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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  • Bill

    i agree with Dr Bradley that a higher minimum wage does not generate economic growth, in macro. BUT, as Dr Bradley acknowledges, Jesus doesn’t call for sound macroeconomic policy, but to care for “the least of these”. So we had better “help her material situation in the short-term”, before we do anything else.

    help her material situation in the short term
    help her material situation in the short term

    • Mike Adams

      Jesus never told the government to help the poor he told us to help the poor. He has the power to fix the plight of the poor instantly, he choose to test the hearts of believers by making the burden of helping the poor an individual responsibility. Allowing someone else to give for us does not accomplish the Lord’s commandments to us. Government is an incredibly ineffective means at any rate because it is led by people with impure motives.

  • Dave

    It’s worth noting that when the minimum wage was introduce here in the UK in 1998, this did not happen. There were no mass layoffs or lack of low skilled jobs, all it did was force the most exploitative employers to pay a better wage to their staff. It is a principle that is supported by all the churches here as it has helped lift many out of the most desperate levels of poverty.

  • GScandlen

    Mr. Tucker is too polite. The minimum wage was enacted at a time when eugenics was sweeping intellectual society. It was aimed specifically at blacks, to deprive them of work and discourage their reproduction. It was part and parcel of the Progressive movement to improve society by ridding it of undesirables. Wilson instituted segregation in the federal government, Margaret Sanger was pushing for abortion in black communities, the AMA’s “Flexner Report” shut down medical schools aimed at blacks, and labor unions forbade black members.

    • I do not see how this ancient history is germane to the present situation.

  • Amarah

    The minimum wage, enforced by the government, looks good on the outside. It looks like the government intends to help the poor become more prosperous. But when we delve deeper into that idea, we realize that raising minimum wage actually decreases job opportunities. We don’t know whether the government intended that more small businesses die and less jobs are available, but that is the result. The whole idea of raising the minimum wage actually backfires on the original intent.
    This is similar to the issue of taxing the rich and giving to the poor. It is forcing people to give to the poor. As Christians, we know that it is important to give out of the kindness of our own hearts and God’s leading. If we give in any other way, it is in vain. As Christians we must be led to help others, whether that be financially, spiritually, or through relationships. If we only ever helped the poor out of God’s leading, God would take care of all the poor, needy, and less fortunate. Lets leave it in God’s hands!

  • anarchobuddy

    I am a bit disturbed that a pastor thought that someone’s income has a direct tie to his or her dignity.

  • Philip

    Is there a historical example of Dr. Bradley’s theory playing out as she predicts, namely of a higher minimum wage leading to job loss and higher prices? One of the comments suggests that the introduction of a minimum wage in the UK did not have this effect.

  • Benjamin Shaw
  • Monet

    I wish this article held companies to the same standard. While small business are more at risk, what about large corporations would would only suffer a slightly decreased profit margin? Should we just say whatever the employer decides to pay is fair? Should we wait until a company feels convinced on its own to raise wages? Profit margins and productivity increased exponentially since the 70s, these companies aren’t going to pay more without being forced. Unions members become victims of retaliation…….there’s a reason why the government has to throw its weight around. cost of living increases regardless, simply because someone is low skilled doesn’t mean they don’t work hard.

  • Dr. Anne Bradley

    Hi everyone, thank you for all of your great questions! I want to do them justice, so my post for next week will address them in a more comprehensive look at the effects of minimum wage. Thank you for joining in the discussion!

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