Suppose, on a reasonably competitive market, that Bob’s labor is worth at most $1/hr to any potential employer. (Suppose that this is the best Bob will be able to produce at any point in his life.) At anything over $1/hr, employers would be losing money every hour Bob worked for them.
However, suppose for Bob to lead a decent, fully human life (however some left-wing activist would like to define that), he would need to make $10/hr.
Now, suppose Bob works at fast-food chain McBurger in a competitive market economy where he gets paid his marginal product, $1/hr. Suppose that he therefore qualifies for government assistance, receiving an earned income tax benefit or basic minimum income, food stamps, and the like. Many on the Left would say that the government thereby “subsidizes” McBurger, because McBurger pays Bob less than it takes to keep him living well, and the government pays the difference. But this presupposes that if you hire someone for, say, 40 hours a week, you owe him enough money for him to lead a decent life.
I don’t understand where this presupposition comes from. If Bob is so lousy and unproductive that he can produce only $40 of value to McBurger in a 40/hr week, and if McBurger pays him for his marginal product, then this just means Bob isn’t productive enough to pay his own way in this world. Bob is going to be a net drain on the world–to keep him alive will require that he consume more than he contributes. From an economic standpoint, the world is better without Bob than with him.
Isn’t it more plausible to think that if there’s some enforceable positive duty to provide Bob with enough stuff to lead a life, that all of us, together share this burdensome duty, rather than just Bob’s employer? Why should Bob’s employer, specifically, be the one that has to bear the burden and lose all this money to keep him alive (at whatever level you consider decent)? This just seems like a kind of moral outsourcing to me. Why not instead Bob’s neighbors, parents, friends, or sexual partners? Bob does McBurger a service, and McBurger pays him for that service.
I’m not going to connect this directly to the Walmart picture above, because we can debate the empirics of whether the market is sufficiently competitive, etc., that any of this reasoning applies*. However, in reading websites and articles arguing that Walmart is subsidized by the government because many workers receive welfare benefits, it’s clear that the authors have not thought through the issue I’ve just presented. (Also, I’m definitely not applying any of this to third-world sweatshop workers, many of whom receive low wages simply because governments ghettoize them to poor countries rather than letting them travel in search of better wages. If you have been voting for closed borders candidates, then it is quite literally your fault that many third world workers receive low wages.)
Relatedly, I sometimes see arguments that go like this:
- McBurger made $200 trillion in profit.
- But McBurger paid many of its workers lower than living wages.
- Therefore, McBurger underpaid its workers.
But 3 doesn’t follow from 1 and 2. We could parody this argument by saying something like, “McBurger made $200 trillion in profits, yet it only paid $1500 for the Apple laptops it bought its executives. Clearly it could afford to pay more, since it has so much profit, so therefore it should.” Again, nothing like that follows. Since McBurger has so much money, it could easily afford to pay, say, $10,000 per laptop. Let’s say McBurger values the laptops at $3k each–at $1500, it’s getting a $1500 consumer surplus from the laptops. If McBurger bought 50 laptops at $10,000 each, it would still lose $350,000. This can hold for employees, too. A company with a high profit margin might be able to afford to pay its employees more than the marginal value of those employees, but it would still be losing money on each of them.
Imagine you argued for the following principle: “If you hire someone full-time, you have to pay that person enough to lead a decent life (defined as follows…), even if that person is so unproductive that you lose money by hiring him.” That kind of moral codes gives potential employers of the unproductive two options: 1) hire unproductive people at a financial loss, or 2) refuse to hire unproductive people. It forbids the middle ground–help out unproductive people (perhaps even, in the process, helping to make them more productive) by paying them what their labor is actually worth.
*Thus, a tip to people making the Walmart subsidy arguments: your arguments would be much better if you could establish, empirically, that Walmart employees are getting paid much less than their marginal product as a result of a market failure. When doing so, please keep in mind the difference between a market and a government failure, too. So, for instance, if you showed me that the average Walmart cashier had a marginal product of $170/hr, but she was getting just $13/hr because Walmart bribed the town aldermen to forbid Target and other competitors from establishing nearby stores, then you’ve got a real case.
EDIT: A question about living wage arguments. Suppose a homeless person offers to squeegee my car window while I’m stopped at an intersection. Suppose washing my window will take 60 seconds. Suppose that having my window washed is worth very little to me–I’d lose money on the transaction if I paid more than 10 cents. However, suppose that a living wage amounts to $30/hr. Am I morally obligated (not out of duties of beneficence, but out of justice) to pay him 50 cents, and thus lose 40 cents on the transaction?