Posts tagged with: libertarianism

John Mackey’s Great Point about Min Wage

I finally watched the Reason interview with John Mackey, and he brought up a great point about the minimum wage.

If businesses are really so greedy that they want to pay absolute bottom dollar for people to work for them, barring already existing laws, why wouldn’t the company just pay people in the US 10 cents/hour? Why is it that wages at the bottom end all look pretty similar? Why is it that, even if you removed existing wage controls, they couldn’t get people to work for them at 10 cents/hour?

It’s because they don’t control those prices. Wages are controlled by a dynamic market process that depends on individual productivity. You can’t imagine a price floor for human labor any more than you can imagine up a price ceiling. You can’t demand they pay $15 an hour any more than they can demand you pay $10/pint of Ben and Jerry’s ice cream.

While it may seem counter-intuitive, businesses aren’t the central arbiter in wage pricing. If they want to continue as a business, they have to set prices according to labor markets. Pay people more than they produce and the business dies. Pay people less and the business dies.
You can’t ascribe absolute agency to the business, and you can’t pretend businesses are operating under different economic laws than you are.