Bill O'Reilly's Magical Thinking

Bill O'Reilly's Magical Thinking

By

Martin L. Cowen III

                        This week the so-called conservative talk show host Bill O'Reilly proposed to libertarian Fox News contributor John Stossel that the minimum wage ought to be $16 per hour. O'Reilly proposed tax credits for business who could not pay that much. This blog post laments their communication.

                        The minimum wage, regarded by conservatives and liberals alike as sacred, is an unmitigated economic disaster. The first response of any opponent of the minimum wage ought to be that the law is a violation of the property rights (the right to contract) of both the employer and the worker. The law forbids a willing buyer (the employer) and a willing seller (the worker) from entering into a voluntary contract. The consequence of the law is not that a low value employee is paid more than he is worth. The consequence is that the potential job goes unfilled and the worker remains unemployed. (The present high unemployment among teenagers and young people is a direct consequence of the minimum wage laws.) No employer can pay more than the worker is actually worth and survive. The alleged benefit of the minimum wage law is entirely illusory.

                        Bill O'Reilly by uttering the suggestion is engaging in Magical Thinking. "It would be nice if everyone were paid at least $16 per hour." Sure. But why not $25, $50, or even $100 per hour. Wouldn't that be "nicer?" Those magical thinkers who like the minimum wage clearly recognize some limitations upon their Magical Thinking.

                        My foregoing response to Bill O’Reilly, based upon property rights (the right to contract), is the necessary, and a sufficient, response to the minimum wage law.

                        Secondary responses follow.

                        Bill O'Reilly's proposal for a government subsidy to fund a $16 minimum wage fails to address the question, "From whence will come the funds for the government subsidy?" Obviously, new taxes or new borrowing will be necessary to raise the wages of all employees by government fiat to at least $16 per hour or $32,000 per year. If a million employees were involved, the cost would be near $32 billion. Taxes take money from taxpayers and give it to others, in this case, low income workers. Again, this process is a violation of property rights (the right to keep your stuff). The taxpayers are the victim of involuntary confiscation of their funds at gun point.

                        Another problem with Bill O’Reilly’s subsidy idea is the regulatory and enforcement nightmare that would accompany a new welfare program of this magnitude. The opportunities for fraud and abuse are enormous. With subsidies this large, dishonest employers and workers might collude to invent jobs and split the subsidies. For example, if the fair market value of a job is $5.00 per hour, the worker can come to work and the employer and the worker can split the subsidy 50/50 to great mutual profit.

                        The big issue though for lovers of the minimum wage law is: “What about the needy employee?” As aforesaid, the minimum wage law does not help the low value employee, the law merely forbids him to work. So he is not helped. But Magical Thinkers will not see this point. They ask yet: “What about the needy employee?”

                        There are a number of categories of employee: the economically valueless, the marginally valuable, and the person who can work and support himself in the world without assistance. My own son is economically valueless as an employee because he is severely disabled. I will happily support my son for the rest of my life. If he and I are lucky, I will be able to do that for 20 more years when he will be 34 years old. I hope that I will have been able by that time to provide for alternative support mechanisms for my beloved son. My other son, who will be 30 years old by then, will hopefully be willing to take up the care of his disabled brother when their mother and I are no longer able.

                        Other economically valueless people may not be so lucky to have a loving family willing to provide for them. In that case, friends and acquaintances might help. Charities might help. In no event should the government become involved. Welfare is not a legitimate government function. I recognize that my true judgment is not the majority opinion. Given that a majority of people believe in societal safety net systems, that said same majority will happily fund charities to enact their dreams in the absence of governmental systems. The common liberal assumption—in the absence of government force, people will not be generous—ignores their own generosity and the generosity of their peers who are in the majority.

                        Economically marginal people are those who can work, but whose work is not sufficiently valuable to sustain their lives without external support. Teenagers, new to the work force, are the best example of this category. Teenagers, who will often work for free as interns, are the greatest victims of the minimum wage laws. Any economically marginal person can work and earn so much as he is worth and receive additional support in the same ways that an economically valueless person receives support.

                        One final point, legislation always has a rational (the stated justification) and a reason (the real reason for the law). Legislators are not altruists and they never act from altruistic motives. They all claim to be altruists and they always assert that their motives are altruistic. “How can you tell when a politician is lying?” Answer: “His lips are moving.”

                        In the case of the minimum wage laws, the rational is the needy employee. The reason for the law is to help well-healed constituencies of politicians by raising the cost of doing business for smaller, start-up, would-be competitors of the well-healed constituencies. In the absence of legislative interference, large firms would be constantly harassed by newcomer competitors. Minimum wage laws reduce this competition, one of the major purposes of all legislation.

                        Bill O’Reilly, the so-called conservative, has done no good for the cause of freedom by supporting the economically disastrous idea of the minimum wage.