the benefits go to families earning more than two times the federal poverty line and more than one-third of the benefits to those earning three times the federal poverty line [4]. ----------------------------------------- Summary ----------------------------------------- Following in the footsteps of the great economists, I will briefly discuss the costs of doing business. There are only five costs [5]. Whatever business you wish to select as an illustration, five costs will cover all expenses in connection with its operation. These five costs are: 1. Goods and Services Furnished by Others We all expect those who furnish goods and services to be reimbursed. This is the main tenet of a free society and commerce. All should readily agree that these items should be paid for. 2. Human Energy Here is the meat of the matter. The labor contributed by a worker should be reimbursed at a level appropriate to that of the value given. As my opponent recognized, this price is added to the cost of the final good or service. However, if given the opportunity to at least work in some capacity for a low wage versus not working at all and gaining no income whatsoever, the vast majority of people will choose to do what they are able until they can find a better job or gain the skills necessary for a better position. The presence of a minimum wage allows neither the employer to hire nor the employee to offer services for less than this arbitrary amount. 3. Taxes Most agree that we all are responsible for a payment in taxes as members of society. Generally the only thing in contention is the level of taxes. Regardless of how high the tax burden, this cost gets transferred to the customer as a price of doing business. 4. Maintaining Tools It is easy to show that machines do wear out and must be replaced during the normal course of operating a business. A separate account within the profit margin generally covers the maintenance, improvement, and replacement costs of machines and is calculated into the final prices. 5. Using the Tools This is the most difficult point to get across. Tools do not grow on trees. Someone in the business concept must purchase the tools necessary to accomplish the end goal of that company. This person - the entrepreneur - takes on the financial risks of failure in return for rent with the use of his tools. This is the item of profit. Profit is the payment to the owner of the tool for its use. ----------------------------------------- References: ----------------------------------------- [1] Out of Work: Unemployment and Government in Twentieth-Century America, Professors Vedder and Gallaway, Chapter 15 [2] Labor Market Connections, Minimum Wages, and Youth Employment, Aspen Gorry [3] The Effect of Minimum Wages on the Labor Force Participation Rates of Teenagers, Dr. Walter J. Wessels [4] Raising New York's Minimum Wage: A Poor Way to Help the Working Poor, Professors Burkhauser and Sabia [5] This Bread is Mine, Robert LeFevre, Chapter 9