(I have tried to start this post four times in the last two days. Distractions and awesome people, just anticipating that I need more data, get in the way and help out without even knowing it. This post is a thinking-out-loud process for a guest post I am doing at an obvious crazy person's blog. A little critique, please?)
I have made the comment on this blog many times that an elementary way to jump start the economy is to abolish minimum wage. I was asked in an e-mail to expound on that concept even more than I already have. As always, I do what is asked of me.
Please understand that everything that I think stems from the FACT that I desire to succeed or fail ON. MY. OWN. I am a staunch advocate for the individualism that made this country great, but my ideology is a little more harsh than that of the Founding Fathers. They still begrudgingly allowed slavery. I would have sooner let the country not ever be born than have institutionalized that abhorrent act. I actually think that I would have had to fight the slave owners even before fighting England.
I said that in the prior paragraph to segue into the fact that I am ideologically opposed to government getting involved in any contract between two men. If the contract goes bad, yes, I hope that the government can HELP settle the dispute to avoid bloodshed, but to DEMAND for anyone depend on government to dictate any part of their contract is unimaginable for me.
Not only that, the math destroys any argument anyone can make FOR a minimum wage.
A FAILbook friend commented today on a minimum wage article that I had posted and offered a point that I had not contemplated. The fact that I had not even thought about his point made me realize that sometimes I trap my ideology into only applying to my circumstances and do not even offer regard to people that are MORE affected by circumstances. That is to my detriment, because his point is monumental and it helps illustrate even better why the minimum wage is actually a cruel and inhumane idea.
In business, wages are a huge portion of the total cost of any product or service. When something used in production costs money, that cost has to be charged to the purchaser of that product or service, just as raw materials do. I keep trying to think of the most basic commodity to use as an example, but I seriously cannot come up with any product that is just overly simple to make. Milton Friedman used a pencil to illustrate this argument and I never considered the vast resources necessary to produce a single pencil until I heard him talk about the different parts. Watch, it is amazing to the almost overwhelming point.
"To foster harmony and peace among the peoples of the world."
In order to make the best hamburger in town, the same exploded view is applicable. Farmers use labor and equipment to produce all of the ingredients necessary to make that burger, and labor is involved to make all the equipment, to ship, to process, and to build the burger. And that labor is a big ol' chunk of the cost of what you wind up eating. The higher the labor cost, the higher the cost of the item. That part is simple.
Now, when you dictate the very least amount that you can pay someone to feed those cows, then you artificially elevate the cost to produce the meat and raise the cost of that burger.
Ignore the fact that Steve wants to work on a cattle ranch. he really doesn't care what he is paid, he just loves him some cows. The federal government has stepped into Steve's business and told him that he cannot work for less than seven dollars and twenty-five cents an hour. The fed dictated what Steve was worth. The farmer or rancher can choose to pay Steve that money or not hire him. If this happened when the minimum wage was first started, Steve would make one quarter an hour. That means that the cost of your least knowledgeable labor has increased by TWENTY-NINE TIMES from 1938 to July of 2009.
Let me reiterate. In seventy-one years, the DUMBEST person in your factory has received a 2900% raise. The very same job that Steve did in 1938 now costs Farmer Roy Earl TWENTY-NINE TIMES more. The work did not change but the cost did. Labor costs for Farmer Roy Earl doubled every two and a half years, but the work never changed.
Now, suppose for a minute that Farmer Jimmy Pete figured out a way to perform the same tasks with less people. He keeps his costs down, yet still doubles his labor costs every two and half years, too. The efficiency keeps Jimmy Pete's prices from going up at the same rate as Roy Earl's. In order to keep competitive, Roy Earl has to get his labor costs down to match Jimmy Pete's or go out of business. So, he hires ILLEGAL Mexicans to handle those jobs and since they are already criminals, Roy Earl doesn't have to pay them the federal government FORCED wage.
Of course, with those criminal Mexicans comes the idiotic stupidity that if they have kids in the United States, those kids are automatically citizens so they get free schooling, medical services, food, clothing, and shelter.
Do you see that a federally mandated minimum wage increases CRIME? Not only that, it reduces the number of employed LEGAL citizens, too. We knew that when the Democrats passed the three year increases and George W. Bush signed that into law.
On July 24, 2007, July 24, 2008, and July 24, 2009, the minimum wage was increased from $5.15 to $5.85 then to $6.55 then to $7.25. For three years, the minimum wage was increased seventy cents per year. That is 13%, 10%, and finally 9% respectively, but in actuality, the REAL money stayed the same.
The people that made minimum wage did not realize a single increase in their WEALTH because EVERYTHING went up in cost to cover the additional expenses of their labor. At best, they experienced a zero sum gain.
Now, also everyone that was making more than minimum wage actually realized a drop in their WEALTH because they did not get that increase. The folks that REALLY caught it in the shorts were the ones that were making seven bucks, or thereabouts, an hour in early 2007. Within three years, they realized a decrease in their net worth that eclipsed the increase of the minimum wage earners.
While every person that makes more than minimum wage took a huge hit in their salary's worth since 2007, some folks are harder hit than others. My FAILbook friend pointed out the retired folks on Social Security and he is damned right. Increasing the minimum wage KILLS your grandmother. Do you remember back in the mid-1990s when Hickbilly Clinton was making such a stink about Gammy eating cat food? The minimum wage made her have to do it.
It is even worse right now, too. With Obamanomics manipulating the market and throwing worthless money into the economy, they have China-ized inflation. And since they kept inflation down through this time, there were no COLA increases for retirees, while REAL costs were skyrocketing. Even though I am vehemently opposed to the very thought of Social Security, there are millions of folks in their golden years that are depending on that money, that they paid in to the alleged "lockbox" system, for their very living.
Now, this argument might seem that I am saying that all wealth or earnings are relative and there is a finite amount of it, but nothing could be further from the truth. Not only does the federal government mandate the wages paid, but they also manage the money supply, dictate the farm yields, restrict the delivery system by charging exorbitant taxes, but they also stifle innovations and growth in all sectors because of the "Progressive" interpretation of interstate commerce.
But, if President Obama is genuinely concerned with jump-starting the economy, a really fast, simple, and effective way to do that would be to abolish the minimum wage. Will it ever happen? Probably not, because Democrats NEED the dumbest and least skilled segment of our society, the minimum wage earner, to vote for Democrats.
Please take the time to comment.