Market Wages

   "All things are for the best in this best of all possible worlds." -- Dr. Pangloss, in Candide, by Voltaire.

   "No bread? Let them eat cake." -- Marie Antoinette.

   Assistance for those in need? "Humbug!" said Ebenezer Scrooge.

   Some folks insist a free market economy is the best of all possible economic worlds, and should be left to itself while it balances supply and demand, settling on an appropriate cost for all things, including wages.
   Many of these same folks oppose a rise in the federal minimum wage, based on their faith in a free market economy, unencumbered by government intervention of any kind.
   Reality check: While the federal minimum wage is now $7.25, states, cities and employers are free to pay more to attract workers. In fact, many do. This is the free market at work.
   Moreover, 22 states and the District of Columbia already have wage minimums higher than the federal mandate. New Jersey, for example, has a wage floor of $8.25 an hour, and New York State requires a minimum of $8.00 an hour. Delaware's new minimum of $7.75 an hour just went into effect on June 1. Pennsylvania and Maryland match the federal minimum of $7.25 hourly, but as noted, many employers offer more. Baristas at Starbucks in Doylestown earn a minimum of $8.20 hourly, plus fringe benefits and tuition assistance. And that is 13.1 percent above the federal mandate.

   Aside from the moral argument that workers deserve a livable wage, there is the practical issue of "you get what you pay for."
   Employers cannot hire skilled workers at unskilled pay levels and expect them to stay. Perhaps, in hard times, when workers are desperate, they may take a job at low pay, especially when the alternative is no pay at all, but as soon as an economy improves and job opportunities arise, these low-paid skilled workers are gone, leaving the employer short-handed and forced to hire and train new, unskilled workers.
   Historically, some employers were willing to do just that, when race, religion, or ethnicity were conditions of hire. The employer bigotry preference was so strong that they would hire an unskilled, incompetent worker of a preferred group -- even at higher pay -- rather than a skilled expert from a disliked group who would be willing to work for less.
   Inefficient? Yes. From an economic viewpoint, bigotry in hiring is inefficient.

   Here's another reality: We do not have a fully free economy, where all elements of supply and demand as well as other factors are left alone (laissez-faire) to reach a new equilibrium. In the case of wages, union contracts and government mandates mean that pay scales cannot go downward as the economy changes. It's a condition called "sticky wages."
   In addition, the federal proposal to raise the minimum wage to $10.10 won't take place overnight, but over a period of several years.
   As for the argument that if the price of a hamburger rises because of a hike in the minimum wage, resulting in customers going elsewhere, consider this. Customers in Pennsylvania are not likely to travel to New Jersey just to save 20 cents on the price of a hamburger.
   Just to be clear, we do not have a fully free market economy in America. Nor do we have a fully controlled economy. The first was backed by Adam Smith in the 18th Century, and the second by Karl Marx in the 19th Century. Neither works. We live in a mixed economy, with many freedoms as well as many controls.
   As for those who still insist that despite short-term problems, in the long run things balance out, consider the response by John Maynard Keynes: "In the long run we are all dead."