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Is Minimum Wage Law the Best Resort?

Bas Van Der Vossen

As you know, California is phasing in a $15 minimum wage. As Matt has explained, this is very likely a very bad idea. But could a minimum wage law be a requirement of justice?

I don’t mean to ask whether justice might require some coercive measures to benefit a group of people. Let’s suppose that it can. (It’s almost certain that the minimum wage won’t help the group one would want to help the most, again for reasons Matt discussed, but set that aside, too.)

I also don’t mean to ask whether justice might ever allow interference with freedom of contract. Let’s suppose again that it does, at least sometimes.

My question is more specific – about this particular kind of freedom of contract. Minimum wage laws apply only to a subset of employment relations, namely bilateral ones. These are not the only employment relations. Importantly, people can be, and often are, self-employed. But minimum wages laws don’t apply to self-employment.

One reason is obvious: it’s not clear how they could apply to self-employment. Such a law would be plainly unenforceable. But equally plainly, even if we could enforce it, such a minimum wage law would be a terrible idea.

There is simply no good reason to prevent people from working for themselves at whatever rate they choose is worth their time.

But this has a bizarre result. People can apparently work for themselves for, say, $8 an hour, without an injustice being done. They just can’t work for someone else for the same price. Or, to put it the other way around, people can employ themselves for $8 an hour, they just can’t employ anyone else at the same rate.

It’s not that difficult to come up with reasons why people might want to work for themselves for only $8 an hour. One might enjoy the work, or find a kind of fulfillment in it, even though it doesn’t really pay the bills. One might treat it as an investment, accepting a low income now in the hope that this line of work will become more profitable later. It might, more regrettably, be one’s best option. And so on.

But one might want to work for others for the very same reasons. If one thinks it’s a good deal to be self-employed at a low wage, it might similarly be a good deal to be employed by others on the same terms. So why is one allowed but not the other? The worry here is a general one. Why would it ever be okay for people to offer a benefit to themselves but not to others?  After all, those others will have their reasons for accepting employment at a low wage. And imposing a minimum wage law won’t change anything about that.

John Rawls wrote that a just society is a cooperative venture for mutual advantage. And these are mutually advantageous exchanges. Of course, any thinker worth their salt knows that mutual advantage isn’t a conversation stopper. It’s possible for exchanges to benefit both parties and still be wrong. But mutual advantage does matter. And any thinker worth their salt also knows that issuing blanket prohibitions on productive exchanges is no way for a society to flourish. The same goes for the people within it.

Again, it’s an open question whether there ought to be policies in support of the poor (or even in support of the working poor – which is not the same). But even if so, a minimum wage law remains a bad idea.

This article was originally published on Bleeding Heart Libertarians.

Bas Van Der Vossen is currently an Assistant Professor of Philosophy at the University of North Carolina, Greensboro, specializing in political philosophy and the philosophy of law. He’s published a number of interesting papers, all of which are available on his website, on topics such as state legitimacy, the duty to obey the law, and original appropriation.

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