I am joining a number of voices to
comment on the minimum wage. I am opposed to raising the minimum
wage- on the simple grounds that all I expect to happen will be a
decrease in employment over the short term and increased prices over
the long term and all the arguments in my view point to other
problems.
First lets take the notion that the
minimum wage should be enough to live on.
First there is the argument it has not
kept up with inflation- the people using this argument might point to
the claim that the 1968 minimum wage when adjusted for inflation
would be about $11.
Depending on how you do the math- the
value might even be higher than $11.
This fact shows me two problems and
neither of them are an artificially low minimum wage.
The first problem is the fact the
buying power of the dollar has dropped about 90% since 1968.
So the first question that needs to be
asked – is what causes inflation.
In the Austrian and Chicago schools of
economics inflation is viewed as a monetary phenomenon caused by an
increased money supply. In fact in the Austrian school- inflation is
not defined as rising prices but an increase in the money supply and
will refer to the rising prices that would result as rising prices.
I've seen a lot of arguments that state
falling prices are a bad thing- because they indicate a decline in
demand and are an indication of the start of a death spiral as people
stop spending money and start hording.
In the Austrian school they expect to
see falling prices. Falling prices are an indication that supply has
increased relative to demand and can be caused by companies finding
new and better ways to provide their products and will in turn lead
to higher sales. while there might be occational spikes in prices
bassed on an economic shock- rising prices are expected to be
temporary as consumers will either leave the market or look for
cheaper alternatives. If you are expecting gradually increasing
standard of living and are seeing the opposite then you need to
examine the reasons which is why I yell for tax, tort and regulatory
reform.
For example if we take a look at the
Big Mac index- when it started September 1986
The price of a big mac according to
the big mac index as of Janurary 2014 was $4.62
so the minimum wage is about 5 cents
less while the price of a bic mac is $1.17 more.
Either the world has reached peak beef
or we are looking at the price of more regulations.
Since a lot of the advocates would make
the claim the Australian minimum wage was $15
The heritage foundation rank Australia
and New Zealand rate 3 and 5 on the heritage foundation's list of
nations by economic freedom
http://www.heritage.org/index/ranking
their official unemployment stats are lower than ours
At first glance this would indicate
that in both cases a better regulatory code combined with a loser
pays legal system allows Australians and New Zealanders to enjoy a
better standard of living and if we simply did tort and regulatory
reform while leaving the minimum wage alone the economy would finally
turn around from the most recent crash.
I have seen people make the argument
that doing such reform would only benefit wealthy ceo's.
The basic problem with this notion- is
two fold first it assumes there is nothing in the tax or regulatory
code that favors and helps big business. That can be blown out of the
water- with the fact Warren Buffet claims to pay a lower tax rate
than his secretary
(
http://money.cnn.com/2013/03/04/news/economy/buffett-secretary-taxes/)
and Mitt Romney allegedly pays around 14%
http://money.cnn.com/2012/09/21/pf/taxes/romney-tax-return/
A lot on the left will talk about the
need of the rich to pay their fair share in taxes – I would agree
with that notion which is one the reasons I support tax reform.
If we were to have an income tax it
should be a flat tax, with few if any deductions. The only deductions
I could accept over the current would be the following-
The first $20 K or so might be tax
free.
$5K or so per dependent.
3% deduction on capitol gains for
every year the asset is held.
Charitable deductions
Another option would be the fair tax
which is a sales tax that would be applied only to new goods, the
purchase of services and be combined with a monthly prebate indexed
to the poverty level.
Then there is the issue of regulations
the argument against regulatory reform tends to be based on the
notion that there are no negative side effects that could result in a
regulation causing more harm than good. While I have not examined the
regulatory code line by line that is still no reason not to do so.
Regulations that kick in after a
company hires X amount of people are the most suspicious in my view.
If a practice should be outlawed then
it should be outlawed across the board not just for bigger companies.
The supporters of a minimum wage hike
will often state that if the minimum wage were higher there would be
no need for programs like food stamps.
This would actually be an argument for
eliminating the department of agriculture not raising the minimum
wage.
The only way a store could afford to
double their starting wages with out increasing prices or cutting
hours would be if they had a high profit margin and a clear reason
not increase their prices.
One of the stated goals of food stamps
is to help poor people to buy food, one of the unintended
consequences of a program with this goal, could be grocery stores
jacking up their prices because they believe the government would
pick up the tab.
Raising the minimum wage to $15 today
would have been the same as raising the minimum wage to $7.25 in
1987. So why wouldn't lowering the income requirements for food
stamps and leaving the minimum wage as is result in lower food
prices?
In this video we see a lobbyist state
that the renewable fuel standard keeps corn prices above $2 a bushel.
This is a horrible argument for bio-fuel. He tries to justify it by
saying it isn't sweet corn.
The type of corn is irrelevant as the
only real argument for bio-fuel or any green energy would be it
decreased the average person's standard of living by offering a
cheaper alternative to fossil fuels.
If that technology existed- the
companies paying the lobbyist in the video would be calling oil
companies to schedule deliveries. I don't know enough about the
science to state if bio-fuel will be the next fuel source- so I am
only opposed to subsidies and not bio-fuel.
The basic arguments for increasing the
minimum wage are built on the notion that it can be done with out
decreasing available hours or increasing prices. The yells for reform
are based on the notion that increasing the cost of business will
lead to higher unemployment and prices and lowering the cost of
business will lead to lower prices and increased sales. As stated-
judging from the 1986 Big mac price and minimum wage and adjusting
them for inflation and comparing them to modern prices and the modern
minimum wage something has changed to increase the price.
So you need to ask which would help the
poor the most- reversing those changes and potentially watching
prices drop by a little over 25% then conducting other reforms to
insure the dollar keeps at least it's current value or do what has
been done quite often in the past- increase the minimum wage,
continue to add regulations and create more money and watch real incomes fall.