Living Wage Rally in Ithaca, NY

After some publicity on local media leading up to the event, I decided to check out the Tompkins County Rally Demanding An Increase in the Minimum Wage to a Living Wage on Monday, March 12, 2012 at 4:30 pm (before heading up to Cornell to attend Tevi Troy's excellent talk on our presidents and the culture.

Here is some video I shot before leaving at 5:30 pm. The Tompkins County Workers Center claim more than 150 people attended the event. If so, they had not yet arrived by the time I left around 5 pm.

Video taken by others at the event: Pastor Rose blesses Bread Breaking at 40-hr Fast and Home Health Worker Bev Speaks Out.

Commentary

Demands for a higher minimum wage, or just a minimum wage itself, constitute a particularly insidious form of interference with trade. As Adam Smith observed a long time ago:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.

Whether we are talking about restaurant owners or restaurant workers, the reasoning is the same: While no supporter of freedom of speech and freedom of association would suggest that workers should be prevented from organizing, there is no reason to nourish cartel like organizations whose sole purpose is to extract a higher price for the thing they sell, their labor.

A minimum wage is a so called price floor: By law employees are required to pay no less than the mandated minimum wage level. Proponents of a living wage think that the government mandated wage level is too low to lead a decent life, and it should be higher. For example, at Monday's rally, I heard the figure $12.78/hour mentioned. In Ithaca, the Alternatives Federal Credit Union calculates one a couple of times a year.

Their methods are insidious because they do not seek to increase their pay by demonstrating how their contribution to the bottom line of their employers is greater than their compensation. No, they seek to raise their own earnings by pricing out less skilled and less experienced labor.

It was interesting to note that some of the most vocal people at the rally either worked at jobs paying higher than the so called living wage they were demanding or employed people whom they paid higher than the $12.78/hour which they were demanding all other employers be required to pay.

At this point, we must stop and ask: Why just $12.78/hour? I mean, why not ask for $13.00/hr? Y'know, make it an even number? well, the answer to that one is easy: Figures after the decimal point tend to give a superficial sense of accuracy and I guess some people find the number 13 to be undesirable.

But, I mean, honestly, why not demand that every worker is paid $40/hr? Heck, why not demand every worker is paid $100/hr? That's still just about $200,000/year, just shy of what Mr. President considers rich. Why not demand that every employer make sure that everyone who works for her is rich?

Well, to understand why that is silly, ask yourself what would have to happen to the price of a burger if every cashier at a burger joint were paid $100/hr?

And, if you do not see the relationship between the price of a burger and the wages of the people who work at the restaurant, then you have no business participating in any kind of discussion about the world we live in.

OK, let's say you sell 50 burgers an hour at the current price of $2/burger. Now, you have to pay the cashier, cook, and the person who takes care of the drive through $100/hr. Plus, there is the rent, electricity, buns & meat, condiments and a whole lot of other things you have to pay for. But, those are small potatoes compared to the $300/hr you have to shell out.

Let's say you jack the price of a burger up to $20 a piece. Are you going to be able to sell the same amount as before?

Are you going to close up shop? No, more than likely, under those circumstances, others will invent robotic systems which will let you continue to operate a low-price, high-volume burger joint without ever needing a human again.

But, let's get more realistic. Suppose you're currently paying your workers $8/hr and now Tompkins County passes a law that says you have to pay them $13/hr. What's going to happen? Who'll benefit from this, and who'll be harmed?

Let's assume for a moment that you the evil capitalist low wage restaurant owner is always going make out like a bandit — you won't, but, let's forget about that for a second.

Previously, you were paying your workers according to how much their output was worth to your customers.

Could the workers productivity have grown by 62.5% just by the government mandating that you pay them 62.5% more than before? Of course not. If $13/hr were going to make them that much more productive, they would have gone to work at one of those fancy restaurants instead of the burger joint.

Are your customers now going to be willing to pay $3.25/burger and buy the same number of burgers as before? No, because if they are, that would indicate you're a bad businessman. Why would you have been selling burgers at $2 each for all these years if you could have sold the same number of them at $3.25?

So, you're going to ask for a higher price for burgers and sell fewer of them. That will mean you will need less output from your workers, and therefore lay some of them off or decrease their hours.

And, given that the price of the cheaper alternative has increased, one of the sources of competition for the fancier restaurants and diners in town will have been removed.

That is the key point in why some local small business owners join this bandwagon: They also want to make it hard for others to start businesses or stay in businesses that compete with them on price.

In a free market, workers work where the pay makes it worthwhile for them to exert the effort they do, and employers hire people whose output they deem is worth it given the willingness of the customers of the business to pay for whatever that business is selling.

Minimum wage mandates undercut this mechanism of free people agreeing to trade services for money.

Such mandates put lower skilled workers with less experience and businesses with lower margins at a disadvantage compared to already established businesses with workers who are already making more than the proposed minimum wage.

Supporting such laws is tantamount to supporting unemployment, poverty, and misery as the poorest among us never get a chance to gain experience and accumulate human capital.

Updates

• 11:39 pm on March 16, 2012: Fixed a bunch of grammatical and spelling errors.
• 9:50 am on March 16, 2012: Posted my commentary.
• 5:12 pm on March 15, 2012: Posted a handful of photos from the rally on my personal web site.