Thursday, April 3, 2014

The (not) Smart Set

The granddaughter of the founder of a niche restaurant chain in Seattle shows that a little knowledge of the problem can be a dangerous thing;
For more than 60 years, Dick’s Drive-In has strongly supported high wages and generous benefits. Our employees start at $10.25 an hour — well above our state’s highest-in-the-nation minimum wage — receive regular merit raises, excellent health insurance, $22,000 in scholarships over four years, child-care assistance, bonuses, paid vacations, a 401(k) retirement plan with a 50 percent employer match, paid volunteer time at local charities and other great benefits.
Employees who sign up for Dick’s benefits quickly earn total compensation exceeding $15 per hour. When they earn their degrees and get even better jobs, we celebrate.
We only wish she would celebrate the benefits of free enterprise, rather than play into the hands of those who want to destroy it;
Seattle is a smart, innovative city and we need a smart minimum wage. A smart minimum wage would not be a one-size-fits-all minimum wage.
Instead, a smart minimum wage would increase as your education and skills increase. For example, if you were a high-school dropout but you earned a GED, your minimum wage should go up. Graduate from high school, and it should go up again. Continue your education and earn a technical certificate, and it should go even higher. 
Sorry, there's nothing smart about a minimum wage. No matter how much equivocation and tinkering (how much lipstick is put on the pig), any floor below which wages cannot legally go outlaws the employment opportunities of someone. Smart minimum wage is an oxymoron; a contradiction in terms like jumbo shrimp.

And a government agency (or police force) is going to be particularly inept in trying to enforce such a complicated scheme as Ms Jasmine Donovan proposes in her Op-ed piece. Simply because they won't have the requisite knowledge to do so. For the scholarly explanation, see F. A. Hayek's famous short explanation in the American Economic Review;
The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. The economic problem of society is thus not merely a problem of how to allocate "given" resources—if "given" is taken to mean given to a single mind which deliberately solves the problem set by these "data." It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its totality.

Of course, someone with an existing business that pays its employees more than other, similar businesses, might benefit from reduced competition in the labor market, but we're too smart to go there.

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