Now, with everything that I’ve told you in other minimum wage articles about how minimum wage laws can actually be detrimental to workers at the low end of the wage spectrum, and to businesses and their viability, and to the economy as a whole, if we don’t appropriate minimum wage laws correctly, it begs a question: Is there another way to raise the wages of workers without needing to utilize the minimum wage as the means to do so?
The answer: Yes, there is. For those of you who think that the use of minimum wage laws is the best approach to raising the wages of those in the working class, I want to present to you a better approach. To do that, I’m going to share with you some facts from American economic history because it will help you understand this approach better.
The period from 1820-1860 is considered to be America’s first industrial revolution. During this time period, the wages for the average American worker went up by 60 to 90 percent. During the period from 1860-1890, real wages went up another 50 percent. Now keep in mind that none of these wage increases had anything to do with minimum wage laws or inflation, because those things didn’t exist at the time. It happened because market forces, working through capitalistic investment, were causing the economy to grow, and creating a market where jobs were plentiful.
In this environment where the demand for workers was higher than the supply of workers, it created an environment where there was a shortage of workers compared to their need. Now this kind of environment led to a couple of things.
First, because businesses were competing against each other for workers, in order to supply that shortage, it drove wages up. Businesses had to compete against each other for workers. If one business needed some more workers, in order to encourage some workers to leave their present employers and come work for them, they had to give a higher wage, or those people would have no reason to leave their present job for a new one.
Secondly, businesses, especially those involved in manufacturing, would utilize new technologies that reduced the need for more workers, thus taking care of worker shortages that way, and these new technologies allowed these firms to produce goods that were higher quality and lower cost than ever before. These new technologies would also allow the products to be produced with less man-hours, which meant shorter working hours for workers.
Think about what all this meant. Workers were getting higher and higher wages, working less hours for those wages, and the cost of manufactured goods was decreasing, while increasing in quality. People were making more money all while the cost of living was becoming less. And all of this was due to market forces, and capitalistic investment. It had nothing to do with the government. We can attribute a government hands-off approach, a libertarian philosophy of doing things, allowing market forces to cause economic growth, to those workers having better lives and higher wages.
How to Increase Income
In the same way, the best way, in my opinion, to improve and increase wages in the working class is to use market forces to drive up incomes using traditional supply and demand curves, but this time the supply and demand curves will be about the supply and demand of workers in the business realm.
As the economy grows, and jobs are created, and the unemployment rate drops. If the unemployment rate gets low enough, businesses start to compete against each other for available workers, and are willing to pay more money to their employees to retain them or acquire them. THIS is the better way to increase the wages of those on the lower end of the economic spectrum
Imagine you own a business. The economy is doing well, and your business is thriving. You need to hire new employees, but they are hard to find. So you advertise a higher hourly wage, and raise the hourly wage of your employees that are already working for you to increase retention of those employees – you don’t want them leaving for another higher-paying job, so you keep up with your competition.
In this way, the wages of those with the lowest incomes can increase, allowing them to improve the quality of their lives.
How to Create Those Kinds of Conditions
What is the best way to create those kinds of conditions that allow workers’ wages to increase naturally? It goes something like this: a) create the kinds of conditions that allow businesses and industries, large and small, to grow and thrive and prosper; b) as businesses and industries grow, they will see a need for more workers, which means the creation of new jobs; c) when the demand for new jobs is higher than the supply of available workers, that helps drive up wages, and motivates businesses and industries to develop new technologies that allow them to do more with less people, which can reduce the costs of goods and services to consumers – this means higher wages and lower cost of living, if done right.
In other words: the well-being of workers is inextricably linked to the well-being of the business community. If you improve the well-being of the business community, the well-being of workers, in the form of higher wages and lower cost of living, follows. Many of you on the political left believe that the well-being of the business community is at odds with the well-being of workers, which is incorrect – by creating economic and social policies based on such incorrect thinking, you end up hurting the well-being of the business community, hinder their growth and well-being, and by doing so, you end up hurting workers by making their lives more difficult, increasing unemployment rates, and keeping their wages down, which reduces their well-being.
So, if the well-being of the workers is inextricably linked to the well-being of the business community, how do we improve the well-being of that business community? The answer to that question is quite simple to me: you improve the well-being of the business community by working to improve their profit margins. By allowing businesses to have more profitability, you give them more money that makes them more capable of growing, and this increases their ability to grow and thrive and prosper. And when that happens, it causes job creation, and a situation where the demand for labor is higher than the supply of labor, which drives up wages in the working class, thus improving their well-being.
So, how do you improve the profit margins of businesses? There are three main ways that we can do that: a) reduce their tax burden, which allows them to keep more money; b) reduce the cost of regulatory compliance, because that will allow them to keep more money; and c) reduce the costs of doing business, because that will also allow them to keep more money.
Those three things do more to help stimulate economic growth, and the well-being of workers, than any other state policy could ever do, including raising the minimum wage, something that if done incorrectly can do more to hurt workers than help them.
