Sunday, May 10, 2015

Minimum Wage and Employee Turnover.

Let me start with this, I oppose minimum wage on purely moral grounds. Minimum wage laws threaten violent action against people entering into peaceful, voluntary mutually beneficial contracts who terms the supports of minimum wage laws do not support. For the same reasons I oppose the drug war, laws against prostitution or other types of consensual sex between adults, the FDA and other laws and regulations that create victimless crimes.

However, some people have started looking at studies on the effects of minimum wage to try to justify the aggression they support. One of the supposed economic benefits that minimum wage brings in reduced employee turnover.

Economic benefits are irrelevant to me. If you claimed that to avoid economic collapse we needed to make a human sacrifice to Mammon, I would tell you to start stockpiling supplies.

The claim has some superficial validity, though. And desperate to justify the violation of rights, some on the left will point to studies that show that an increased minimum wage can reduce employee turnover and thereby reduce the costs of employee training.

In some cases, a business may not be paying a high enough wage and would save money in employee training costs by raising the wage. In these particular cases, a higher wage is more than offset by the lower training costs.

There are two clear problems with this claim. The first is that it is not clear that all or even most companies will save money by raising wages and lowering training costs. In fact, some companies may actually be better off lowering wages below the current minimum wage, which leads to the second problem, government has no incentive to find the correct wage.

No only does government have no incentive to choose the correct wage, they have a huge incentive to overshoot that wage to appeal to voters.There is also no reason to assume that the best wage is the same for all jobs. Jobs that are less labor intensive and less risky would tend to have lower wages. Jobs that are more physically intense may need a higher wage to keep employees from leaving from exhaustion and burn out. But a one size fits all approach does not meet the needs of either types of work.

If some employers should have a higher wage, we should educate them. Using coercion does not inform them that they might be better off, it only violates their rights.

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