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Monday, March 07, 2005

Econ. 202: The Paradox of Minimum Wage and High Salaries

One of my regular visitors made a comment on my last post that I am happy that he made so that I can explore this issue further. Expat Teacher said:
"You've come out against a minimum wage (or at least an increase) in previous posts. Yet in this post, you certainly make an argument for paying people what they are worth.

Do you just hope that companies will do that of their own free will? Yet, I know you are a Christian and therefore must believe that all people are selfish (and/or self-centred) and don't give willingly or freely without some sort of outside influence (Holy Spirit, government, police, etc)

Maybe a Economics 202 post could explore this more."
Yes, I am most definitely against a government-mandated minimum wage AND I am most definitely in favor of paying people as much as possible. Notice I didn't say "what they are worth". People's salaries are only worth what someone is willing to pay them. That is the very definition of worth in a labor sense.

Not sure why there has to be a sense that opposing a government-mandated minimum wage and favoring high salaries are in opposition. Not in any way is that true. Generally speaking, a company with high wages is usually a company that is very successful.

In relation to my last post about companies providing good customer service, I think that paying higher salaries makes good business sense. Paying higher salaries to attract better employees should result in higher revenues and hopefully higher profits, thereby justifying the higher salaries.

Having the government mandate a minimum salary is the equivalent of the government saying that they know better how to run a business. Of course, the government doesn't have to bear the immediate consequences of such an action.

Regarding the question as to why companies would voluntarily increase wages, capitalism is the only economic systems that provides an answer to that question. Capitalism provides incentives that enable a company to look out for its own best interest while at the same time benefitting society and those it employees. No other economic system does that half as well.

Capitalism is the only economic systems that recognizes the true human condition of sin, yet harnesses that sin to the benefit of all. Now that doesn't mean that all successful capitalists are those who sin the most; far from it. The best capitalists are those that know how to provide what others want and can provide it at the cost that others are willing to pay.

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