Why is it that companies are responsible for being both the cause of and cure for poverty in this nation? I have grown particularly tired of individuals who have little understanding of business operating costs advocating hikes in wages. The actions of companies are, after all, simple actions by any human. There is no inherent abnormal evil within a corporation.

The most common argument claims that companies have a nearly infinite amount of money; shareholders will not lose more than a few pennies apiece with a wage raise. Surely, K-Mart could afford to pay employees two dollars more per hour.

I guess these wage advocates are partially right. Yes, companies could pay their workers more. But companies do not act any different than the average consumer or wage-raising advocate. Why would any person pay more for a good than they value it?

The ability to raise wages lies in the hands of both consumers and companies. Suppose consumers began tipping a dollar to every employee who works for a business. A checkout clerk at Wal-Mart would make $20 to $30 an hour from this form of exchange.

Yet I have never heard any defenders of the poor advocate such a system. This consumer behavior would raise wages for the poor ten times more than the few cents or dollars suggested by minimum wage laws. Consumers would have the ability to improve the welfare of low-skilled workers directly.

In fact, I could use the same argument that minimum wage advocates use. How much is one more dollar tipped to a gas station attendant going to affect you when you have already pumped $40 into your tank? No person can truly argue that a dollar would be too much. Yet no one willingly gives the extra buck. If individuals are so concerned about low wages, then they should start tipping every low paid worker possible. One dollar is not too much. Come on, it is only a tiny percentage of anyone's total paycheck. It is the same argument used against businesses, applied to the consumer.

What most people do not realize is that they behave exactly like "evil" corporations.

Who wants to pay more than they have to for anything? These defenders of poverty ask corporations to make decisions that no one would make on their own.

Suppose you went into a grocery store and saw bananas for $3. Would you go up to the cashier and say, "I think I will pay $5 even though the price tag says $3"? The fact is that we are all always looking for a better deal. This search for better deals is the cornerstone of a market economy; it promotes competition among companies.

Despite this obvious fact, large portions of the population still think big businesses should pay employees more. Few people understand that employees are just like other goods. They hold a certain value relative to the business owner’s needs. A minimum wage law can push the minimum wage to $8 an hour but this does not change the fact that the worker may be valued at $6 to the company. The government can push the minimum wage law to a million dollars an hour, but any push in the minimum wage will not change the value of a worker. Instead, when the minimum wage is raised, unemployment occurs. The company will not pay $8 for something it values at $6.

Let's take this back to the consumer perspective. Say you are going to the grocery store and you want to buy a tuna steak. You value the tuna steak at no more than $6. You like tuna steak but not so much that you would pay over $6. You are happy to accept any price up to $6, and the lower the better. Now you get to the grocery store and see the tuna steak is $8. You don't value the tuna steak at $8, so you don't purchase it. You most likely acquire an alternative. Similarly, a company will not employ a person at $8 if they are only worth $6.

Consumers do not pay more for a product than they value it. Yet companies are expected to pay more for an employee than the employee is worth. "When it's a company, it's u2018evil'; when it's me, it's ok", is the logic. Wage advocates are telling us that a person is "evil" if they desire to pay no more than they value a particular good. A person is immoral because they do not purchase a tuna steak at $8 even though they value it at $6. This idea is absolutely ridiculous!

The role of raising wages is always placed on corporations despite the fact that consumers also control the outcome. This same mentality is applied to taxpayers. Plenty of socialists talk about the "public good" and the "collective." The productive members of society should pay high taxes for the "public good" so that the unemployed can have a better standard of living through redistribution.

Once again, why must it be the taxpayer who takes the action for the "public good"? Could I not also say that the unemployed person should get a job for the "public good"? If he or she finds a job, the burden on the rest of society is lifted. But I have never heard a socialist advocate the unemployed finding employment for the "public good." It seems that all actions that require benefiting the public good should be placed in the hands of taxpayers and corporations. The responsibility of an individual for the public good and, most importantly, his own good is out the window.

The actions are equal. One action requires a taxpayer taking the action. The other action involves the unemployed person taking action. However when we examine this situation closer, it is obvious that the two sides are not equal actions.

When the taxpayer has his money stolen by the government, he only benefits the "public good" and the fairyland "collective." When the unemployed person gets a job, he benefits himself as well as the "public good" and the fictitious "collective." There clearly seems to be greater gain in choosing the latter option. The latter option has two benefits while the first has only one.

Looking at the two suggestions, it is necessary to analyze how these policies would be implemented. The socialist nut cases supporting these absurd ideas want to tax the rich. There is no asking going on here. The idea is to forcefully and coercively tax individuals for the "great collective."

Libertarians are not coercive or forceful in their suggestions. Libertarians advocate natural market incentives without government subsidies. No libertarian, for example, suggests forced work farms for the unemployed.

The nature of the two suggestions is entirely different in this aspect. One group advocates force while the other does not. Would not forced work farms also be solutions to unemployment? Sure, they would. But Libertarians believe that the only "collective" good worth preserving is freedom and liberty. On the other side, freedom and liberty are sacrifices to the bloodthirsty gods of egalitarianism.

Everything comes back to human action. You don't pay $8 for a tuna steak you value at $6. You don't pay a worker $8 and hour if you value them at $6 an hour. It is plain, simple, clear human nature. We cannot expect others to take actions that we ourselves would not do. To call these people immoral is to call ourselves equally immoral. The only way to realize such action is through force and coercion; no person will buy overpriced tuna steaks naturally.

What is best for each individual in voluntary trade is best for the market economy as a whole.

June 24, 2006

The Best of Vedran Vuk