Analyzing the minimum wage: Rights based arguments are meh

The minimum wage debate has reentered the political stage with special promotion by President Obama, starting with his State of the Union Address this past January.  The political huffing and moral rhetoric surrounding the topic may give the impression that it is a straightforward issue; on one side are the corporate employers who are watching out only for their bottom lines and their profit margins, while on the other stand the working poor who could use a  helping hand from legislators.

As is often the case in politics, the actual issues at hand are far more complex and interesting than the rhetoric would have you believe, and I think debate about the minimum wage misses not only a great deal of understanding of the other side, but also a great deal of research done on this topic.  This series of posts (next and final posts) will construct a thorough picture of the motivations behind the minimum wage through an analysis of both the politics surrounding the minimum wage as well as the extensive economic research done in the past 20 years.  This inquiry will point to a couple conclusions, one being that political rhetoric largely ignores most of the research done on this topic.   More in depth analysis will also show that the minimum wage generally has lower effects on poor unemployment than would be expected from economic theory. Yet it remains an unwieldy policy tool.  Smart people can disagree on the minimum wage, but only within a rigid framework supported by the data.  But before we can get to the data, it’s important to discuss why data driven approaches are worthwhile at all, since alternative arguments are quite common.

Rights Based Arguments

In order to understand the debate on the minimum wage, we have to first explore why voters and interest groups take certain policy positions.  There are two broad philosophical ways to look the minimum wage (along with most other issues): deontological (rights based) or consequential (utilitarian or outcome-based).  Empirical measuring the outcome of different policies is a powerful argument, but requires extensive research and nuanced understanding. The end goal of political discussion is often the election of politicians, not the furthering of knowledge, thus arguments over outcomes are often clouded by morally-charged rhetoric.
Why are consequentialist arguments superior to deontological ones (at least in economics)? Because the measuring stick is agreed upon beforehand: provide the biggest benefit for the most amount of people. Rights based arguments can be problematic when there are differing views as to what rights actually exist.  The classic philosophical rights-based conflict is best described in terms of negative versus positive liberty.  A negative view of liberty is simply the absence of obstacles. In our example, individuals are more free (in the negative liberty sense) if the state does not intervene in mutually agreed upon exchanges, even if low wages are present. It is their “right to not be interfered with”. Positive liberty is the idea that one should be free to realize their potential. In context, an individual is positively free if they can receive a living wage for 40 hours of work a week.

But Isaiah Berlin, the philosopher who first named these concepts, noted a paradox with positive liberty; since a positive right relies on duties imposed on others to help the individual realize a goal, it usually required some form of state action that would infringe on an individual’s negative liberty.  By deciding who receives the right and who the duty is imposed on, a positive right also implies a societal choice overriding an individual’s choice. Classical liberal criticisms follow these lines of thought and derive from the concern that individual rights could be eroded at the will of the state.  In relevance to the minimum wage, Berlin’s critique asks: whether it is a violation of freedom to force a wage to be above a certain level, who should determine what wage is guaranteed by right, and why should an employer be required to supply this funding rather than the state? Moreover, one could even argue using positive liberty, that society’s only moral course is to maximize economic growth (which will compound over hundreds of years) and so any growth maximizing policy is the “positively free” one.

At the very least, rights based arguments are abstract, hard to reconcile, and can miss the political reality. At worst, a purely deontological defense of the minimum wage has no way to answer these questions, and we have not even touched constitutional or legal discussions.  If your position is to defend the minimum wage on solely rights-based defenses, your road will be fairly difficult. In reality, most defenders of the minimum wage do not rely on this position, but simply apply this rhetoric for political ends, or focus on better, utilitarian arguments.

Consequentialist Approaches

The appeal of consequential, or utilitarian, approaches over deontological ones is pretty obvious: even if you can prove that your system of rights is “correct”, if the policies dictated by that rights system cause harm to a great number of people (and other policies could do better) then no one should really care if the deontological system is right, at least in economic policy questions. For our example, if people have a right to a living wage, but that implies a minimum wage which results in a great deal of unemployment or stunted job growth for the working poor, it is not a good policy. Likewise, if the defense of the rights of employers means that employers can engage in low wage transactions that hurt the poor, the policy needs to be changed.

The big question then is not whether workers have a right to a living wage, but whether a minimum wage policy results in the best outcome, especially for the working poor. This discussion is superior to any argument about abstract rights, because we can rely on real-world results and knowledge.  And to understand the consequences of a a minimum wage policy, we need to analyze the impacts from an economic perspective. You can find part 2, and my economic analysis, here, as well as an in-depth look at the data.