Wal-Mart and minimum wages

TPS's resident poker theorist, Thomas Johnson, sends along this bit about Wal-Mart and minimum wages from his new blog, Inefficient Market. (I think we should change our motto to "Thoughts directed by Tom...since 2005.")

First off, I strongly believe that Tom so named his blog just so that I'd have to write the phrase "inefficient market" on TPS.

It turns out that Wal-Mart is in favor of raising the minimum wage in certain areas. But...they're evil, and only good people are in favor of raising the minimum wage! What's next, upwards gravity?

Here's what he had to say:

I think this is an example of how even an otherwise well-functioning market can incentivize participants to break it. Can we really expect rational politicians to resist passing a law that both appeases the interest of large corporate donors and makes them look good to populist voters? How do you fix a situation in a capitalist democracy where everyone thinks it's a good idea to break the system, even though the average citizen will be worse off afterward?

1) The incentive for rent-seeking was not created by the marketplace; that is a function of having a government that will intervene in the marketplace. Minor, but crucial, difference.

2) The typical self-interested politician model shows them directing policy to maximize their time in office. Raising the minimum wage is popular with the general public, and if it gets their hands into Wal-Mart's coffers...all the better for them.

3) We get arguments like this a lot concerning West Virginia-- how can capitalism work so well when... (insert statement here, such as "Enron can swindle everyone" or "I'm forced to pay for poor public schools). The rub here is that this isn't capitalism. Using the government to put your competitors out of business is not capitalism. It's about as anti-capitalist as it gets.

So how do you fix the situation here? Get rid of the minimum wage. How do you fix the overall issue of rent seeking? Get rid of the government in the economy. Both tough mountains to climb.

(The underlying article from the Mises Institute has a few great facts to throw out the next time someone goes anti-Wal-Mart on you. Instead of arguing for net social benefit-- always a tough sell over a minute or so, plus the invariable "I'm losing but big rich people are winning so that's a net social gain" comeback-- I'm going to come back with "Wal-Mart is in favor of raising the minimum wage!" and "Wal-Mart's average salary is at least 50%, and sometimes over 100%, of the federal minimum wage." For better or worse, these are the margins that the Wal-Mart is good/Wal-Mart is bad debates are won.)