First World Consumers

by Mary Rose Farruggio, Age 18

First-world consumers often fail to contemplate the source of the newest running shoe or tablet in the market. These products simply appear in a store near you, as if by magic: shiny, sleek, and with all the careful detail and craftsmanship that befits modern luxury. We are eager consumers: competitive in our desires, insatiable in our demands, and pushing relentlessly to keep up with what is new, relevant, and likely to secure us social status.

Yet very few people can watch the images of factory workers in Indonesia or China without some distress. The monotony of their days, the desperation of their living conditions, and the seeming helplessness of the individuals’ circumstances are not things that can or should be easily dismissed.

What does this make us then? Are we simply thoughtless, greedy, spoiled and hypocritical Americans, feasting upon the stolen wealth of other nations? Are we a mercilessly oppressive colonial power that exploits other people around the world, leaving children hungry and communities ravaged?

Unfortunately, the problem is not quite as simple as villains and victims.

In spite of our pity for the level of human suffering in many developing nations, we must still do the citizens of these nations the respect of considering them rational beings. Employees of companies like Apple and Nike are not being held in these jobs against their will. Like the rest of us, individuals in developing nations weigh the opportunity costs and benefits of their decisions, and many choose to work for these companies. As unbearable as their conditions may seem to us, the fact that people are readily and eagerly taking these jobs is only evidence that their alternatives are worse. The quality of life in many of these communities may be lacking, but the fact that workers accept and stay in these jobs is proof that being employed by one of these corporations is still a step upwards.

The solution to poverty, both at home and abroad, may seem straightforward: if people do not have enough to live on decently, require that they be paid more to force their standard of living upwards. Sadly, the unexpected consequences of such intuitive solutions makes them less than economically sound. At best, minimum wage laws and proposals to raise the minimum wage are a trade off. Just because the minimum wage is raised does not mean businesses will suddenly be willing to pay considerably more for labor than they did before. Some people will keep their jobs, earn more money, and hopefully be somewhat better off, while others will lose their jobs and be considerably worse off. There is little evidence to suggest that raising the minimum wage decreases poverty. At the same time, some studies show that raising the minimum wage can actually increase poverty because of the direct correlation between raising minimum wages and rising unemployment.

Capitalism, though sometimes harsh on the individual level, is always the most efficient way to allocate resources in an economy. To create a minimum wage or raise an existing one limits the efficiency of an economy, as the productivity of potential workers is lost. Just as price discrimination increases efficiency by decreasing the consumer surplus, eliminating minimum wage restrictions increases efficiency by allowing businesses to purchase labor at various prices based on their demand for certain skills. Higher employment rates mean less wasted human potential, as more people are able to join the workforce and gain the skills and experience for further growth.

The source of poverty is not low minimum wages, but the lack of human capital available for the economy to utilize. To truly alleviate poverty, communities need to put resources towards giving their citizens skills that are valuable and relevant to the modern economy. To help people we need to invest in people by giving them the opportunities to help themselves, both in the classroom and in the workforce.  

Ultimately, minimum wage laws generally hurt the people they seek to protect more than help them. America is all about social mobility, but minimum wages don’t give people a head start on the ladder upwards. Minimum wages prevent those living on the bottom rung from ever entering the race.