By Steven Clyde

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In the midst of the hearsay of the common babbler, we time and time again find instances of the Dunning-Kruger Effect. To the dismay of scholars and people of the like who have an unquenchable lust for the truth there is no shortage of deranged talking points which not only have zero basis in reality but also fails to recognize its abhorrent contradiction of itself.

In Plato’s provocative work Allegory of the Cave , he described a fictitious instance in which there were subject humans who spent their entire lives in a dark cave tied down while staring at a wall of the cave, and there was a fire behind them which cast shadows on the wall. All they ever saw their entire lives were shadow figures made from people behind them. When one of them is released in the the real world, they are in disbelief; there is a sun that casts bright light and things have texture, appearance, a feeling, there are many sounds, etc.

Plato describes that, its impossible for the other subjects back at the cave to understand what the subject who was freed was really saying to them, and furthermore described the freed subject as insane. Though controversial as a philosopher, Plato offered us a great insight that any of us can ponder on: its impossible to comprehend the unseen. And within the realm of logic and economics, its impossible to comprehend what you don’t know.

This situation I describe here is of that of someone who quite literally, cannot comprehend economic theory, and their argument fails from every angle. A friend online asked her for data showing that raising the minimum wage helps businesses and the local economy, and this was the response he was given:

Okay, so lets break that down.

“It’s not about helping businesses, it’s about helping people pay their bills”

This is completely oxymoronic, and without using a direct ad hominem attack I would like to say that I indeed am going to attack this persons character, as they completely fail to use logic as a normal person should and lets face it: completely contradicting yourself isn’t worthy of praise.

On one hand, they claim they don’t want to help businesses. They didn’t say “businesses might feel some pain”; they just flat-out said they don’t care about the actual businesses themselves. But then what of the employees? Are they better off now that their employer is no longer in existence? And how does a sudden increase in labor costs amount to helping more people pay their bills, on any planet?

An artificially set wage level by government isn’t, at least the way its implemented now, a type of legislation that forces businesses to hire anybody in the first place. This is crucial. It might be true that, wage increases wont push certain people out of the job market supposing they have the necessary skills to produce enough according to what the wage increase demands via their productivity, but what about all those people who didn’t have that high of a level of productivity to begin with? Namely, we’re  speaking of people who are just entering the job market for the first time, and this sets a dangerous path into adulthood in which the lack of the most basic skills (and the knowledge on how to gain skills) leads to a completely avoidable life of poverty.

And to effect our opponent here on a more visceral level, lets not forget who we’re mainly talking about when we say “those people that will lose their jobs or not get hired in the first place”. We are speaking of young minorities in their teens and early twenties. Its young minorities who wont be able to pay their bills, and now they should be further handicapped according to this person. They should not only be handicapped by an existing minimum wage law that’s making it difficult for people of low skills to advance in their current jobs, but they should be handicapped further by raising the wage so high that most will never get a job in the first place.

This was a common tactic of unions in South Africa during the apartheid era, in which “Equal Pay for Equal Work” campaigns were created to rid employers of the need to hire black workers. It was thought that, since black workers had a lower productivity than that of whites (because of disadvantages as a result of the government), equal pay for equal work really meant that whites needed to be paid more than blacks. The other option was just to not hire them at all.

It was a clever strategy,  but it’s rooted in racism.

Walter Williams, the brilliant (and black) PhD economist at George Mason University, spent much of his life studying what has so heavily played a part in the destruction of his race, which was exactly this: the minimum wage.

He has said on many occasions, that not even slavery has had such devastating effects on the black community as did obscene and racist laws like the minimum wage law. When describing how the minimum wage influenced the disparities between whites and blacks, he notes[1]:

From 1900 to 1954, blacks were more active than whites in the labor market. Until about 1960, black male labor force participation in every age group was equal to or greater than that of whites. During that period, black teen unemployment was roughly equal to or less than white teen unemployment. As early as 1900, the duration of black unemployment was 15 percent shorter than that of whites; today it’s about 30 percent longer. To do something about today’s employment picture requires abandonment of sacred cows and honesty.

His point is this: Are you telling me that the world we live in currently, struggles from more racial tension then we did back during the civil rights era of the 50’s and 60’s? If not, then there must be another explanation, and empirical data confirms the grim scenario Williams gave us insight to.

“Most businesses do fine, you hear a few go under but it gives people more buying power and less stress”

Again, this is completely contradictory.

This just in: lowering the supply of businesses that provides goods to the public, does not equate to people have MORE buying power. It equates to less. When you take away people’s options, you aren’t giving them better ones; you are depriving them of other potential options which may have worked just fine for them but are less expensive.

It’s probably the strangest scenario to this person that, Amazon and other retailers are able to sell goods for so cheap (even with shipping costs), but more so that there’s so many people providing those goods in the first place!

“If a business fails because of a $2 increase then it is mismanaged and it is only a matter of time before it goes under.”

Not everyone is good at math, so its no surprise they fail so miserably on this account.

I would give my own analogy, but I give credit to Brian Herr who laid it out so concisely that it would take a large mental strain to try and sidestep his theoretical:

So let’s say you have a store that requires 10 employees to run. All your employees are paid $8 per hour and you are open from 8am till 8pm. That leaves your labor costs at $465, 920 per year (before adding benefits, etc.). So lets see what happens when we increase minimum wage by just $2 per hour: it comes out to be $582,400 per year in labor, which is an extra $116,480 in labor costs. That is a 20% increase. Think of what that business owner could do to invest in his business with that extra $116,480. Hire more employees? Open a second store (which needs more employees to run).

Secondly, think of what the employer will have to CUT in order to make up for the extra $116,480 he now has to pay the same employees for presumably the same amount of output? Oh idk, how about cutting benefits? Or fire employees?

What Brian  brilliantly points out is that, the unseen is the real costs of labor; its easy for the average person to misconstrue what the average person makes based on the idea of say a $10 an hour wage. A 20% increase in a employers labor costs will most likely be devastating, had they not been pouring every dime of profit back into the business in the first place (versus pocketing it), which still leaves an unlikely scenario of surviving the obstacles down the road.

Furthermore, what our opponent sinisterly attacks is the person who has just started their business. Starting one either requires having capital on hand acquired through sacrifice, a loan from an entity, or a magical pile of money you can play with. Most people only ever get one of the first two options, and the very first is a result of pure self-sacrifice. The second is a result of proving you can pay off your debts (at least in theory, but not comparable to how government warped banking procedures).

James Herrold also added a convincing analysis:

Minimum wage hurts the poorest among us. It’s amazing that she says “if you can’t afford to pay a higher wage, you don’t deserve to be in business”. I doubt she would ever say “if you’re not talented enough to earn a better wage on your own merits, then you don’t deserve the job anyway.

Or would she? By her logic, is it inconceivable she would?

“Many people don’t know how to run a business”

Which is why eight out of ten businesses fail in the first 18 months of business. It’s not completely because of mismanagement though. Archaic regulations keep employers strapped for pennies (with the general public being duped into believing they have untold riches they refuse to share). Competition is enough alone to drive many people out of business, but competition in a free market is healthy.

The difference between this persons view and that of one that understands economics, is that while both agree that failing businesses are (in theory) market signals that resources should be allocated in a different and more efficient way in the economy, one proposes that we should use the state to shut down businesses which wont allow voluntary contracts to exist below a certain wage, while the other proposes that businesses that mismanage their resources from everything to capital goods costs, to depreciation costs, and yes to even labor costs will fail anyway and that this is not necessarily a bad thing. The former will push many people out of business that had good products but couldn’t afford the plethora of regulations and fines placed against them, while the latter pushes businesses who had bad products, and where the resources they were currently using would be better suited in a different sector of the economy.

“The minimum wage is not an issue for stable companies. These sad stories are blaming others for the mistakes they make because they don’t know what they’re doing”

Lets take the sliver of truth that is there and work backwards. Yes, it is true that companies that have been around for quite some time and have developed clientele relationships, a solid customer base, an ethical work environment, etc. will have an easier time adapting to higher costs. Why wouldn’t they? This is like being surprised that an equal tax cut across the income brackets will harm people of lower incomes more than people of higher income brackets; you missed the point genius! Taxes are what hurt people in the first place, and it doesn’t matter if you’re rich or poor.

Poor people are hurt by taxes because they have very little money to consume with in the first place.

Rich people are hurt by taxes because it warps incentives and rather than investing money back into the economy, they now need to focus on battling for their own money against interests that want to deplete them of said profits.

This is exactly what we saw happen in the midst of the two world wars, in which propaganda needed to be heavily used to urge citizens to pay their taxes.

A raise in the minimum wage is nothing but an extra tax on a business, which, according to the person’s comment shows they don’t care about anyway.

To sum up the rebuttal points:

1.) You aren’t helping workers by destroying the place where they work. By limiting the amount of businesses in existence with minimum wage laws, you aren’t “leaving just the well-managed businesses” but rather you are giving companies that have been around longer an edge against those who want to be entrepreneurs themselves. This is the tactic of a monopolist, and not one of an egalitarian.

2.) By closing down current businesses, you are not adding to the number of jobs that are available; you’re lessening that amount and these now unemployed workers will have a hard time getting back in the workforce.

3.) Who does this really effect? It effects the unseen, which is the young teens and young adults (who are most likely minorities) that cannot get a job in the first place.

Notes:

[1] https://townhall.com/columnists/walterewilliams/2013/04/10/black-unemployment-n1561096

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