As Latter-day Saints we know that one of our most primary responsibilities is to care for the poor and needy. King Benjamin taught:
Ye yourselves will succor those that stand in need of your succor; ye will administer of your substance unto him that standeth in need; and ye will not suffer that the beggar putteth up his petition to you in vain, and turn him out to perish.
Perhaps thou shalt say: The man has brought upon himself his misery; therefore I will stay my hand, and will not give unto him of my food, nor impart unto him of my substance that he may not suffer, for his punishments are just—But I say unto you, O man, whosoever doeth this the same hath great cause to repent; and except he repenteth of that which he hath done he perisheth forever, and hath no interest in the kingdom of God.
…And if ye judge the man who putteth up his petition to you for your substance that he perish not, and condemn him, how much more just will be your condemnation for withholding your substance, which doth not belong to you but to God, to whom also your life belongeth; and yet ye put up no petition, nor repent of the thing which thou hast done. I say unto you, wo be unto that man, for his substance shall perish with him; and now, I say these things unto those who are rich as pertaining to the things of this world.
Mosiah 4: 16-23
Our very salvation is on the line, therefore it is no surprise that we as a people are very attentive to social programs designed to help the poor and needy, believing that by support such good programs we will then be helping to fulfill this essential calling and responsibility that God has placed upon us. We are extremely generous and in many ways we succeed at improving the world around us, but we are still open to other ideas that sound promising and good. This is why some of us are so drawn to the concept of the minimum wage, the idea that the government can demand by law that businesses should pay workers a certain, or minimum, amount to ensure they have a higher standard of living.
The idea that we can diminish or banish poverty by mere legislative fiat is a heady one. But is it that simple? Of course not. It is, in fact, significantly worse than that. It isn’t just that minimum wages are proven to not work – consider that the first minimum wage was established in 1938 at $0.25 an hour and ask yourself why it still hasn’t eliminated poverty even though it has increased by 2,800% since its inception. It is that the minimum wage still hasn’t achieved even the most basic promises its proponents have made about it – and there is no reason to assume that it would magically do so now. The larger problem is that minimum wages actually make the lives of poor people worse by causing them to lose their jobs, making it harder for them to get new jobs, and destroying the value of the money that they do have, causing even those who do maintain work to slip farther into poverty. Here I will outline why the minimum wage is so catastrophic for the lives of the poor and why it is something that any people who want to help the poor should abhor.
The Minimum Wage Destroys Jobs
The way that people obtain wealth is through their work, one needs to create products and services that people want so that they will give you their money in order to obtain the product or service they want or need. This is the basis for the free market capitalist society – one can only make money by adding value to the lives of others and thereby making their lives better. As wealth cannot be created without work – nothing from crops to cars simply springs fully formed from the Earth ready for our use – this means people must have a job doing the work necessary to produce the needed and wanted goods and services. Poor people need jobs so that they can have the money necessary to buy the goods and services they want and need. Without a job they have no money and cannot get anything. They have to work in order for the argument over wages to even matter, and as Dr. George Reisman, emeritus Professor of Economics at Pepperdine University, explains in his article How Minimum Wage Laws Increase Poverty, minimum wages destroy the ability of poor people to get jobs, thereby dooming millions to suffering, hardship, and poverty:
Raising the minimum wage is a formula for causing unemployment among the least-skilled members of society. The higher wages are, the higher costs of production are. The higher costs of production are, the higher prices are. The higher prices are, the smaller are the quantities of goods and services demanded and the number of workers employed in producing them. These are all propositions of elementary economics that you and the President should well know.
It is true that the wages of the workers who keep their jobs will be higher. They will enjoy the benefit of a government-created monopoly that excludes from the market the competition of those unemployed workers who are willing and able to work for less than what the monopolists receive. The payment of the monopolists’ higher wages will come at the expense of reduced expenditures for labor and capital goods elsewhere in the economic system, which must result in more unemployment.
The payment of the monopolists’ higher wages will come at the expense of reduced expenditures for labor and capital goods elsewhere in the economic system, which must result in more unemployment. Those who are unemployed elsewhere and who are relatively more skilled will displace workers of lesser skill, with the ultimate result of still more unemployment among the least-skilled members of society.
The unemployment directly and indirectly caused by raising the minimum wage will require additional government welfare spending and thus higher taxes and/or greater budget deficits to finance it.
One of the fallacies that people who call for a minimum wage engage in is that they treat wages as if they exist in a vacuum instead of what they are – part of the cost of a company pays to produce something. When a company develops the prices it will charge for something it has to include the cost of the people it employs in producing/selling that thing in order to ensure it makes a profit from producing/selling that thing. When you increase the cost the company has to pay for labor it is forced to raise prices to compensate for lost profits. And this happens across the board. Take the example of pencils.
The lumber company has to pay its workers more to chop down trees, so it charges the pencil company higher prices for the wood it needs. The pencil company has to raise its prices to pay for the increase in worker employment costs and to offset the increase in costs it paid to the lumber company. The retailer has to pay those increased costs in the form of the higher price it pays for pencils from the pencil maker and for the increased costs of its on employees. Thus, it has to raise its prices on pencils in order to offset all the new costs and now poor people can’t buy pencils anymore or are forced to buy substantially fewer pencils, decreasing their standard of living and eating away at the supposed extra income provided by the wage increase.
This means demand falls as people no longer are buying pencils as much as they had been before. When demand falls that tells companies to either cut their own production or cease it entirely. It only costs them money to produce as many pencils so they decrease their production amount to a level low enough that they start making a profit again. All the workers who used to have jobs making pencils are now fired, or “let go,” because they are no longer needed and cost the company more than they are worth. But this effect doesn’t stop there. Now that it is making fewer pencils, the company also decreases its orders for wood to the lumber company. The lumber company, faced with decrease demand and higher costs, is also forced to fire people in order to adjust its production downwards towards a profit making level.
The result of either of these is that while some privileged people will enjoy a higher wage, at least on paper, people who were previously gainfully employed are now fired. Poor people, already suffering from the increase in prices, now lose their jobs and have no money at all. And it doesn’t just happen with pencils. It happens the same way with everything else, including food. The economy is an interconnected web, not a series of parallel supply chains. When you do something like artificially increasing the wage costs all employers have to make you cause a ripping effect that tears at everything else and drives up the costs of everything and destroys the jobs of millions of people. For example, a 2018 study showed that for every $1 the minimum wage increases the likelihood that restaurants which focus of serving the middle and lower classes will fail increases by 14%, causing poorer people to not only lose those jobs but also to lose the restaurants which most cater to them. When costs go up the standard of living for everyone is lowered as we have to spend more to get less and this effect is made exponentially worse for the poor as they lose both the necessities and pleasures of life that make it enjoyable. These people, who were already in poverty, fall into even worse suffering and even those weren’t in poverty before, sure are now. And even those who keep their jobs find their hours cuts and a lose of overall al money, such as seen in a 2016 study of the minimum wage increases in Seattle, Washington, which resulted in workers actually making $125 less after wage increases and hour decreases. Similar results can be seen in New York City with the fallout of its minimum wage increases.
Dr. Reisman continues:
Your and the President’s policy is fundamentally anti-labor and anti-poor people. While it enriches those poor people who are given the status of government-protected monopolists, it impoverishes the rest of the economic system to a greater degree.
…The higher the minimum wage is raised, the worse are the effects on poor people. This is because, on the one hand, the resulting overall unemployment is greater, while, on the other hand, the protection a lower wage provides against competition from higher-paid workers is more and more eroded. At today’s minimum wage of $7.25 per hour, workers earning that wage are secure against the competition of workers able to earn $8, $9, or $10 per hour. If the minimum wage is increased, as you and the President wish, to $10.10 per hour, and the jobs that presently pay $7.25 had to pay $10.10, then workers who previously would not have considered those jobs because of their ability to earn $8, $9, or $10 per hour will now consider them; many of them will have to consider them, because they will be unemployed. The effect is to expose the workers whose skills do not exceed a level corresponding to $7.25 per hour to the competition of better educated, more-skilled workers presently able to earn wage rates ranging from just above $7.25 to just below $10.10 per hour. The further effect could be that there will simply no longer be room in the economic system for the employment of minimally educated, low-skilled people.
In other words, the people who the minimum wage is supposed to help the most – the poorest people with the least skills and therefore the lowest ability to get higher paying work – are injured the most by the minimum wage. They’re the ones who are most likely to lose their jobs and the ones least likely to be able to get a better job – with a rise in the minimum wage to $15 per hour predicted to destroy at least 2 million jobs (or more) right from the start. The result is that people who were poor but working and getting by are stuck in crushing, humiliating, seemingly unending poverty by the very policies, politicos, and people who claim to want to help them the most. The whole effect can be summarized easily as shown below:
The result of the minimum wage is to effectively criminalize the labor of poor people, making it illegal for them to work and dooming them to suffering and poverty.
The Minimum Wage is Racist
One of the most perverse things about this process is that on top of its job destroying, life worsening effects, the minimum wage is also horribly racist. Research out of UC Irvine has shown that for every 10% increase in the minimum wage, estimates are that employment falls 8.5% for vulnerable groups such as African-Americans, Latinos, and low skilled workers. (Similar results have been shown in regards to women losing jobs due to minimum wage increases.) We saw this happen especially to African-Americans after the federally mandated minimum wage increase in 2009. About 13,200 African-Americans lost their jobs due to the 2008 Great Recession, then the worst economic collapse in US history since the Great Depression. About 18,500 African-Americans lost their jobs when the minimum wage increases went into effect in 2009. Yes, you read that correctly. The minimum wage increase was 40% more devastating to the African-American community than what was then the most catastrophic downturn in the American economy since the Great Depression.
This isn’t by accident. This is exactly what the minimum wage was meant to accomplish.
As Dr. Thomas Leonard, author of the book Illiberal Reformers: Race, Eugenics, and American Economics in the Progressive Era and Professor of the History of Economics at Princeton University, has shown, that from the very start the minimum wage was a racist policy designed to harm black communities and provide financial support for white communities at the cost of ethnic and racial minorities. In his article, Minimum Wages Were First Designed to Keep Women and Minorities Out of Jobs he explains:
[Right before this he discusses how modern minimum wage proponents see it as a boon to poor people and minorities.]
Progressive labor activists took a very different view 100 years ago, when 15 states established America’s first minimum wages. Labor reformers then believed that a legal minimum would hand a raise to deserving white Anglo-Saxon men, and a pink slip to their undeserving competitors: “racially undesirable” immigrants, the mentally and physically disabled, and women. The original progressives hailed minimum-wage-caused job losses among these groups as a positive benefit to the U.S. economy and to Anglo-Saxon racial integrity.
…It lifted up the deserving while excluding the unworthy and did both in the name of progress. Journalist and progressive social reformer Paul Kellogg in 1913 advocated a minimum wage of $3 per day for all immigrants, double the $1.50 per day ordinary laborers were then paid. Kellogg knew that no firm would hire an unskilled immigrant for $3 per day. That was the purpose of his high minimum wage, as he wrote, to exclude “Angelo Lucca and Alexis Spivak” from American shores, thus protecting American jobs for “John Smith and Michael Murphy and Carl Sneider.”
Kellogg targeted “racially undesirable” immigrants, but a high minimum wage would also protect the American workingman from unworthy economic competition already in the American workforce. The developmentally disabled, then called “feeble minded” or “defective,” also were treated by many labor reformers as low-wage threats. Unable to command a minimum wage, they too would be pushed into unemployment and then could be removed to institutions or to labor colonies.
A racist society will only hire the people it is prejudiced against if those people are willing to give the employer some obvious benefit over employing the privileged group. Minorities do this most easily by being willing to work for less pay and/or more hours, therefore securing profit to the employer. When you make the employment cost of hiring someone from the group which people are prejudiced against equal to or greater than those from the privileged group, then the racists are going to hire the privileged person every time. Thus, a minimum wage ensures that those prejudiced against, such as black people, have less money, fewer jobs, and are trapped in poverty, while the privileged group, such as whites, benefit from higher pay and less competition. In an interview with the Free Thoughts podcast, Dr. Leonard further elaborates:
There’s a very long list of people who at one time or another just almost comically if it weren’t sad, long list of groups that were vilified as being inferior [by the Progressives of the early 20th century]. As I say, physically disabled, mentally disabled coming from Asia or Southern Europe or Eastern Europe, African American, although the progressive weren’t terribly worried about the African Americans, at least outside the south until they started the great migration and became economic competitors in the factories as well.
…Mexican immigrants as well. The idea of inferiors threatening “Americans” or “Native Americans” is a trope that recurs again and again and again, not just in the progressive era but also in the New Deal. And it is I suppose shocking and bizarre to see the minimum wage as hailed for its eugenic virtues. But one very convenient way of solving this problem of how do we identify the inferiors is to simply assume that they’re low‐skilled and, therefore, unproductive and a binding minimum wage will ensure that the unproductive are kept out or if they’re already in the labor force, they’ll be idled. And the deserving, that is to say the productive workers who were always assumed, of course, to be Anglo‐Saxon will keep their jobs and get a raise.
Even though Progressives themselves have renounced racism the minimum wage and the effects of it haven’t magically changed or become less racist. Just look at the disparity in the employment rates between white and black Americans.
Those numbers regularly puzzle economists and activists as they persist despite desegregation, the passage of labor laws considered favorable to minorities, affirmative action, and many other programs designed to help African-American communities. The problem is simple. It doesn’t matter what you say or even what you actually truly believe if what you do has the same effect as if you were a member of the Ku Klux Klan. If you hate black people then support the minimum wage. If you want to help minority communities, if you want to help poor people of all races and ethnicities, then you have to get rid of laws that destroy their jobs, prevent them from making an earning, and promote racist outcomes. You have to get rid of the minimum wage.
The Minimum Wage and Inflation
Earlier in this article I talked about how the minimum wage drives up prices by raising costs and the harm this does to poor people (retired people as well.) But that isn’t the only economic force driving up costs. It isn’t even the worst. The worst is the inflation caused by the minimum wage and the printing of enough dollars necessary to ensure there is enough money in the system in order to pay everyone the wage the government orders that they be paid. This causes the value of each individual unit of money (whether measured in dollars or cents) to fall, which in turn demands that prices rise as businesses now need more money in order to achieve the same level of profit they had in the past with less money. To understand why this is and how this effects the poor we first need to understand what money is, its history, and what its purpose is in the functioning of society.
The first thing to understand is that money is not a uniquely special item totally unrelated to everything else people have, it is a commodity like everything else. Like all commodities, all things, money has a value based on a few key characteristics – how rare it is, how transportable it is, how divisible it is, how easy is it to duplicate, etc. Historically, people have chosen money that was rare enough that it wasn’t common but was not so rare that it could be obtained by the common people, that could be easily carried around by people, that could be easily divided in to smaller amounts, and wasn’t easy to counterfeit. When something had these qualities it usually became the medium of exchange, that is the means by which people exchanged the value of their labor for the product or services of another. Though there are differing local examples – the Mayan and Aztec use of cocoa beans as money for instance – but the most widely used form of money throughout world history has without a doubt been precious metals, specifically gold and silver.
In addition to the reasons above, there was another reason gold and silver became so universally used – they maintained value indefinitely. Cacao beans may be beautiful and tasty, but eventually they rot. We still have gold coins from thousands of years ago. And unlike other forms of money, if I have a gold coin from 2,000 years ago it is still as spendable as if it were minted yesterday. Therefore gold and silver allowed the poor to maintain a true savings and build wealth for themselves. Prices are kept low as well because the money supply is stable, the value of your money doesn’t radically shift due to human whim and is therefore more dependable. This also restricts the power of governments to act – if they cannot simply create more money then they can only do that which they have the money to pay for or for which they can borrow the money from other nations to pay for. This limits greatly what governments can and cannot do and is why the U.S. Constitution limited the ability of the government to create and distribute money to the minting of gold and silver coins.
So why don’t we use gold and silver anymore?
Because the government does not like to have its actions limited. It wants the ability to create money on demand in order to finance the things it wants to do even if it cannot pay for them. Those in power want to seize control of the monetary system and force everyone to use the single currency the government creates because of the immense power that gives it over the economy and the ability that gives it to then print fiat currency to pay for everything it wants to do but for which the cost is so high the public would never agree to pay for through taxation. It is the only way that the welfare-warfare state can function, something you can see in the history of money in the United States. Though sold as a good to the people of the nation – to finance welfare spending, for example – it is actually disastrous.
You see, in order to pay for the increased costs brought on my welfare-warfare spending, the government starts printing more and more paper money. This attacks one of the fundamental characteristics of money which gives it the worth it has – its rarity. The more common something becomes, the less value it has. There is a reason we don’t take bits of concrete in exchange for anything. Concrete is too easily made and is too common. The more common something becomes the more worthless it is until finally it has zero value. This is why even though air is essential to life it has no practical monetary value – it is simply too common and is therefore worthless. The same thing happens when you print more and more money. As you inflate the money supply – the amount of money in the system – the less rare the money becomes, the less valuable it becomes, until it is worthless. As the value of the money decreases it loses purchasing power, the amount of stuff any specific amount of money can buy. The weaker the purchasing power of your money the more you need of it to buy anything. This results in the rise of prices as companies need to capture more and more money to equal the value lesser amounts of money had in the past. We often call this rise in prices inflation but it is actually the result of inflation, which is actually the increase in the money supply.
Inflation harms the poor in numerous ways. It destroys their wealth and savings as central bankers increase inflation rates by approximately 2% every year, robbing people of that much value every year. In other words, your $10 today will only be worth the equivalent of $9.80 next year and $9.60 the year after that and $9.40 the year after that, etc. And that is only if there isn’t some large economic collapse that would lead to even worse problems. You may think that isn’t much, but it adds up over time and if you’re poor then every dollar and every cent is essential. Losing just a few dollars may mean the difference between having to choose between rent, utilities, or food. Thus, inflation acts as a hidden form of robbery and regressive taxation, aimed at the most vulnerable people in the nation.
Further, the newly printed money doesn’t just pop into the system with everyone getting equal amounts. Because of the way the system functions it is the wealthy corporations and politically connected elites who get first access to this money, which they then can spend before the inflation rate has kicked in and caused prices to rise. This causes the rich and powerful to prosper and grow even wealthier and increase their living standard while the poor have the value of their savings robbed from them and are forced to pay higher prices to purchase fewer goods, lowering their standard of living. This, as Dr. Jonathan Newman, Assistant Professor of Economics and Finance at Bryan College, rightfully notes is one of the main drivers of income inequality. The government inflating the money supply by printing more money creates vast income inequality and increases poverty. Dr. Newman explains that the Gini Ration is the most used measure of income inequality, with numbers closer to zero signifying a decrease in income inequality while numbers closer to one signifying an increase in income inequality. Just look at what has happened to income inequality since the United States fully embraced fiat currency and totally stopped using commodities like gold and silver as the monetary base.
You can see that when the government was restrained by gold and silver the level of income inequality in the United States was remarkably low and trended downwards overall. But as the US government has become unrestrained by being able to print fiat paper money the level of income inequality in the United States has skyrocketed, even as the government has increasingly invested in more and more welfare programs to supposedly help the poor. As long as the government can print fiat currency for any reason any program to help the poor is the equivalent of taking an ax to someone, hacking off their knees, and then handing them bandages for their wounds. It is crippling insanity of the most destructive kind.
So, the inflating of the money supply is incredibly destructive, but what does this have to do with the minimum wage? There are 209,128,094 adults in the United States. In order to ensure each one of them makes $15 an hour you would have to print $3,136,921,410, that is over three trillion dollars, and that doesn’t even take into account the fact that people would make more than $15 an hour or the thousands of other reasons we need money outside of strictly ensuring pay is at a certain hourly amount. To give you a comparison, the total money supply in November 2019 was $3.964 trillion, and that was before the United States printed more than 20% of all its money in all of its history in 2020 alone. As that money seeps into the system it is going to do incredible, inestimable harm to poor people.
The cruel irony of it all is that minimum wages are also terrible at providing any real wage to works. For example, if I was paid $1 and hour in 1913 (when I would be paid in silver coins) that would be the equivalent of making $26.98 an hour in May 2021. I believe everyone would agree that making the equivalent of almost $30 an hour would more than qualify as a “living wage.” Yet monetary inflation is such a terrible policy that has such terrible effects on the value of money that even the most “pro-poor” people in the nation are deceived into accepting pay at a far lower value than it should be at if we had stayed with gold and silver. The minimum wage is a sop and a lie to prevent people from discovering just how badly the inflation upon which the minimum wage (and every other so-called welfare program) depends has robbed them. The government robs us, gives us half of what was taken back as a “minimum wage,” and tells people they should be thankful for the government saving them from the poverty it created. The minimum wage is like taking painkillers to hide your chess pains because they make it hard for you to do anything while dying of cancer.
How To Really Help The Poor
Given now that the minimum wage is really just another part of the statist corporate agenda to benefit the wealthy at the expense of the middle class and poor, what actually can be done to make the lives of poor people better? You can start by dismantling the cogs of the extortion machine. Requiring the government of your country to at least decrease its paper money supply is a fantastic place to begin. This worked well for the United States when Reagan did it in the 1980s (see pgs. 14-15), producing the most successful American economy since WWII (see pgs. 5-7), and he only did it to a marginal degree. Part of this policy would also include decreasing the minimum wage, as it necessitates mass inflation. These policies combined would help to cause prices to fall down to their real levels of value and the economy is able to redirect towards providing people with what they actually want and/or need at a level which is more affordable for everyone. Yes, despite what you may have heard, deflation is largely a good thing. Only the rich living off their access to inflated wealth and upon the suffering of the poor have anything to fear from deflation. For the middle and lower classes it is a boon.
Beyond these, there are the larger goals which we should all work towards. Dismantling the licensing system that forces people to pay the state for the privilege of conducting business and which locks the lower classes out of starting their own businesses. Eliminating legal tender laws and allowing private organizations to produce, distribute, and use a variety of monies based on their value and utility, which would force the US government to maintain the value of its own money as opposed to inflating it endlessly. Other important issues, such as eliminating zoning and housing laws, would surely be beneficial but are beyond the scope of this article. And you can always employ poor people under the table, that is without the government knowing, so they don’t have to pay taxes and so that they can get work. The key to understand here is that there is a lot Latter-day Saints can do to help the poor improve their lives and to add value to society, lifting the living standard for everyone, but all of these things require us to abandon the activities of the state as opposed to embracing them.
The government cannot make things better. Even when well intentioned it only makes things worse. The true answer is to allow people the liberty to buy, sell, and trade goods and services – including their labor – at the value they choose, with whomsoever they choose, for howsoever long they choose. Coupled with eliminating the government programs that cause inflation this liberty will promote greater levels of prosperity with greater income equality and success for the greatest number of people possible. The free market is how you can best serve your fellow man and woman, fulfilling the Lord’s commands to care for others in the best ways possible.