The following idea was born out of an appearance on All In with Chris Hayes by Ron Unz, self-described Libertarian and former publisher of American Conservative magazine, and refined on the Facebook page of a friend who fancies himself an armchair economist, based largely on having an MBA and taking a Microeconomics course in the process in which he excelled. My friend, who defies most political labels but probably would be most comfortable being called a Libertarian (in the traditional sense – not the Rand Paul sense), has posited that the best solution to the negative economic impact of inefficiencies in government social safety net programs is to simply give poor people the money directly and let them determine how best to spend it. He does not, however, support a minimum wage. I in turn have responded that the minimum wage is not only a good ides, but arguably a good conservative idea.
I start with two “givens” based in the libertarian mindset and free market ideology of my friend.
Given 1: As stated previously, giving poor people direct financial assistance (money) is a more efficient and less economically damaging way to provide for their needs than current government safety net programs.
Given 2: It is more financially efficient to allow the free market to produce a direct transfer of funds from those who will underwrite this program to those who will receive the cash than it is to introduce government inefficiencies via taxes and redistribution of wealth
Now let us introduce some requirements for this program. These are what I believe would be required for this to meet the definition of a fair free market solution. They are for the purpose of this argument and do not necessarily reflect my own personal beliefs, though I believe they reflect conservative concerns,
Requirement 1: For this to be considered a free market solution, any cash taken from one group of individuals and given to another group of individuals to alleviate poverty must return to the giver some value in the form of goods or service.
Requirement 2 (really a codicil to requirement 1): In order to assure equability and limit overhead, this should be to the greatest extent possible a one-to-one transaction.
Since enforcing requirement two on the level of one-to-one is not really supportable in a large economy, our solution must try to emulate that as much as possible while accepting that, at least with the tools currently available and affordable to implement, it is not 100% achievable.
Accepting the givens and requirements stated, it appears that the most efficient way to reflect the costs for this program would be in the cost of the good or service being supplied to the individual. That way they are literally “paying for” the program when they pay for the program. For example, if I am hiring a maid it would be reflected in how much I pay the maid and thus go directly to her benefit in turn for my getting the maid service. I am no longer underwriting maids from whom I receive no services in order to assure that my maid can eat. If I am buying a hamburger it would be reflected in the price of the hamburger, thus assuring the money goes to the guy who made my hamburger and not everyone who makes a hamburger for anyone ever.
Now all I need to do is assure that the difference in the price of the hamburger is actually going directly to the poor person, minus the percentage in taxes that would be constant regardless of the price of the burger. So how do I best assure that any new increase in the price of my burger reflects my assuring that those who provide me with the burger are not themselves starving?
Well, if I agree in advance to set a floor for what that worker can be paid to assure they are getting the money they need to be above the poverty line, accepting that the seller of the burger will no doubt pass the cost on to me in the price of my burger, I do not have to calculate how much more I need to pay for my burger – the employer will have done that for me based on the agreed upon rate, presumably based on a calculation of a living wage in today’s economy.
In other words, a minimum wage.