The Minimum Wage and Some Stories

When it comes to the minimum wage, conservatives and libertarians have no idea what they’re talking about. The theoretical discussions about this issue are just bizarre. The self-fulfilling logic is as follows: 1) Lots of people are getting paid at the minimum rate. This implies that many people who are worth less than the minimum will not be able to get jobs. 2) Not many people are getting paid the minimum rate . This shows you that everybody is worth more than the minimum rate and therefore the minimum wage rule is a wasted effort.

I’m gonna tell you a little story – actually two little stories, compare and contrast. Assume there’s no truth to either. Fiction. It’s just for entertainment. See if you can ascertain the moral.

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My daughter goes to school downtown. She takes public transportation. She buys a bag of tokens every week for the bus at student rates and I get her a monthly pass for the train. The other day she calls me on her cell phone. That is, she calls my cell phone from her cell phone, which is OK because we’re on a family plan. She says, "Daddy, I fell asleep on the bus and when I woke up we had passed the station. Now I’m lost. What do I do?" So I ask her to read the street signs and she gives me a couple names, which I plug into MapQuest, which is already up on the screen. Bad section of town.

Two minutes later, still on the phone, I’m in my car heading downtown. Her cell phone has a good charge on it, but mine doesn’t, so I plug in the adapter and start charging while I’m still talking with her. My map is open on the passenger seat and I see she’s approaching a bus intersection, so I tell her how to get a transfer and when to get off. She goes the wrong way, but we get it fixed up after she gives me a few more street signs and landmarks. I meet the second bus at a convenient location and realize that we’re not going to be able to get home before her lesson, so I stop at a local store, buy her another notebook and pick up a gallon of milk. Then I take her straight to her lesson, whereupon I call my wife to find out whether she can pick her up after the lesson. If not, I wait. Otherwise I go to the Home Depot to look at the insulation and replacement windows for the house. Our house, I should say. We just paid off the last of the mortgage. My wife wants to re-mortgage to pay for home improvements, but I’d rather do them myself or wait until we can afford it.

Now, my other kids go to private school because quality education is extremely important to us, but my youngest was able to get into the special public school, which was up to our standards. We were thrilled For one thing, we saved a lot of money. After-tax money, I wanna tell ya. So, the transportation money and the cell phone and half a dozen other things that we used to think about, that’s just chicken feed. Our other kids carpool and ride their bikes, so it works out well.

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My daughter has a friend in the public school whose mother works in a warehouse up in the northeast some place making minimum wage. I know she could get more over the river for the same work, but then her daughter couldn’t go to the same school and she wouldn’t be close to the grandmother who does daycare for the younger ones. She asks for a raise every so often, but the boss just laughs at her. She’s a little ADHD and imagines this is the only job she could do. The boss tells her she’s lucky.

She’s on the bus route, but usually walks to work so she can afford the daughter’s tokens, and also because she buys three cigarettes at the corner store for a dollar. The train would get the daughter to school much faster than the three buses, but there’s never enough money for the rent at the end of the month, much less for the monthly pass. The only reason she shells out for the tokens is that her daughter can buy them at school. Since she often works a double shift, she doesn’t have time to go buy one at the train station.

The prices of public transportation are really outrageous. I believe there are three reasons for this: 1) Unions are greedy and always schedule their actions around the election cycle, so the mayor usually just folds rather than endure the negative publicity. 2) Every time an accident takes place, somebody sues the bus company for a zillion dollars, and they usually get it. 3) The public portion of the funding seems to just disappear. … But then again, I might be all wrong. Maybe the prices reflect legitimate market forces.

So anyway, the girl’s half-brother goes to the same school. One morning he gets yelled at by a teacher. He and his friends decide to ditch school for a day. They jump the turnstile and take the train out to one of the friend’s houses. Transit police do nothing. Meanwhile, the girl finds out what her half-brother is up to and decides to call her mother. She borrows my daughter’s cell phone, sneaks into the bathroom and calls the warehouse. The mother is on break smoking one of her cigarettes under the exhaust fan. She can’t hear the supervisor yelling for her, and the supervisor doesn’t want to leave his post. He makes a couple dollars more and doesn’t want to be docked. The girl then calls the grandmother, who can’t really understand the situation or what to do about it. The girl won’t call the boy’s father because the father is abusive and she doesn’t want to get the boy in trouble. She walks out of the bathroom thinking about the problem with the cell phone in her hand. A teacher confiscates the cell phone and it’s several hours before she can contact her mother.

When the mother finds out, she waits until break time, tells the boss her problem, clocks out, and walks over to her friend’s house. Can she borrow the car? OK, if you gas it up for me. She arrives at the house to find two drunk boys. Her son is missing. The alcohol had a bad effect, and he left the house in some sort of rage. They thought he might be walking home. Hours later she finds out her son is in the hospital, badly injured. She goes to visit the boy three days a week. The father refuses. The daughter now lives with her biological father, who is happy that he doesn’t need to send grocery money any more.

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At the end of that day, I got a phone call from the school saying I had to pick up the phone. I scolded my daughter that night for lending the phone out and grumbled about the inconvenience of driving to school.

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So what is my feeling about the minimum wage? IMO, the market is not fair. The market is not efficient. The market is not wise. Many people are trapped into very inefficient decisions. It’s not as bad as the old company store scam, but it’s not good either. People don’t know what they’re worth. They lack mobility. They may be unassertive, even meek. They are often uninformed and poor negotiators. Some of these people may also have issues that make them vulnerable to manipulation. Employers don’t fire them because it’s too hard to replace them, but they don’t pay them any more than the minimum because they don’t have to. In general, the assumptions behind the economic models do not apply.

Poor people don’t have sufficient flexibility to fix problems ahead of time, before little problems turn to big problems. They don’t know how to defend themselves. They don’t know where to go or what to do. So poor people end up paying for social corruption, economic distortions, crime and stupidity. The middle class pays for the mistakes of the poor, and the upper class campaigns against taxes and opines on such academic subjects as the minimum wage, the death tax, socialized medicine, real estate prices and why Ted Kennedy is a buffoon.

Society is not well organized. The class strata are pulling apart. People in a position to change things don’t really understand what’s happening, and may not care. We need to institute social mechanisms that have a chance of addressing these problems.

6/25/2006 12:57 AM