Wage against the machine

Some members of the County Council, led by Calvin Ball, want to institute a “living wage”. The theory behind this proposal is that a family of four needs $52,000 in annual income to live in Howard County. Therefore, Mr. Ball wants to establish a minimum wage such that a family of four with a husband and wife each earning that wage would earn the minimum amount needed to live in the County. Well, at least the minimum amount needed to live in the County according to Calvin Ball. You might be asking, what about a family of three, or a husband and wife with no kids who would be willing to work for less? The answer is: to hell with them! My representative on the Council, Greg Fox, questions benefits of Ball’s idea, and rightly so.

Greg Fox, a western county Republican, is skeptical.

"I'm concerned about what it's going to do to the cost of government," he said, adding that "I don't think it's necessary. I think it's a free-market issue. I don't believe we need to put any artificial wage levels in there."

His position is similar to that of the county Chamber of Commerce, which opposes the bill and the idea. Heidi Gaasch, the chamber's government affairs director, said, "First and foremost, wages should be set in the marketplace, not by the government. It undermines the purpose of the competitive bidding process" and could drive up government costs.

Greg Fox, until further notice you’re my hero! Wage floors are bad ideas. To maximize their profits, firms produce output until the marginal revenue of the output equals the marginal cost of producing that output. What this means is that raising the minimum wage that county contractors are allowed to pay their employees will simply cause those contractors to hire fewer employees or force the county to pay more for the services that the contractors provide.

Anyone can see the fallacy of Calvin Ball’s proposal. If raising wages is good, why don’t we raise wages to $500 an hour? That way we can all drive Ferraris and live in mansions. Oh yeah, about 99% of us won’t have jobs.