Government Should Not Set Wages
Friday, May 6, 2005
By John Dendahl
Hope must spring eternal! Despite the universal failures of socialist
regimes, lefties continue to mouth the siren song of economic salvation
by the government.
Albuquerque City Councilor Martin Heinrich has joined the choir.
He wants Albuquerque to follow in the ruinous footsteps of Santa
Fe with an elevated minimum wage law. Heinrich is pretty much a
piker, though. His Fair Wage proposal would set the minimum at "only"
$7.15 per hour, while Santa Fe's so-called "living wage"
is already $8.50 and slated to grow to $10.50.
This being such a terrific idea, why not $50?
You have to give the left an "A" for spin. "Living
wage" is as warm and fuzzy as motherhood and apple pie.
Then follow with an "F" for economics.
With each passing day, communities in the United States find themselves
in greater competition with each other, and with other countries'
economies. One doesn't need Econ. 101 to understand that a rational
employer will do whatever it must to avoid paying more than a particular
job contributes to whatever the employer is selling in a competitive
market. This cost avoidance can include automation, out-sourcing,
moving to a less anti-competitive location and myriad other strategies.
When a community like Santa Fe - well known for elitism from the
get-go - adopts a super minimum wage, it telegraphs to everyone
its decision that lower-paying jobs are simply unwelcome. That leaves
nearly unemployable the young, who are eager for career starts,
and others who are simply unskilled.
Sure, a hotel, restaurant or retailer wanting to sell in the Santa
Fe market has to bite the bullet and pay, but the result must be
higher prices with the risk of driving customers away.
Or the result could be driving customers ever more into labor-efficient
operations like Wal-Mart. More on that below.
Some considerations go beyond labor cost. One employer recently
moved his business from Santa Fe to Pueblo, Colorado. When asked
if the "living wage" law were the cause, he replied, "Not
directly ... but I don't want someone coming in and telling me how
to run my business." I know from personal experience in Santa
Fe that his wasn't the first to leave for exactly the same reason,
and no one will ever know how many businesses refused to consider
Santa Fe on this account.
One morning last October, I debated "living wage" with
former Albuquerque District Court Judge Anne Kass. Supporting her
anti-capitalistic view of the world - in debate and a subsequent
column - Kass went all the way back to slavery, then fast-forwarded
to an unnamed family in Arkansas that "has amassed a shocking
fortune ... the old-fashioned, American way - by exploiting workers
That would be the family of Sam Walton, who invented Wal-Mart.
Kass' spin appeals to the typical knee-jerk liberal, but in fact
she ineptly picked a stunningly inapt example to support her case.
For one thing, Wal-Mart employees already do exceptionally well
when compared with others employed in retailing.
For another, Wal-Mart's sales per employee are astronomical. It
can pretty easily swallow any increase that might result from a
"living wage" law, and happily collect customers driven
to it by price hikes other retailers must enact to cover government-mandated
Lastly, I can think of no business that should be less a target
of the left than Wal-Mart. Name a single business anywhere that
has made it possible for more people of limited means to live better
than has this product of Sam Walton's genius. Of course his family
is wealthy: that's a highly prized result of business success in
Heinrich's upbeat statements to the press notwithstanding, a case
simply cannot be made that Santa Fe's "living wage" law
has been good for its economy. Now he's backing off, saying only
that "the sky has not fallen."
Well, a bit of patience on that is warranted. No one claimed the
sky would fall in the ten months the law has been in effect. Further,
anyone acquainted with Santa Fe's economy for at least 50 years
knows it is not a reasonable test bed for Albuquerque or any other
New Mexico community.
An economy remaining at the U.S. bottom has no need of more bleeding-heart