Should There Be a Minimum Wage?
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Wages should be set by workers’ needs, not by market bargaining. Left to the market, wages come out of an unequal contest between employers and workers, so there’s no reason to expect them to be fair. Instead, a fair wage can be worked out from what a worker needs to live decently, then fixed by law.
Justice H. B. Higgins made this argument in the 1907 Harvester judgment, which laid the groundwork for Australia’s basic wage. He rejected leaving pay to the unequal contest of the market and based a fair wage instead on “the normal needs of the average employee, regarded as a human being living in a civilised community.”
a fair wage can be worked out from what a worker needs to live decently, then fixed by law
Prices can’t be set by decree. The economy, like a person’s mind, is a creative engine, and prices are its feedback mechanism, much as emotions are for the mind. So you can’t fix a wage by decree any more than a person can just ‘decide’ to be happy.
unequal contest between employers and workers
This is a mistaken socialist talking point. The idea is that employers have ‘power’ over prospective employees (not ‘workers’) because the latter ‘need’ a job.
But the reality is that employers also need employees. There can be swings from a buyer’s to a seller’s market, yes, but once again (see #6125) regulators should take a look in the mirror to see if they caused any of the conditions that made it harder for people to find jobs that pay well.
Ironically, the minimum wage is itself one such regulation. And it affects industries that are already heavily regulated, such as grocery stores. Existing regulation makes it harder for new competitors to enter the market – who would otherwise have competed not just for customers but also for employees.
civilised community
A civilized community doesn’t use force against peaceable citizens. Minimum wage laws outlaw, at the threat of violence, employment contracts that peaceable citizens would otherwise have entered into voluntarily.
a fair wage can be worked out from what a worker needs to live decently
Bureaucrats can’t know what one man needs. That information doesn’t exist in the aggregate. See Hayek’s ‘The Use of Knowledge in Society’, which I simplified here. Justice Higgins should be more humble and aware of epistemological limitations.
The information Higgins wants is hard to come by. Prices can find and communicate it, fallibly, when not tampered with. Tamper with them, and it gets even harder to find that information.