Minimum wage advocates insist that workers have a “right” to a certain salary. Nothing could be further from the truth. There is no such thing as a “right” to a wage, only a right to trade one’s work for a wage that is agreed to by both employer and employee. By setting a minimum wage, the government is violating both parties’ right to negotiate and trade based on their own self-interest. It’s just plain wrong.
Employers’ assets do not belong to the “public”, but to the employers themselves. They have a right to invest their money on computers, machinery, advertising or salaries as they see fit. At the point of a gun, minimum wage laws force an employer to pay an arbitrarily high wage. If workers feel they are deserving of a higher salary, they must offer employers an actual value, not just the majority rule of publicity-seeking politicians hungry for populist appeal.
Beyond the moral argument is the very practical reality that, simply put, minimum-wage laws don't work. Like any government intrusion in the free market, they end up exacerbating exactly the problem they were designed to remedy.
Wages are not arbitrary. Employers must make careful decisions about what positions need to be filled, who is best suited to fill them, and how much they can afford to pay.
If one could simply set a minimum wage to alleviate poverty, why not set it at $15 an hour? Why not $100 an hour? You could insure that every dishwasher in America made $200,000 a year. Of course, politicians gravitate towards supporting a minimum wage: it’s effortless to hand out money when it’s coming out of someone else’s pocket.
In the real world, political speeches don’t pay the bills. If it costs you $8 per hour to hire a worker that only produces $5 per hour worth of value, you won’t stay in business for very long.
The minimum wage doesn’t hurt employers as much as the low-skilled people it was intended to benefit. Any number of workers, from low-skilled laborers to soccer moms to others moonlighting off-hours, might want to take a job that pays less than the governmentally-mandated minimum. And they have every right to do so. Yet regulators would rather see a person not working for $4.85 than working for $5.15.
Employees have the right to negotiate, accept or leave any job they choose. So if I indeed have a right to my life, then it follows that I have the right to willingly and consciously accept a job for any wage I see fit, even if it's lower than the wage the government sees fit.
At the same time, employers in a free market are entitled to offer whatever type of compensation they want. If I own a business and want to hire an employee, then I have the right to offer to pay whatever sort of salary I choose. When the government allows the free market to work, both sides inevitably come to mutually agreeable terms. For both political parties, simply letting the free market govern wages seems, well, impossible. How did our “capitalist" country fall this far?
The way to raise the standard of living in this country isn't to boost the minimum wage, but to abolish it altogether. If businesses were allowed to compete in a truly free market, more low-skilled employees would be working, and more high-skilled employees would be working for higher wages. It’s a moral and practical solution that the collectivist do-gooders just refuse to understand.
Jonathan Hoenig is managing member at Capitalistpig Hedge Fund LLC and is a markets columnist for Smartmoney.com. He appears regularly on FNC's business program Cashin' In. At the time of writing, Hoenig's fund held no positions in any of the securities mentioned.