–– Paul Schlehlein
The audio version of this article is available here: YouTube, Apple Podcasts, or Spotify.
Most nations around the world utilize minimum wage laws, which make it illegal for employers to pay less than the government-specified price for labor. Politicians and labor unions are notorious in their calls for higher minimum wage. These regulations, however, vary significantly.
The per-hour minimum wage in USD is about $19 in Luxembourg, $13 in Germany, $7.25 in the US, $2 in India, and $1.50 in South Africa. Some African countries are so poor (like Sudan, Burundi, and the Gambia) that monthly salaries work out to under $1 per day, or just a few cents per hour.
These figures can be misleading because they do not factor in purchasing power. Country A cannot boast of a minimum wage that is twice that of Country B if its costs for goods and services are three times higher than Country B. Still, these figures get the reader in the ball bark of a nation’s affluence.
At first glance, minimum wage laws seem good for society. Don’t they protect the poor from silk stocking owners at corporate headquarters? Don’t they guarantee that Richie Rich won’t lowball the single mother who’s just trying to feed her kids? Aren’t these rules helpful in censuring Mr. Deep Pockets from paying a teenager half of what he’s worth?
In fact, logic, historical evidence, the laws of economics, and the principles of Scripture show that minimum wage laws are actually harmful to a society and do not help them flourish.
Government or the Free Market?
The first reason for this is that minimum wage laws assume that government, not employers and employees, know the proper wages businesses must pay.
In this view, politicians should determine salary, not the market. In fact, the best people to determine the minimum (and maximum) wages of employees are not bureaucrats at treetop level that try to guess what someone’s time is worth. Instead, it’s the workers and businessmen on the ground that stand to benefit and suffer most by the wages paid. Who can really say what someone’s time and money are “worth”? Let the free market decide.
Value is subjective. Suppose a wealthy, 21st-century stockbroker in Johannesburg hopped in a time machine and returned to the days of Shaka Zulu. His skills in the stock exchange would be of no use to him in his new world of thatched huts, assegais, and goat herding, just as Shaka’s expertise in hunting and war wouldn’t return a sizable check in today’s world. What has value in one time and place may not have worth in another. Supply and demand best determine what something or someone is worth.
God never gave government the role to determine minimum wage earnings. And It’s untrue to say that without minimum wage laws, the corporations hold all the bargaining power. The employer should be free to offer what he thinks best and the employee is also free to accept it or walk away.
The Value of Washing Cars
If a boss offers John $5 an hour to wash cars and John thinks this offer is too low, he is free to wash cars elsewhere. If he can earn $10 an hour down the road, then it’s fair to say his previous boss paid him too little. But if John can’t find work elsewhere washing cars, it’s probably not true to say his previous boss paid him too little, at $5 an hour. In the free market, increased value usually equals increased pay, and decreased value usually equals decreased pay.
In Matthew 20, Jesus tells the story of the Parable of the Labourers and the Vineyard. At the start, the landowner and the labourers agreed upon a price. The boss would hire for a denarius a day. He justly paid whatever the labourers agreed to and was also free to pay extra if he should so choose.
But suppose the labourers rioted at the vineyard. Marching with signs and blowhorns, they demanded that the minimum wage be tripled to three denarii a day. Caesar agreed and encoded the law. Now the workers are three times as wealthy, even if the owner had less cash himself. Didn’t this fix the problem of poverty?
In fact, no, it didn’t. It will only make things worse, which we will see in forthcoming articles. Though not obvious at the start, minimum wage laws harm society and actually hurt the poor far more than the wealthy. Christians would do well to know why and how to defend this from Scripture.