Analogy by Kyle A. Lohmeier
I’ve noticed a few stories over the last several days that are related to the minimum wage. Namely, in response to municipalities that have passed draconian minimum wage laws, Wendy’s will replace meat-and-bone cashiers with automated ordering kiosks at many stores. Also, last week the Kentucky Supreme Court struck down the city of Louisville’s decision to impose an eventual $9 minimum wage upon employers.
My line of paid work brings me into contact with a lot of members of the millennial generation, particularly on the younger end. Naturally, among them, the incessant talk about raising minimum wage and the ever-popular #FightFor15 movement are hot topics. As someone who understands Austrian School Economics, overhearing those conversations is akin to overhearing a debate over whether Deadmou5 or Skrillex is the best at making that brand of noise the kids like.
Being both dumb and a glutton for punishment, I’ve endeavored to explain to the kids why raising the minimum wage will accomplish exactly nothing. Of course, economic theory is voodoo magic to kids who think Bernie Sanders’ economic “policy” was realistic, so I’ve lately attempted to do so by way of analogy, which I’ll share here. Maybe someone else will have better luck with it when talking to their own batch of confused millennials.
I try to tell the kids that money, currency, dolla-dolla-bills, etc., are just the language we use to describe value. Likewise, miles-per-gallon, MPG, is the language we use to describe fuel efficiency. Simply arbitrarily changing the numbers in either case doesn’t change reality, I endeavor to point out.
For example, say we just decided that a mile is now an even 2,000 feet as opposed to the somewhat arbitrary-sounding 5,280. All of a sudden, even F-250 Super Duty duallies are qualifying for tax breaks for being super fuel-efficient, because, if a mile is only 2,000 feet, the MPG rating of the F-250 is going to look more like that of a midsize sedan than a monstrous pickup truck. Is the F-250 Super Duty actually any more fuel-efficient? Of course not. So, in response, before long, the EPA is going to revise its fuel efficiency standards to reflect the new definition of a mile, and the F-250 Super Duty dually will be back in the efficiency bracket it belongs in.
The same thing, I continue, hoping in vain the relevance of the analogy is sinking in, applies to economics if you just arbitrarily change the definition of the value of a dollar. A “dollar” (sometimes air quotes help), I explain, describes a unit of value in the same way a “mile” describes a unit of distance. Changing their definitions doesn’t actually change anything; if employers are forced to pay employees more dollars than they earn, they’ll take a real loss on value. Taking constant losses is unsustainable for any business, so, they’ll be forced to recoup those losses elsewhere; as will every other business. Eventually, the entire economy catches up and everyone is exactly where they were before, it’s just the numbers we use to describe it are different, slightly bigger. Same as the EPA re-calculating MPG requirements to reflect the sudden and arbitrary change in the numbers we use to describe distance.
Just like no fiddling with the definition of a “mile” will put the F-250 Super Duty into the same efficiency class as a mid-size sedan, no fiddling with the definition of a “dollar” will put a fast food cashier into the same class of value-production-per-hour as an emergency medical technician, automotive assembly line worker or any other occupation where the value generated per hour is roughly $15 in today’s terms.
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