The World-View Behind Minimum Wage Advocacy – Ludwig von Mises Institute Canada

The World-View Behind Minimum Wage Advocacy – Ludwig von Mises Institute Canada.

It’s at times like these, with minimum wage laws suddenly in vogue again, that one realizes that having the evidence on one’s side is not enough to win public policy debates.  The intellectual framework that people use to order their experience of the world must also be taken into account. How people interpret the facts is actually more decisive than the facts themselves.

Yes, I realize that there are studies purportedly showing that minimum wage legislation does not reduce employment. But these are significantly outnumbered by studies demonstrating the opposite that such laws give rise to job losses among the least skilled workers in society, precisely in line with the standard economic theory of wages (see hereand here). As William Watson tells us, even the panel that the Ontario government convened to study the issue noted that in Canada, “researchers have generally found  an adverse employment effect of raising minimum wages especially for younger workers … those studies find that teen employment would drop by 3-6% if the minimum wage is raised by 10%”. Yet the Ontario government brushed all this aside and went ahead this week to raise the province’s minimum wage by 75 cents to $11 per hour.

So why doesn’t this evidence register with the advocates of minimum wages? Much of it, if not all of it, reflects the powerful human tendency to make sense of things in terms of one’s moral priors. Jonathan Haidt’s The Righteous Mind is the most recent work to recognize this feature of the human mind. This propensity towards the moral interpretation of reality is not irresistible — indeed, it must be overcome if one is ever to arrive at the truth. But it is very difficult to thoroughly bracket one’s deep moral convictions, especially in trying to understand the social universe, where ethical issues pervade just about every inch of the entire scene. It’s a trait rarely to be witnessed, even among the most celebrated intellectuals, whose renown in fact is often predicated on their consistent application of a widely held moral view.

Supporters of minimum wage laws, being mostly on the political left, believe that the overriding aim of government policies should be to improve the condition of the less advantaged. By itself, this goal does not dictate any particular means of achieving it, but the passion with which that goal is espoused clearly predisposes its advocates to favor the most forceful means that immediately presents itself.

In other words, if you feel very strongly that poverty needs to be reduced, you are apt to choose the most direct route — which is have the government compel higher wages for those currently earning the least. You are not going to have much patience for someone claiming that high wages cannot be coerced into existence. Nor will you give much credence to someone pointing to a less direct route to the alleviation of poverty involving relatively abstract forces like supply, demand, capital, and productivity. You are liable to come away viewing someone like that as a mouthpiece for the employers whose stinginess you see as the problem.

Buttressing this set of beliefs is a more comprehensive theory of society. Naturally, it offers an interpretation favoring political over market solutions to social problems. The theory pays short shrift to the idea that individuals can interact voluntarily with each other in exchanging goods and services. Instead, society is portrayed as an intricate web of power relations, all of it ultimately reducing itself to the operation of two distinct groups — with the one holding more power having the advantage over the other with less power. Society comes to sight as a  battle between oppressors and the oppressed. Morality, then, summons us to side with the oppressed by calling on the state to deploy its power to force the hand of the oppressors.

Ever since Marx, this has been the essential thread in the left’s understanding of society. All that has varied is the definition of the basis of power. With Marx, of course, it was the ownership of the means of production. Since about the 1960′s, a more culturally oriented left, the post-modernist left if you will, has tended to emphasize race, gender, and ethnicity in its conception of power.

The case for minimum wages basically takes us back to the Marxist identification of power with property. The underlying premise is that the relationship between companies and workers is not consensual. Since workers have less leverage, the state must be brought in to make up for the power imbalance.

Such is the constellation of ideas that classical liberals and libertarians are up against, not just on minimum wages but on a much wider range of issues in which questions of power are apt to arise. Evidence from ordinary experience, history, and the social sciences can be helpful in waging this intellectual struggle. To more effectively sway minds, though, the job will have to emphasize moral and political philosophy in addition to the elaboration of more correct theories of the economy and society. Mindsets need to changed more than facts need to be adduced. That is the lesson to be taken away from this latest rage for minimum wages.

Tomas Salamanca is a Canadian Scholar.