We have watched the scene repeatedly shown on our favorite cable news shows. Across the country, fast food employees are engaging in strikes, protests, and other forms of civil disobedience, demanding that the federal minimum wage be raised to $15 per hour. Cities like Seattle and Los Angeles, and states like California and New York, have capitulated to the protestors’ demands, enacting legislation that requires drastic increases to the minimum wage.
Basic economics teaches us that far from reducing poverty or helping the plight of the working poor, in reality, raising the minimum wage actually makes it more difficult for poor people to find sustainable employment. Raising the minimum wage increases the supply of labor and reduces its demand, creating a surplus of individuals looking for work and a shortage of businesses looking to hire. Low skilled workers are disproportionately harmed by a high minimum wage because they lack the marketable skills and work experience that justify higher wages. Their jobs may be transferred to salaried employees, replaced by automation, done by the business owners themselves, or left undone. Additionally, poor individuals must pay the higher prices for goods and services necessitated by increased labor costs.
Economists are now able to utilize complex econometric computer models to quantify the economic effects of changes in public policies. One such study, published by the Heritage Foundation, found that raising the minimum wage to $15 an hour would reduce fast food profits by 77%, reduce fast food sales by 36%, and would force fast food restaurants to raise prices by 38% and cut employee hours by 36%. Another study, published by the American Enterprise Institute, used data from the Bureau of Labor Statistics to demonstrate that unemployment in Seattle increased 1.2% during the nine months that followed the city-wide minimum wage increase from $9.32 to $10 an hour in 2015. Imagine the effect on Seattle’s unemployment rate when the minimum wage is raised to $15 per hour for larger businesses in 2017 as mandated by the law recently passed by the city council.
As Christians, we bear the responsibility of faithfully applying biblical principles to all areas of life, including economics. Through a combination of carefully studying the Scriptures and prudently observing economic phenomena, we can derive economic principles rooted in biblical truth and the reality of economic science.
The Parable of the Workers in the Vineyard, found in Matthew 20:1-16, records a parable told by Jesus to his disciples. Proper exegesis requires that we first determine what Jesus’s purpose was in telling the parable. It is from this parable that we glean the spiritual principle of “the last shall be first, and the first last” (Matthew 20:16). No matter how long we individually labor for the Kingdom of God, God’s grace is such that we will all enjoy blessings of Heaven and eternal life with Him.
Behind every parable is both a spiritual and earthly principle. Parables use earthly stories that contain self-evident truisms to communicate spiritual truths. The Parable of the Lost Coin (Luke 15:8-10), for example, uses the self-evident truism that we search after lost things that are valuable, and rejoice when we find what we have lost, to elucidate why Jesus seeks His lost sheep and angels rejoice in Heaven when sinners repent. Just like the woman seeks after her lost coin, Jesus pursues lost sinners, and all of Heaven rejoices when they are found.
What is the self-evident and earthly truism utilized by Jesus in the Parable of the Workers in the Vineyard? In the parable, a group of laborers confront the vineyard owner at the end of their workday, claiming that it is unfair that they would make the same wages as those who worked for less time. The owner replies, “Friend, I am doing you no wrong. Did you not agree to work for me for a denarius [a Roman silver coin]? Take what is yours and go your way. I wish to give to this last man the same as you. Is it not lawful for me to do what I wish with my own things?” (Matthew 20:13-15, NKJV).
By using this example, it is clear that Jesus assumed that employers were free to offer whatever wages they wished. Similarly, employees are free to agree to certain wages; if they don’t feel that the wages being offered are reasonable, they can reject the employer’s offer. This is called liberty of contract, which allows for employers and employees to voluntarily assent to the terms of the exchange of labor and wages. As humans created in the image of God, we are endowed with the ability to decide with whom we contract and the terms of that contract, much as God reserves for Himself the agency to decide with whom He covenants.
Minimum wage laws violate this biblical principle by interfering in the employee/employer relationship. Employees and employers are stripped of their constitutionally protected liberty of contract when the federal government suspends the laws of economics by instituting a wage floor. The employer and employee cannot contract to exchange labor for wages under the minimum wage, even if both parties find the exchange mutually beneficial according to their own self-interest.
Employers are accountable to God in that they pay their employees fair wages in a timely fashion. “Behold, the hire of the labourers who have reaped down your fields, which is of you kept back by fraud, crieth: and the cries of them which have reaped are entered into the ears of the Lord of Sabbath” (James 5:4). We can safely assume that government does have a legitimate obligation to penalize fraud in the workplace when wages are withheld from employees.
Like their employers, employees are equally accountable to God in that they abstain from laziness, dishonesty, and theft of time. John the Baptist also told the Roman soldiers to “be content with your wages” (Luke 3:14). When both parties faithfully uphold their moral responsibilities, God is glorified.
Minimum wage laws strip us of our liberty of contract, which was given to us by our Creator and allows us to glorify Him. These laws also hurt the poor, which are the very people that minimum wage advocates claim they want to help. Next time someone recommends increasing the minimum wage as a way to help the working poor, share with them the economic consequences of doing so, as well as the biblical principle of liberty of contract.
This post was originally published in Issue #35 of the Baptists for Liberty newsletter: http://baptistsforliberty.weebly.com/uploads/1/1/9/8/11989443/issue35-aprilmay2016.pdf.