Libertarians effectively (and ironically) follow the Labor Theory of Value, first proposed by Thomas Aquinas in the 13th century, and later championed by Karl Marx. In Pseudo-libertarian terms, the LTV boils down to this: The value of a dollar is based on the work it took to earn it. That’s the theory. Unfortunately, the problem with acting on 800-year-old economic theories is that they tend to get a little outdated.
Long ago, the value of a dollar was tied to the value of gold. After that, it was the price of a barrel of oil, and now it’s…whatever it is on Wall Street. The interest rate on hedge funds of oil derivatives, maybe; but the one thing it isn’t based on is the value of a hard day’s work. If it were, there might really be something to worry about in terms of a minimum wage increase. But, as studies from none other than Goldman Sachs show, past a small, short-term drop in net employment, there just isn’t. Where there is a demand, there will be a market — and right now, potential consumers are too broke to demand anything but bargain bread and water.
In the video below, the presenters tie that value to something as small as a box of Mac and Cheese on the shelves of Walmart. Walmart isn’t the lowest-paying employer out there — but it is the BIGGEST employer out there, who also happens to pay starvation wages, using taxpayer dollars to directly subsidize its profit margins in doing so. The video shows how much Walmart would have to increase prices on a box of Mac and Cheese to offset its profit losses by increasing wages to $10 an hour. And, predictably, it barely registers on the cost scale. (Not that we should care in the slightest about Walmart’s profit margins. But they do. So we’ll pay anyway…or shop somewhere else.)
But Walmart, as the nation’s largest employer, makes money coming and going on starvation wages. First, they save billions a year up front; then, their employees spend their food stamp money at Walmart, because they offer low prices, because they pay starvation wages. One wonders if Walmart’s REAL motive in refusing to pay a living wage isn’t to just make money up front, but to keep people from having the cash in hand to shop anywhere else. But, that’s the Walmart Theory of Labor, which happens to coincide nicely with the Walmart Model of Business.
It’s a perverted idea — but not as perverted as the notion that making a population richer will result in poorer communities. Because that’s exactly what pseudo-libertarians argue. It’s utterly insane by modern standards; but, then again, so are a lot of “free market” ideas that have attempted to function in the last few centuries.