Sunday, July 12, 2009

Minimum Wage, Maximum Stupidity

The only way to increase wages is to increase worker productivity. If wages could be raised simply by government mandate, we could set the minimum wage at $100 per hour and solve all problems. It should be clear that, at that level, most of the population would lose their jobs, and the remaining labor would be so expensive that prices for goods and services would skyrocket. That's the exact burden the minimum wage places on our poor and low-skilled workers, and ultimately every American consumer.

Since our leaders cannot even grasp this simple economic concept, how can we expect them to deal with the more complicated problems that currently confront us?

~Peter Schiff

27 Comments:

At 7/12/2009 8:10 AM, Anonymous Anonymous said...

Peter Schiff??? The only thing impressive about him is his PR. And the minimum wage isn't $100/hour. It's 7.25, and one can barely subsist on such a wage. I know all the arguments for no minimum wage, but the bottomline is there is a wide swath of the population that doesn't have the aptitude, the skill sets, the socialibity nor the desire to productively work. We can pay them zero/hour, which we'd get farn close to without fed mandated laws, but then we'd have millions more dealing drugs, stealing and collecting welfare. It all comes down to what kind of society you want to live in. I bet you big money that Schiff lives in a gated community with some really big-ass fences/walls surrounding his manse.

 
At 7/12/2009 8:20 AM, Anonymous ListenEllipse said...

@Anonymous: "We can pay them zero/hour [...] without fed mandated laws." Zero is exactly the wage these workers make because of minimum wage laws. You're right, many workers just aren't worth paying that much money, but because of minimum wage laws they cannot find a job for say $6 an hour. Since they cannot get a job for their skill level, they are forced into unemployment. Would you rather pay these workers make $6 an hour (if that's what their worth) or make $0 an hour because they can't find a job?

 
At 7/12/2009 10:42 AM, Blogger Ironman said...

Here's an interesting thought, which would apply to the situation immediately after a minimum wage increase. When you increase the minimum wage, those earning it tend to have greater productivity than those who were earning the previous level of the minimum wage. That makes sense because when you increase it, you've just added all those people who used to make more than the old level of the minimum wage on up to the new level into that category of being "minimum wage earners." We should reasonably assume that those who earn more than the minimum wage are more productive than those who just earn the minimum wage.

But, because the government didn't increase the amount of revenue needed to support all those people now making the minimum wage at the new, higher level, that pushes out the less productive. Given a choice, and required to pay the same rate, an employer will either reduce the hours worked for the less productive worker or lay them off altogether, assuming that they cannot absorb the increased cost otherwise.

Here's where it gets interesting. Because the work that the employer needs to get done hasn't really changed all that much, that makes the formerly more productive worker less productive, since they would now have to take on some of the workload that was previously done by the less productive worker.

That effect would in turn weaken the economy, as you now have more productive people being required to do less valuable work. That in turn limits their ability to advance their skills to earn higher wages. Which would make them vulnerable to losing their hours or jobs the next time the minimum wage in increased. The country as a whole is losing the opportunity to realize its potential level of productivity, which translates into lesser economic growth.

In an international economy, where not every nation follows the same arbitrary minimum wage hiking agenda, the government would have just made the entire U.S. workforce less productive and less competitive.

 
At 7/12/2009 1:39 PM, Anonymous Benny The Free Marketeer said...

I am a free marketeer, so I do not support a minimum wage, although I would cut the homeowner's mortgage interest tax deduction way before I cut the minimum wage.
That being said, worker productivity has advanced handsomely for decades, but worker pay has flatlined, in the USA.
If there is a connection between worker pay and productivity, it hasn't been seen in the USA since 1972.
Today's minimum wage is actually lower, adjusted for inflation, than in the 1960s.
This whining about the minimum wage is typical of modern right-wing caterwauling. The focus is on minor market intrusions, while willfully looking the other way when it comes to rural subsidies, the home mortgage interest tax deduction (nanny-statism to the max), or a bloated, ossified military.
This is why the right-wing is marginalizing itself. It does not stand on principles--only on privilege. Unable to create a base among thinking conservatives, the right-wing must now appeal to the religious nuts to get enough votes.
Oh, that makes sense. Libertarianism mixed with religion. As in, you are free to do as you choose, unless the church-and-state says it is bad.
The right-wing is becoming a rump group of losers. Sarah Palin is Queen.
It is sad to see the party of Everett Dirksen, Eisenhower, Goldwater other true conservatives reduced to being a group that whines about the minimum wage but engages in profligate spending and volitional wars.
Worse, I see no bright lights on the horizon, a dedicated, principled right-wing thinker, who is willing to stand up to market intrusions across-the-board.
So, Obama is ascendant.
The Banana State of America.

 
At 7/12/2009 1:43 PM, Blogger Robert Miller said...

This comment has been removed by the author.

 
At 7/12/2009 3:23 PM, Anonymous Anonymous said...

Benny - The topic of THIS thread IS minimum wage. Minimum wage IS going up so it makes sense to discuss it. I agree that allowing the market to work in MOST instances is the right choice, but can't you do more than troll and go off topic when a topic comes up?

 
At 7/12/2009 4:40 PM, Blogger sethstorm said...


In an [deleted] economy, where not every nation follows the same arbitrary minimum wage hiking agenda, the government would have just made the entire U.S. workforce less productive [deleted].

Penalize those who ship off work to those nations. Reward those who keep work in this nation.


Would you rather pay these workers make $6 an hour (if that's what their worth) or make $0 an hour because they can't find a job?

False dilemma. What you're suggesting is that they're only worth slave labor type work.

 
At 7/12/2009 4:54 PM, Blogger sethstorm said...


Penalize those who ship off work to those nations. Reward those who keep work in this nation.

As an additional part:

Ensure that the work is
US-derived from companies that are not in any way influenced by those slave-labor nations.

 
At 7/12/2009 4:58 PM, Blogger sethstorm said...


If wages could be raised simply by government mandate, we could set the minimum wage at $100 per hour and solve all problems

The fallacy of the extreme example, in practice.

 
At 7/12/2009 11:43 PM, Anonymous Benny The Free Marketeer said...

Anon:
You have made my point. The present-day right-wing only wants to talk about the minimum wage, or national health insurance. The right-wing will try to sound high-minded when discussing these two issues, by citing a reverence for free markets, and a dislike for ossified bureaucarcies.
Great! I agree.
But I wish the that same reverence would not disappear when the topic is the home mortgage interest tax deduction, the SEC, of the US military, or the massive annual infusion of federal dollars into rural areas.
This lack of moral clarity utterly undermines the Republican Party. The Republicans are perceived, and perhaps accurately so, and mere minions for plutocrats and religious nuts. A confederacy of poltroons.
I realize it matters little what is posted on one of about one million blogs. I cannot change the present-day right-wing. I was hoping that this one blog would rectify this short-coming, and take a fresh look at all federal programs and subsidies.
But, week after week, all that is posted is about the minimum wage and national health insurance.
Nothing about how, say, ethanol is yet another rural-agribusiness subsidy, disguied (in drag0 as an energy program. Ethanol is dearly loved by Republican senators.
I contend the modern-day right-wing is marginalizing itself, due to a lack of prinicples and moral clarity.
Beating up on minimum wage workers does not make for principled government. In fact, it is small potatoes to something like the scope of the planned ethanol program, which is mandated for even further expansion.
What is sad is that the free-market principles I extoll meet such resistance even at this site.
That is how far the right wing has sunk.
But hey, go back to kicking the crap out of minimum wage workers. I predict the right-wing will not amount to much in the future.
Nominate Sarah Palin. I can't stop you.

 
At 7/13/2009 12:53 AM, Anonymous Anonymous said...

Benny -

I am the anon poster above. I am not right-wing, nor a Republican. I care little what they say as I am more libertarian in my beliefs. Most Republicans are believers in big government that isn't quite as big as Democrat big government, but follows what they or their constituents believe.

The problem is that when government gets to be a certain size, the power becomes more important than the principles or philosophies. As I am fairly young, I am not certain when government reached that tipping point, but that doesn't matter. What matters is electing senators and representatives in 2010 that are as libertarian as possible. This means electing third party candidates, democrats and republicans (note the lower case designations) that will decrease spending, decrease governmental power and empower markets.

One reason that the minimum wage is often used as an example is that it is so easy to show the fallacy of the concept. It is easy to show how trying to help the most vulnerable with a policy that looks like it would be beneficial to the poor actually hurts many poor people by reducing the demand for unskilled labor.

It's also not hard to show how farm subsidies mostly benefit the very wealthiest farmers, rent control most benefits wealthy New Yorkers and San Franciscans and how a public school system has less benefit than a system that ties the dollars to students and their parents with choices. However, this blog doesn't try to do everything at once.

While you seem to assert that the people who post here are right-wing when they support threads like this, I assert that most of the posters and Dr. Perry are much closer to libertarians and supporters of Friedman, Hayek and Bastiat rather than W., Palin or Shelby.

Mind you, I do believe that there are a greater number of Republican public servants who have beliefs congruent with neoclassical economics than Democrats, but there are a few there too. I guess my point and my admonition would be that while one issue (minimum wage) is hardly the whole picture, it is neither the purpose nor the scope of any blog to discuss the entirety of governmental economic policy in every thread.

Benny - 1.) this isn't a right-wing blog, 2.) you have to focus on individual subjects, 3.) while you are welcome to comment how you wish, it is not productive to do so in a manner that attacks a political party that I don't think was even mentioned in the discussion.

I dislike the Republican Party of 2009 too, but Shiff's comments are sound. Especially amidst a recession.

 
At 7/13/2009 1:25 AM, Blogger Robert Miller said...

This comment has been removed by the author.

 
At 7/13/2009 1:36 AM, Blogger OBloodyHell said...

> I am a free marketeer, so I do not support a minimum wage, although I would cut the homeowner's mortgage interest tax deduction way before I cut the minimum wage.

Translated, benny sez:

"I am a lying jackass because, as a leftist, I want to push an agenda of left-wing talking points as follows, but figure you're all stupid enough to take me seriously just because I start out with such a ridiculous lie... so here goes with my left-wing talking points..."

The rest need not be translated. It's pure libtard-speak.

 
At 7/13/2009 7:42 AM, Blogger sethstorm said...


Robert Miller said...

I'm sure you've been able to get by on less. That may have been possible in your times, but not possible for US citizens in this time frame. You lived in a time largely accessible to the US citizen. These days, I only read about such in history books.


You define a 'living wage" and I'll define a higher "dignity wage." Then I'll invent an even higher "prosperity wage" and then a higher "self-actualization wage". None of those will be any more or less BULLSHIT than the wage you choose.

It's not an idea to which I agree or subscribe. It just doesn't make any sense.

I don't believe in defining those numbers. I do believe in pricing out practices of the Third World. At some equilibrium wage, there will be somebody willing to turn hazardous work into slave labor. Then they'll figure out how to keep law enforcement out of the way or in on keeping things quiet.

I've had enough family history in terms of multiple branches and generations being residents of company/mining towns. To price labor without such minimum is to invite those hazards without any of the benefits. At that point, those people will not live long enough to be able to advance.

Since you want to get rid of unions, there exists no check against these practices. While there are corrupt unions, there are equally corrupt businesses. The pace for which the market can address such issues is slower than the pace for which a PR campaign or lobbyist can perform damage control. Do not think for a second that a business capable of manipulating a government would not be also capable and willing of more direct manipulation.

Unless you can purify unions and businesses much like one can purify water, neither is going to be in any position to criticize the other. Due to the nature of each entity, it will only stop when they are both neutralized at the same time.
Had PATCO only received a judicial penalty for Taft-Hartley(versus a devastation and the tilt of the employee-employer relationship away from a true mutual understanding), they would have less need for a politician to give them the means for vengeance.

The only places of agreement are with environmental regulations and taxes. Kill off the stuff that keeps GM from making large cars available to the masses. Scale back environmental regulation that makes existing energy cost more. Lower business taxes to an effective range of 2%->0.5% scale, where the 2% gets assistance in growing their business but pays the higher end rate; the 0.5% rate goes to those who largely can do that on their own due to scale.

At the very least, it does its best to avoid the "Warren Buffet's assistants" tax issue. Find a way to cut individual tax down to a point where they would be paying (at most) not to form a business.

I believe in honest business, responsible/capable US citizens, and a government that is equally accountable to both of them.

 
At 7/13/2009 7:52 AM, Anonymous Machiavelli999 said...

The only way to increase wages is to increase worker productivity.

This is a nice classical economics statement, but yet how do they explain wages stagnating this past decade despite rising productivity??

we could set the minimum wage at $100 per hour and solve all problems. It should be clear that, at that level, most of the population would lose their jobs, and the remaining labor would be so expensive that prices for goods and services would skyrocket.

I am not exactly sure what would happen if the government did that, but I don't think it is what Peter says would happen. How could prices skyrocket when no one has any job, and hence no money, to buy stuff with? Its Peter's classical misunderstanding of inflation. You can't have inflation with no demand.

 
At 7/13/2009 8:25 AM, Blogger 1 said...

The mach says: "This is a nice classical economics statement, but yet how do they explain wages stagnating this past decade despite rising productivity??"...

Hmmm, have something credible to back that baseless, factless statement up?

I know my hourly wage has increased (even taking inflation into account) over the last ten years...

Isn't the minimum wage part of the leftist agenda of pandering to the parasitic?

As Jeff Jacoby says: "Minimum-wage laws don’t make low- and unskilled Americans more productive, more experienced, or more desirable. They merely make them more expensive - and more likely, therefore, to be unemployed"...

sethstorm whines: "Penalize those who ship off work to those nations. Reward those who keep work in this nation"...

ROFLMAO!

Thanks for the chuckle sethstorm...

 
At 7/13/2009 9:57 AM, Anonymous Junkyard_hawg1985 said...

Machiavelli999 said, "You can't have inflation with no demand."

While this statement is consistent with Keynesian economics and everyone is entitled to their opinion, your statement is simply wrong. It is quite possible to have both very high inflation and very low demand. Look at Zimbabwe today. Inflation is extremely high and unemployment is as well. Likewise, in post-Soviet Russia, GDP contracted 60% while inflation wiped out pensioners. The path to ending up in places like Zimbabwe and Russia is to ignore classical economics. Thinking you can positively affect economic growth by artificially raising prices (labor costs) is a great way to do damage to the overall economy. The only difference is whether you do a small amount of damage to the economy or create a train wreck. A $100/hr minimum wage would create a train wreck today.

 
At 7/13/2009 12:09 PM, Blogger Robert Miller said...

This comment has been removed by the author.

 
At 7/13/2009 12:29 PM, Blogger Robert Miller said...

This comment has been removed by the author.

 
At 7/13/2009 1:36 PM, Anonymous Machiavelli999 said...

While this statement is consistent with Keynesian economics and everyone is entitled to their opinion, your statement is simply wrong.

@Robert Miller and Junkyard,

The examples you bring up (Ukraine, Zimbabwe, Russia) are emerging markets and the reasons for their high inflation in the face of declining GDP is because the world abandoned their currencies. Despite all the talk from Russia and China of a new reserve currency, there is nothing in the near-term that will replace the dollar. So, we are not at any risk of the world abandoning the dollar. The more accurate comparison to our current situation is Japan in the 90s.

0% interest rate policy, stimulus after stimulus after stimulus, debt rising to 200% of GDP and the end result is......DEFLATION!

 
At 7/13/2009 1:52 PM, Anonymous Anonymous said...

Hmmm...minority teenage women, with high school or less education living in the South, working in the private sector part-time in the leisure & hospitality industry are the preponderance of minimum wage workers.

I wonder why?

Read real close. In the 30 years of BLS data, the percent of workers earning the federal minimum wage or less has declined from 13.4% to 3.9%. I would say that is marketplace progress writ large.

I would put Peter Shiff in the complete and utter economic moron crowd just like his old man is a complete and utter constitutional moron.

 
At 7/13/2009 2:48 PM, Anonymous Junkyard_hawg1985 said...

Machiavelli999 said: "The examples you bring up (Ukraine, Zimbabwe, Russia) are emerging markets and the reasons for their high inflation in the face of declining GDP is because the world abandoned their currencies. Despite all the talk from Russia and China of a new reserve currency, there is nothing in the near-term that will replace the dollar. So, we are not at any risk of the world abandoning the dollar."

Germany also went through hyperinflation with the Reichsmark. They went into the problem as one of the world's largest economies (#4 in 1900, #5 in 1925). This hardly qualifies as "an emerging economy." They got into this trouble for printing money to pay their debts (Weimar Republic). If we start printing money to pay debts, we will see the same problem. The fed scares me when I see them monetize $1.2 trillion in debt.

You also go on to tell another whopper, "So, we are not at any risk of the world abandoning the dollar." Not at any risk???? Why was it necessary for Hillary Clinton to go to China to beg for trust from our #1 lender because of the high deficits we are running?

With the high external and budget deficits we are running, compound interest will eventually catch up with us. At that point we can a) default or b) monetize the debt.

The same thought process that says we can just raise labor costs with no impact on the overall economy, is the same one that thinks we can pay our debts by printing more money. It is the lack of understanding of the role of money.

 
At 7/13/2009 7:30 PM, Blogger sethstorm said...


These are words strung together with correct English grammar, saying nothing. The sentence has no economic or social meaning. At a market equilibrium wage, labor is supplied willingly. By definition this is not "slave" labor.

Well, it is since that is the only choice they can make. It is only willingness in the technical form, not in the actual form.

The companies involved have too much of an advantage to keep hazardous practices in use as they can easily prevent a change for the less hazardous.

During the times of FDR, safety standards were mostly nonexistent. For what hazards people did encounter, they were paid quite well. Danger was priced in there.

Those practices are completely unlike your Third World examples where the safety standards don't account for hazards. They do not hesitate to cut corners. They do not price in danger at all, save for using it to conveniently kill people who object to the practice, especially labor union supporters.


Penalize companies who move overseas and reward them for staying here

It deals with the immediate problem, work in our nation.

 
At 7/14/2009 6:39 AM, Anonymous Jim said...

Benny,
You cannot be unaware of the dramatic influx of illegal aliens into the workforce over the decades. When you add some 8 to 11 million entry level workers, happy to work for $5.85, it naturally holds down wage increases across the board. If you factor in the added low end workers, your argument fails.

Further, it would be impossible not to recognize that given the added benefits received by workers do not contribute to their well-being, providing another form of income.

Look at MP's teen employement graph and you will see that the minwage jump has done little but keep teens unemployed, with greatest impact on entry level jobs for black males...just the people we would all like to see become more integrated into society.

Jim

 
At 7/14/2009 6:56 AM, Blogger 1 said...

"During the times of FDR, safety standards were mostly nonexistent. For what hazards people did encounter, they were paid quite well. Danger was priced in there"...

Yet another unsubstantiated statement sethstorm...

What's next?

Blame Bush for the housing bubble burst?

 
At 7/14/2009 10:59 PM, Blogger Robert Miller said...

This comment has been removed by the author.

 
At 7/15/2009 9:38 AM, Anonymous Anonymous said...

In my fantasy I am the 'swing vote' in Congress for the next Minimum Wage bill. The concession I extract from proponents for my vote is that I get to title the bill. My title? The Jobs Below $7.25 Per Hour Abolition Act of 2009.

 

Post a Comment

Links to this post:

Create a Link

<< Home