Fast-food workers, urged on by the Service Employees International Union, held protests in American cities yesterday, calling for higher hourly wages.
The minimum wage is now $7.25. The average fast-food employee makes about $9 an hour. The protesters say they want a “living wage” of $15 an hour.
Fifteen dollars seems like a convenient figure, but why not $16.50 or $18.33 or $55? The higher the number goes up, the more absurd it sounds, but it’s the same flawed logic that produced the $15 figure.
An artificial wage set by the government suggests that income is simply an amount of money that is available for distribution, but as Thomas Sowell writes in his book Basic Economics, “there is no collective decision about the value of an individual’s work.”
“In a market economy, those who get the direct benefit of an individual’s work decide how much they are prepared to pay for what they receive,” Sowell writes. On the other side of the equation, the individual doing the work is free to decide whether they are worth more than what the employer is willing to pay and then make career decisions accordingly.
The amount a person is paid is dependent upon many different factors, including productivity. The guy digging a ditch is no doubt engaging in more strenuous labor than the fellow operating the backhoe, but the backhoe operator commands a higher wage because he is more productive.
In the fast-food business, the shift supervisor making $15 an hour is, in economic terms, more valuable than the worker in an entry level position because of the additional responsibility and the skills necessary to make the operation run smoothly.
Another problem with arbitrarily forcing employers to pay higher wages is that it may actually decrease employment. A company forced to double entry level wages might choose to hire fewer workers or invest in technology instead of higher wages as a way to maintain or improve productivity.
Economist Milton Friedman argued that forcing employers to pay a higher minimum wage simply guarantees that “people whose skills are not sufficient to justify that kind of a wage will be unemployed.”
The fast-food worker protest also spreads some misconceptions about the industry. Based on the rhetoric, you would think that most people working at McDonalds or Burger King are trying to raise a family on minimum wage.
Phil Hickey, Chairman of the National Restaurant Association, wrote in the Wall Street Journal this week that “only five percent of the 10 million restaurant employees earn minimum wage. Those who do are predominantly teenagers working part-time jobs.” According to the bureau of Labor Statistics, half of the minimum wage employees in fast-food are under 20.
(The Center for Economic and Policy Research refutes that claim, arguing that 40 percent of all fast-food workers are over 25.)
At its most basic, people demanding a higher minimum wage want for themselves the same thing opponents want for everyone: prosperity. The best route to that prosperity is through a market-based economy, which is the most efficient mechanism for allocating resources, including an individual’s labor.