The Living Wage Scam

Repeat after me. Economics is not magic. Economics is not magic. Economics is not magic.

How could it be possible for a person working at a business to NOT be paid a “living wage?” After all, they’re right there, ALIVE and working, right? They’re not some zombie, brought back to life by a voodoo practitioner or a bioweapon gone wrong, they’re a living, breathing human being making wages that they are using to keep themselves alive, correct?

Furthermore, did they not willingly find the wage they’re being paid acceptable? Presumably so, correct? After all, slavery has been abolished in the West, so nobody puts a gun to your head and forces you to work yourself to death. Instead, it works just as the late, great Milton Friedman noted:

For example, long ago, your humble author worked as a Walmart portrait studio manager, a Burger King Assistant manager, and in a group home full of juvenile delinquents. None of those were great jobs, but I had a choice whether to accept the wages they were offering, and I said, “Yes.” Whether any of those jobs paid what would be considered a “living wage” today is hard to determine since it’s a fairly arbitrary term, but nevertheless, I lived through them, gained experience, improved my skills and here I am, still alive.

All that being said, to be fair, we can’t just make fun of this obviously misnamed term, we need to discuss the arguments made by supporters of the living wage. In order to do that, let’s start with what a website called, “The Living Wage Calculator” has to say:

While the minimum wage sets an earnings threshold under which our society is unwilling to let families slip, it fails to approximate the basic expenses of families in 2022. Consequently, many working adults must seek public assistance and/or hold multiple jobs to afford to feed, clothe, house, and provide medical care for themselves and their families.

Establishing a living wage and an approximate income needed to meet a family’s basic needs would enable the working poor to achieve financial independence while maintaining housing and food security. When coupled with lowered expenses for childcare and housing, the living wage might also free up resources for savings, investment, and the purchase of capital assets (e.g., provisions for retirement or home purchases) that build wealth and ensure long-term financial stability and security.

An analysis of the living wage (as calculated in December 2022 and reflecting a compensation being offered to an individual in 2023), compiling geographically specific expenditure data for food, childcare, healthcare, housing, transportation, and other necessities, finds that: The living wage in the United States is $25.02 per hour, or $104,077.70 per year in 2022, before taxes for a family of four (two working adults, two children), compared to $24.16, or $100,498.60 in 2021.  

So, after reading this, there are a few things we can note.

First of all, while there is no hard and fast rule for what constitutes a living wage, the amount is inevitably going to be considerably higher than the minimum wage. Furthermore, the idea of a living wage is clearly a political concept that doesn’t even make the faintest nod toward real-world economics. In other words, it’s essentially people who look at economics like magic going, “I think people should earn at least this much! Look into your crystal ball or wave your wand or whatever businesses do to earn money and make it happen!”

This viewpoint becomes even clearer once you get out of the dry language of the website above and into the real world. For example, here are some comments on an X thread by Nina Turner, whose whole schtick is essentially just going, “Everything should be handed out for free” in a hundred different ways. Most comments disagreed with her, but here’s the sort of leftist thinking that causes them to embrace a living wage:

So, the first huge mistake they’re making here is looking at a job primarily as a way to support people. In other words, why do jobs exist? Because people need money. So, the job is created to pay them, and it should pay them a certain amount of money that leftists find suitable because that’s why the job exists.

Of course, this is Cargo Cult thinking. What’s a Cargo Cult?

During WW2, the US was building airstrips on remote islands in the Pacific. The natives were shocked when we landed airplanes there but were also thrilled when we gave them food, supplies, and other goodies. Then, when WW2 ended, those bases were no longer needed, and the planes didn’t return. Quite understandably, the natives missed all that free cargo flowing in, and then myths started to spring up about it. The planes were sent by mythical figures, their ancestors, or their gods and could be enticed to come back with the proper rituals. Next thing you know, the natives are doing mock drills, building ceremonial airplanes and even fake control towers to entice those planes full of cargo to return.

Ultimately, it didn’t work because they didn’t understand the purpose of those planes just as so many leftists that are ignorant of economics don’t understand the purpose of jobs. So, what is the purpose of a job? Again, let’s go to Milton Friedman:

If you want $25 per hour to take orders at McDonald’s or push a button 4 times a day like George Jetson, the first problem you’re going to have is that you’re not producing more than $25 per hour worth of value to a company, so they have no reason to hire you:

A company that pays workers $25 per hour to produce let’s say $5 per hour in value will quickly go out of business. For a company to hire someone, that person typically needs to be able to produce more value for the company than they are paying them. Furthermore, jobs that pay a “living wage” do not exist in a vacuum. On the contrary, many professions are actually competing in a global marketplace. If one company pays its workers $25 per hour and another puts out a similar product much cheaper by paying its workers less, the more expensive company is likely to fail. We also have automation replacing workers, AI on the horizon, and remote work is making a lot of positions much more competitive than they used to be:

The focus always, always, always needs to be on workers building skills that make them WORTH MORE, not pressuring businesses to pay workers MORE THAN THEY’RE WORTH. The free market is not some kind of Las Vegas magic act. It doesn’t pay people certain amounts of money because the audience thinks it will look cool. Ultimately, the salaries workers are paid have to be justified by the amount of value they produce for businesses to survive. That’s what the real world is like, not the magical world of the living wage where people can be paid any amount of money if enough communists and unemployed poets want it to be that way.   

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