Economics 101 & Public Square

How Then Shall We Help? An Economist Answers a Pastor’s Question about the Minimum Wage

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Last week, I spoke at a pastors’ luncheon at Northwest Nazarene University. I was speaking on the topic of income inequality in the context of how we care for the poor.

One pastor asked,

You started your lecture talking about how we all have inherent dignity, because we are created in the image of God. How then is it dignifying to make $5.00 an hour? What are Christians supposed to do?

He was, as we all are, wrestling with the issue of income and one’s ability to care for oneself and their families, and how to reconcile that with our dignity.

Our dignity is not dependent on our income. Bill Gates has no more dignity than a single mother living below the poverty line.

However, Gates doesn’t face most of the material challenges faced by that single mother. She has to choose between getting new tires and filling a prescription for her sick child. Choices like this define a life in poverty.

Giving the mother cash may help her material situation in the short term, but it doesn’t elevate her dignity. If we don’t view our call to help transform the person as going beyond giving cash, we are going to fall short.

In his most recent State of the Union Addresses, the President has repeatedly exhorted Congress to raise the minimum wage. In 2013, he proposed it be raised to $9.00, in 2014 to $10.10. In his address last month, he reiterated this request, coupling the plea with a proposal for improving the skill sets of lower-income individuals.

Given our call to care for the least of these, the heart behind these initiatives is admirable, but raising the minimum wage does not uphold the dignity of individuals in need.

As Christians, we need to understand and address the unintended consequences imposed by the minimum wage if we are to truly help the poor.

Widening the Opportunity Gap

Coming from the desire to help those in need, proponents of the minimum wage generally assert that those in the lowest earning bracket will benefit from the raised minimum wage.

This doesn’t fully grasp the situation. As I’ve written in earlier articles, the minimum wage doesn’t close the opportunity gap – it widens it.

Forcing employers to pay a wage rate above the value employees bring to their company forces employers to cut employees and raise prices.

Using cost-benefit analysis, employers seeking entry-level employees will weigh candidates’ experience and price point, trying to hire and retain employees with the highest skill set for the lowest price.

A higher minimum wage raises the cost of employment for businesses, resulting in job losses. It becomes riskier to hire lower skilled laborers, and studies have shown that lower-skilled laborers are actually becoming unemployed.

On top of this, firms will need to raise their prices to cover the increasing costs of operation, and the now-unemployed, low-skilled workers will struggle even more to buy necessities.

The dignity of these individuals, assailed first by job loss, is further jeopardized by the increasingly difficult task of meeting their own needs.

Historical Motives Behind the Minimum Wage

In addition to the economic consequences of this plan, we need to be aware of the heart behind the policy.

Modern proponents of the minimum wage generally share the desire to help those in need, and this is admirable.

Unfortunately, many are not aware of the unintended consequences I explored above, nor are they familiar with the policy’s history.

In a recent article for the Foundation for Economic Education, Jeffery Tucker illuminates the motives of the plan’s originators:

One hundred years ago, legislating a price floor on wages was a policy deliberately conceived to impoverish the lower classes and the undesirables, and thereby to disincentivize their reproduction. A polite gulag.

Well-intentioned labor policies have since replaced these horrible motives, and now few remember why and how the minimum wage was first introduced.

Though most modern proponents endeavor to help, we cannot dissociate the original purpose of the policy with its current use.

How Then Shall We Help?

As Christians, we are responsible for our stewardship decisions, of which the minimum wage and how we personally choose to help the vulnerable are a part.

It is not enough to want to do good by throwing our votes toward feel-good policies. We actually have to accomplish good. That is our biblical command. It’s not negotiable.

God created us in a state of utter abundance. We had all we needed in the Garden of Eden. Our sin makes us broken and brings poverty, both material and spiritual.

We must remember God’s original intent. He has designed his world to work for his good and our role in it is to bring about greater levels of flourishing. Good stewardship helps us help others.

We must follow the model of Jesus and get into relationships with those we want to help, so we can learn how to help that particular person. How can we help them grow into what God created them to do?

That is our first task. It’s messy. It’s time consuming. It will require much from us. But it’s our job, and we cannot take it lightly.

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