I hear a lot of people advocating for a raise in the minimum wage (usually to $10 or $15 per hour) so that people can "make a living wage." Here is my response to that.
If you think we need a higher minimum wage to ensure that we take care of everyone's needs, you are advocating for wages to be paid based on need, not the value of their work. That sounds nice, but there are some serious problems with that view. For one, it's unfair. (Yes, I just used the code word of the liberals in favor of my conservative viewpoint. I love turning the tables like that.) Paying wages based on need is inherently and unavoidably unfair.
Let's use an example of two men doing exactly the same job at the same company. One is a married man with 3 children. The other is single with no children. Should the company pay the married man more than the single man, even though they do exactly the same work?
If you believe that people should be paid based on their need rather than the value of their work, then you must say that the married man should receive more pay for his work because his need is greater. Yet very few would agree that a married man should be paid more for the same work. We instinctively realize that it is unfair and unjust to pay two people differently for the same work.
Let’s go a bit further. If people should be paid based on their needs, then why not do away with a set wage altogether? Instead, employers should simply meet all the needs of all their employees in exchange for work. So, if an employee’s car breaks down, rather than pay for the repairs himself, he would turn in the bill to his employer. Likewise, all food bills, rent statements, utility bills, hospital bills, and all receipts for any need are paid or reimbursed by the employer in exchange for working at the company. That way, we can ensure that everyone can live on what they make. Of course, that also means that many employees will make much more than other people doing similar work. It also means that employees become, not masters of their own destiny, but more akin to slaves – being fed, housed, and clothed in exchange for working for the master. Is this what we want? It is if we think that wages should be based on need.
Instead of basing wages on need, a much better way is to base wages on the value of the work being done. In this view, a person who provides more value to the company should receive more pay while someone whose skills are less valuable receives less pay. This seems heartless on first glance, but actually has several advantages to both the company AND the worker.
The advantage to the company is obvious. Basing wages on the value of the work produces incentive for employees to do better quality work in order to receive better compensation. Plus, the burden of deciding what constitutes actual needs (as opposed to wants) is removed and the overhead involved in doling out welfare to all employees is gone. No one debates that paying for the value of the work is better for companies.
What many don’t realize is that a system where wages are based on the value of the work is actually better for employees.
For one thing, when compensation is based on need, it is nearly impossible to have anything more than the most basic needs met. No matter how hard you work in such a need-based system, you can’t get any more. The employer is only obligated to provide for your needs. If you want nicer things, you’re out of luck. No amount of harder work, increased skill, or better efficiency will get you more than the basics you need to survive.
What’s more, you can work your hardest and still get less than someone who doesn’t put in much effort, but has more need. This is tremendously disincentivizing and demoralizing. How can anyone have pride in their work when it doesn’t matter how hard they work? They will still get the same compensation as if they had barely done the minimum. And how depressing would it be to work very hard and have the guy at the next desk, who does practically nothing, getting the same or better than you. It’s simply not fair or right to pay different amounts for the same work or give the same pay for different amounts of work.
In a system where wages are based on the value of the work, a person can get ahead by working harder, developing new skills, or becoming more efficient. Their future is in their own hands. That is empowering. That gives people hope. It gives them reason to produce something of value that is useful to society because it is also useful to themselves personally.
Paying for the value of work rather than need gives people the opportunity to better themselves. It gives them incentive to do better and to have hope because they are masters of their own destiny, not slaves to a system.
A value-based system of wages is not only better for businesses and workers, but it is better for society as a whole. A society where everyone works to better themselves in order to provide more value, and thus earn a better wage, is a prosperous and thriving society. New inventions are made, new services offered, new businesses opened, new technology developed – all for the purpose of allowing individuals to better their lot in life. There is no incentive for developing these things in a need-based system. There is far more total production when everyone is working to provide more value in order to get more for themselves.
A system where people are paid based on need has no hope or future. A system where people are paid based on the value of their work is empowering to individuals and allows them to better themselves, provide for themselves and their families, and make their society more productive.
So, should we pay wages based on need or on the value of a person’s work? We can't have both.
If wages should be value-based, then we shouldn’t raise the minimum wage. We should allow individuals to be paid based on the value of their work. Those wishing to earn more must either work more hours or increase their skills. But they have that opportunity to decide for themselves and control their own destiny.
On the other hand, raising the minimum wage to a “living wage” simply means that those not providing enough value to be worth that minimum wage will have no jobs. It means cutting off hope for those of low skills who cannot make it into the job market. It means keeping a permanent underclass who have been priced out of jobs. It might sound compassionate to want to pay everyone enough to live on, but the results actually hurt those with poor job skills. And that isn’t good for anyone.