TLE feedback

I received the following feedback on my TLE minimum wage article.

Greetings bkMarcus,

I enjoyed reading your article about the minimum wage in TLE's 8/8/04 edition.

While discussing the minimum wage laws with people, I have found that including an example is an excellent way to get the point across.

Here is the one that I use:

Suppose that I own a company that ships boxes of goods. Within my company, I have a group of employees who physically pack the boxes. Based on the cost that I charge my customers, I have determined that I can pay $1 per box packed. Some of my employees pack very fast (say 30 per hour) so I pay them more than others who can only pack 10 per hour. When a new employee starts, he might only be able to pack 5 per hour. As he gains experience, he will become a better worker and might eventually become one of my 30 per hour employees.

But here's where the minimum wage laws come into effect. If the minimum wage is raised to $6 per hour, should I pay my 5 box per hour more than the work he has provided for me? Would that be a good business decision? Or am I better off only hiring people who can pack at least 6 boxes per hour? What happens when the minimum wage is upped to $10 per hour? It would be in my best interest to clear my staff of anyone packing less than 10 boxes per hour.

The case of a new employee I would hire who can do 5 boxes per hour will never be given an opportunity at my company; it is not in my best interest to pay him twice his worth (through the fault of the mandatory minimum wage). Because I don't hire him, he will never be given the opportunity to increase his skill and get paid well above the minimum wage.

In the case of my shipping business (which can be applied to any business), the minimum wage laws have hurt the very people they are designed to protect. Instead of earning $5 per hour and being a productive member of society, my former employee is now unemployed.

How is this a good thing?

To which I replied:

What I like about your example is that it explicitly ties remuneration to productivity, which is of course the point most supporters miss. Paying by the box is more concrete than paying by the hour. Unfortunately, even this simple example requires a basic level of business literacy that I'm afraid too few people seem to grasp. Explaining minimum wage law and price fixing to someone who actually deals with profit and loss is much easier than it is to explain such things to students, academics, minor bureaucrats, so-called "public sector" workers, etc. Even cubicle workers in a large enough corporate hierarchy are divorced from the basic issues of productivity. Money has become so abstracted for them that it becomes an arbitrary form of symbol manipulation, no longer grounded to the creation of goods and services. This is, of course, no accident. If more people had even the basics of economic literacy, we'd live in a very different world -- one in which the government would get away with much less. Economic illiteracy is therefore in the interest of the ruling classes.