While one hour of work might not be worth a whole lot in Georgia, the state’s $5.15 minimum wage is a meaningless metric to begin with. The federal minimum wage, currently $7.25, prevents virtually all employers from actually paying employees according to Georgia state law. In principle, I don’t have a problem with a federal law mandating that a minimum wage guarantee workers live above the poverty line. But in practice, the federal government is unequipped to do anything of the sort.
Let’s look at the differences in cost of living across the U.S.: a pack of cigarettes will run you a hair under $14 in New York City. In Kentucky? Less than half, ringing up at $5.72.
This pales in comparison to the differences in rent in places like Los Angeles or New York City versus Mobile, Ala., or Youngstown, Ohio.
In providing a uniform baseline from sea to shining sea, the federal government either forces employers to pay a prohibitively high wage to workers in the South and the Midwest, or it provides no meaningful wage at all for anyone along the coasts.
Although minimum wage legislation might actually be beneficial at the federal level, for it to work, the federal government must task the states to discern for themselves whatever a “living wage” constitutes and require them to hold to that wage as a function of time. While federal enforcement might be necessary to ensure a living wage, the best way to realize that is through the states’ internal mechanisms.
But I am unsympathetic to any federal mandate that guarantees a wage that ensures workers are above the poverty line.
The key word of the last sentence is “federal.” What actually happens to the economy with a $15 minimum wage in the long term? We don’t know. Economists today have wildlydiverging opinions on the outcome. We can learn, though, but only by one way: using the states as testing grounds, testing opposing ideologies against one another.
Seattle’s minimum wage is currently set to $15, and it might well turn out that this will benefit everybody. Henry Ford comes to mind — the automobile industry pioneer paid his employees famously high wages so they could have enough money to buy the very automobiles they produced.
But so too, it might hurt everybody, with huge numbers of service, retail and other traditionally low-skilled workers being laid off. Whether the Affordable Care Act, for instance, netted more good or bad, there was no shortage of companies that either cut the hours of workers or laid them off to bypass laws regulating employer-provided health care.
The problem with federal intrusion beyond a basic provision of a certain standard of living is that it incidentally proscribes any economic experimentation.
But even in the event that we know the best set of economic policies to reach a specific end, why not let the states fight it out among themselves? Competition, after all, breeds innovation.
The obvious retort is that this incentivizes states to engage in a race to the bottom. But states like Oregon, California and New York show that this is not a hard or fast rule. If the gap in the standard of living between Oregon, California and New York and other places continues to rise, then people should vote with their feet. We live in the most mobile society ever; though there might be significant barriers to movement in the short term like immediate moving expenses, the concerns about these constraints are overblown.
Just a century ago, the population of California was below 5 million. By 2015, it had grown roughly tenfold to around 40 million. There was more opportunity in California then, and should recent trends continue, the coastal economies will continue to outpace the rest of the country, prompting even more migration thereto.
Whatever the solution is, the best way to incentivize poverty reduction is by forcing competition between states to provide the best quality of life; wherever that place is, people will go.
Grant Osborn (19c) is from Springfield, Ohio.
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