While we were in Vancouver last week, the dipsticks in Washington, District of Criminals did it again. They increased the Minimum Wage from $6.55 to $7.25 per hour.
I don’t mean to preach to the choir, but there goes the remnant of what might otherwise have been the start of a jobs recovery.
Wage and Price Controls don’t work. You and I can see it in everyday real life. Richard Nixon tried it and failed. The Pols that run the country can’t seem to see beyond the end of their noses. Actually, they know exactly what will happen but they’re so hell-bent to reward unions, they don’t care.
Why unions? Simple. If the minimum wage is increased, naturally the union wage must also be increased. Increasing the union wage rate keeps the membership in line and fattens the pockets of the union officials. In turn, it helps get the Pols re-elected. Talk about being hypocritical. The very Pols that caused the dollar to lose purchasing power due to government deficit spending now pretend to be so munificent as to help the poor earn a “living wage.”
This is no different than rent controls or price controls. Anytime artificial numbers are substituted for what an otherwise free market would be willing to pay, somebody gets hurt. In the case of minimum wages, it’s the very low-level worker that gets hurt. If the objective is to provide employment for entry level workers, minimum wage isn’t the answer.
Would you like a job paying $6.55 per hour or would you prefer no-job paying $7.25 per hour?
It really is that simple. If you’re a marginal worker, you’re expendable. The business for which you work can perhaps justify paying you $6.55 per hour to sweep or wash dishes. When then forced to pay $7.25 per hour for the same services, the business just decides they can no longer afford to hire the sweeper or dishwasher. They make other arrangements to get the jobs done. Meanwhile, the former dishwasher is now out of a job thanks to the Federal Government raising the minimum wage.
During WWII, we had all sorts of wage, rent and price controls. Perhaps because we were involved in a major war, folks simply made-do without and devoted their efforts to helping the United States win the war. Once the war was over, most of the wage and price controls were removed. The economy then took-off like a scalded dog.
There were a few pockets of resistance however. One was Santa Monica, CA. They decided rent controls were necessary because “greedy” landlords were taking advantage of the “poor” tenants. Ditto NYC, by the way. The result was fewer units available because the very folks that risk their own money and expended their own energies to provide living accommodations weren’t willing to do so for a less-than-profitable return. Existing units were not well maintained because the owner was seldom allowed to increase rents to cover expenses. New units were exempt. Those new units were rentable at whatever the market would pay. As a result, all varieties of high-priced new units came on the market while the more-affordable units vanished. Once again, the very folks who were supposed to be helped by rent controls now found themselves with no choices, thanks to government interference.
As mentioned above, during WWII, we had price controls on almost everything. We also had coupon books that limited the quantity of almost every good we could purchase. My mom traded coupons with other moms so everyone had a chance to get what they really needed. Shortages, however, were the norm. It made almost no difference whether you had an “A,” “B,” or “C” gasoline sticker for your car because you couldn’t buy tires.
When prices and/or quantities are artificial.
Why Minimum Wage Means Maximum Slaverylly limited, scarcity is the result.
Have you heard the opposition to Obama’s National Health Care complain about rationing? This is exactly the “why” of that complaint. Some bureaucrat will decide who gets what medical treatment. The excuse is that medical costs are too high. It’s another form of wage and price controls. In this case, the result will be otherwise-avoidable deaths simply due to the rationing of medical services. And as you’ve read many times, if you think health care is expensive now, wait until you see what it costs when it’s free.
So what’s the solution? What about “all those poor people?” What’s a heartless capitalist to do?
Recall Mama Obama ranting during the campaign that “some folks are going to have to give-up some of their pie so that others can have some?” Neither she nor the multitudes like her understand the basics of Economics 101. Our economy is not a zero-sum game.
For most of my life, I raced cars and one of my favorite races was the 2000 mile La Carrera Panamericana from Guatemala to the USA through central Mexico. Let’s admit that Mexico is a poor country. That is, many of the folks are considered to be poor. Yet as I traveled throughout Mexico, I saw color TVs in cardboard shacks. I must have been really “poor” when I was a kid because we didn’t even have a black and white TV. No one did. We were one of the first families in the neighborhood to get a TV and that wasn’t until 1948. Today, even a poor Mexican can have a color TV. Why? Because contrary to Mama Obama, the world’s pie continues getting bigger. That means even the poorest among us can enjoy a living standard that wasn’t even available when I was young.
We have a bunch of politicians who continuously deficit-spend thus reducing the purchasing power of the dollar. Then they graciously increase the mandatory minimum wage in order to off-set the loss of purchasing power they, themselves, created. Do you suppose there is a moral hazard hiding somewhere in this fraud?
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Oh, poor Tex. Having a life in the poor sport of race car driving – being the circus in bread and circuses for the very comfortable people who could afford his piece of the show. It certainly wasn’t those folks with the color TV’s in their shacks. BTW Tex, our family couldn’t afford a B/W TV until ‘55 (when the minimum wage went up to $1) and we were the first in our neighborhood.
I’ve brought several small businesses to stability by totally ignoring minimum wage. We always paid higher than ‘average’ which resulted in workers staying longer and doing more to keep their jobs. Yep, the managers and owners took a little less but the companies longevity increased slowly and sustainably.
The simple reality is that you don’t get out of the slums by working minimum wage or by being slaves – so you job hop and sell drugs to the folks with the BMW’s (good old capitalism at work).
I’ve heard the same arguments every time the minimum was raised and each time the country grew richer – might there be a connection? The biggest problem with the MW hike is that it is much too small. Tex has been living too large, too long to see the realities of life down below.
Christopher Wright, Alaska
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Dear fellow Texan:
Why can’t people grasp that when the minimum wage is raised above the point where the work produced is not worth the expense small business owners stop hiring? Worse, hikes in the MW result in more people working under the table, making less than they did before. Those who remain employed in traditional areas must do more work for the same money or they lose their jobs.
I don’t know where in Texas you live or whether or not you deal with part-time workers, but in our neck of the woods the going rate for a part-time hand is seven bucks, nine if he’s building fence efficiently and knowledgeably. These are people with skills and experience taking on afterhours work to try to make ends meet. They aren’t minimum wage kids, but the market commands no more.
I wrote an article last night on a trend I think is building. As we descend further and further into Depression and what I call the Anti-Industrial Revolution we’re going to get back to practices common before the rise of the middle class. I don’t say we’ll get to the point where a house maid or footman will work for ten pounds a year, two work uniforms, one “Sunday best” uniform, alternate Sunday afternoons off, and room and board, but I WILL prognosticate that there will be a great deal of labor available for anyone who provides room and board. It will definitely be a buyers’ market.
During the coming Greater Depression, with probable food shortages and interruptions to the delivery system, the most safety to be had will be on an outfit that can raise meat, dairy products, eggs, and vegetables. No one with sense will want a minimum wage of even $15 in fiat money of declining value because there will be less and less to buy with it.
In the last week I have had FOUR unsolicited applicants for work on our small ranch. People are hurting, even here in Texas where we’re running fifteen per cent. below the national unemployment average. Reduced hours, no benefits, and far more applicants than there are spaces at convenience stores and for “Welcome to WalMart,” and those with a sense of self-preservation conclude quickly that agreeable work in the country that includes room and board is the greatest degree of safety available.
Signature chuckle. If Gary finds room for “Ding, Dong, the Bear is Dead,” Shooters will learn which of the four I hired. Hint: in classic economical times, my new foreman would be considered unemployable and few would consider what I offered him–that has him jumping up and down shouting “Whoopee!”
Isn’t life funny? I’m thrilled to have picked up a young, strong SEAL stigmatized as a “felon” for not being able to pay child support (there being little market for SEALs), and he’s exuberant about getting back to ranching, having his own private quarters, and having full run of the kitchen complete with the joy of cooking for the Boss Lady. He comes with three glowing recommendations, one from the minister he has been living with. What a bizarre world we live in, eh, compadre?
Sorry I don’t buy the authors premise. It is the keeping of wages down which has occurred over the many years of a conservative mindset which has resulted in the mess we are in right now. There is too little cash left over for the average person on the street to buy anything. Under the conservative mindset they think the average person should be able to pay his own health care, retirement, buy a home send Johnny and Suzie to school all the while enabling companies to bust unions and retract workers rights etc. Now lets talk about the big whigs on Wall street and what was there reaction to this economic mess when they were told they might not get their big fat bonus? Do you remember? They said they might not play ball with the solution .
Now as everyone looks to China to bail us out the sad reality is that China relies on the US to buy their garbage but right now we don’t have any money. Lets see if China can see the forrest for the trees and encourage their business’ to open their pockets and raise wages to the average Chinese worker because THAT is the only thing that will rescue China.
Tex didn’t pick this toy up to play with it, so I’m going to answer for myself, not him.
A bizarre but very practical notion is that employers have to make a profit or there is no point in offering goods or services. They are not in business to support their workers in luxury; somewhere along the line, they have to make enough to support themselves and make their efforts worth while; they need to accumulate capital to expand their businesses or start new ones, which is where jobs come from. I cannot tell you how many times over the last twenty years I have heard small business owners say sadly, “I have the business to expand, but between regulation and increasing minimum wages it wouldn’t be worth my time.”
Tex is absolutely right: when the mandatory minimum wage is increased small businesses hire fewer people BECAUSE THEY CANNOT AFFORD TO DO SO.
Would YOU cope well with having your “overhead” (in your case, rent, gas, taxes, utilities, food) increased by even five or ten percent? Hey, it’s for the children. It’s for universal health insurance. It’s so that ACORN, the unions, banks, and agribusiness can increase their bottom lines and power, and it is your patriotic duty to sacrifice for their benefit.
When the minimum wage is increased fewer workers are hired, which means that those who retain their jobs must do more work for the same money. If the business that employs you cannot afford to hire an assistant for you because of increased production, you have your choice of working harder for the same money or hunting another job. Think before you quit, because the “official” unemployment rate is ten percent and the rate as sensible people calculate it is twice that.
Why do I suppose you are an employee and not an entrepreneur? Silly question. I’m sure you can work the answer out for yourself.
There are those who attempt to tell the forest from the trees…and those of us who can discern ornamental gardens. Sometime very soon all of those who think the world owes them not only a living but everything else on a silver platter are going to be faced with “try and collect.”
The US has bankrupted itself on the premise that it can provide all things to all people who are not capable of or willing to work for them. You will be able to safeguard yourself and your family better if you pay attention to the advice you get here on Whiskey & Gunpowder. To conserve MEANS to protect and preserve.
Linda Brady Traynham
@Christopher Wright, Alaska made up a fictitious story to counter the authors proven fact.
Despicable cretin, go back to the soupline and stay there.
@MJJP, you started off on the wrong foot then let your fantasy run away with your brain and the next thing you know you’re bouncing all over the planet babbling about all sorts of things you have apparently aquired through mainstream soundbites. Please, sit down and let the grown ups talk or you will be sent to your room with no supper.
Jeeziss, this country is filled with automatrons…….
It never ceases to amaze me how a few simple statements of fact can start a firestorm. I guess there are a great many folks out there who just can’t be confused by the facts – their minds are made-up. Do I detect a tad bit of envy and jealously on the part of Mr. Wright from Alaska and MJJP?
The presumption is that I’ve had it easy since you assume I’ve got it made. You want me to be the fall-guy because you, perhaps, didn’t succeed as well as you perceive I have succeeded?
I built the businesses I ran from scratch since I had no money with which to buy one, unlike Mr Wright who admits he just bought his businesses. I built the race cars I raced because I was the designer and the mechanic as well as the driver. I busted my tail getting a degree in Mechanical Engineering while my peers were chasing women and drinking beer. After paying taxes to educate your children, I then had to pay private school tuition for my kids because the public system failed my kids. I lived my life two years behind my current income while most of America has lived two years ahead of their anticipated income. So now it’s my fault that I succeeded because I deferred my pleasures while you were spending your futures?
My question to you is: Do you not understand the relationship between cause and effect? In physics, I learned that for every action there is an equal and opposite reaction. Do you not understand that when the government mandates higher wages, someone else looses? The very folks you supposedly want to help are the very ones that are hurt the most. I laud Mr Wright for his decision to pay his employees a higher wage but his decision to do so was for his own benefit – retention of good employees. It was not a matter of simply “taking a little less.” For most small businesses, it’s a matter of survival. I again ask: “Would you like a job paying $6.55 per hour or would you prefer no-job paying $7.25 per hour?”
Did you read Rancherlady’s response? Did you pay attention to the wages she references? Our Texas economy has remained well above what passes for the “norm” in America yet we still have limits. My stomping ground in the Hill Country of Central Texas just NW of Austin has about the same wage scale. But let me suggest that wages are in competition with every other expense we face.
We all have limited funds – even the Federal Government although you’d never realize it by the way they waste our money. That means when you spend a dollar for a hamburger, you have a dollar less to spend on a book or a pair of underwear. Person A may be willing and capable of doing a specific job for a dollar less than Person B. Why shouldn’t Person A be able to work for the wage he negotiated? When the government steps-in and says everyone must be paid the wage that Person B demands, the market simply says “Nuts.” Can’t afford the extra dollar. Therefore, no job. Period. Boy, that really solves the problem, doesn’t it?
Are there greedy people out there? Of course. Are there inequities in our system? Of course. Can you name ANY other system that even begins to match our success? Rancherlady is correct when she opines that this is a frontal assault on capitalism – our way of life. I mentioned the poor Mexican that has a color TV because our system makes that possible. Kill the system and you will have absolutely nothing. As Ayn Rand observed, Atlas will Shrug.
Someone needs to pull Tex’s pen. Not 1 in 10 people had even seen a TV in 1948 and Tex’s family had one. And you can be sure those early adopters paid dearly for those sets.
* Television production begins to rev-up. By July of 1948, estimates are that 350,000 TV sets are in operation in the USA. 3/4 of these are in the eastern network cities, and half are around New York City.
* 27 Stations in 18 different cities are in full operation.
* Only one in ten Americans has seen a television set up to this point.
* About two dozen different TV set models are on sale, ranging from Pilot’s 3″ set at $100, to DuMont’s 20″ set at $2,495 ($28,000 in today’s money!).
* A TV station costs $1,000,000 to construct and place into operation. 73 new permits have been issued in the United States.
* Gillette pays $100,000 ($1.1 Million today) for the right to televise the Louis-Walcott return boxing match.
* Television rights for baseball games in New York city cost $700,000 ($7.7M).
* Longest TV network is from Boston to Richmond.
* Average of 3.47 persons watch each night per set in a household.
* Of the 42 hours of TV available for viewing per week, the average set is operating for 17 hours.
* 68% of the viewers remember the names of the programs’ sponsors.
Where did I go wrong?
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One issue that I haven’t seen mentioned with MW hikes is one of the biggest issues here in Ontario, and I presume everywhere, is that the general cost of living increases every time minimum wage does. Actually, many items start to raise their prices before MW is. MW is raised to “keep up with the cost of living”, naieve people get excited because they think they’ll finally stand a chance of getting ahead. Then EVERYthing goes up in price…even things that had just gone up 3 months before.
Minimum wage is an evil thing. Jobs have been scarce in Canada since shortly before the Recession hit. I’d been predicting a “second Depression” for years. Many adults with responsibilities and families are stuck working for minimum wage…even with their college/university degrees. We have shifted from an Employee’s Market to an Employer’s Market and now all Employer’s want EVERYBODY to jump through hoops for …you can’t call it a living. Even singles on MW with just the basics (rent, heat/hydro, phone, food) can barely afford to scrape by with their MW jobs. I would love to get into this more, however I just got called away from the computer.
Actually, a minimum wage is the only thing keeping us from becoming like Chna. SLAVERY!
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