Friday, August 15, 2008

The Real Minimum Wage And Its Beneficiaries

The phrase "minimum wage law" contains an inherent contradiction. You can't raise the minimum wage. The minimum wage has always been zero, and it always will be zero. Wrap your head around the implications of that, and, as Jesus said, you're getting very close to the kingdom of God.

I was looking for a chart to show what I meant. The simplest one I could find, thanks to Robert Love, contained a cat.
Here's an excerpt from Voters Mandate That More Teenagers Remain Unemployed, posted at The Libertarian Party of Colorado blog.

The Denver-area inflation rate for the first half of the year was 3.7 percent, propelled by rising energy costs.
It’s not just another economic statistic: Thanks to a 2006 ballot issue, Colorado uses the measure to set the state’s minimum wage.
Now $7.02, the minimum wage will increase Jan. 1 to $7.28, the Rocky Mountain News calculates, based on the Colorado Department of Labor’s rules.

Combine that with fun fact #2. Many long term union contracts are tied to a specific multiple of the minimum wage. That's why they lobby so hard for increased minimums.

Fun fact #3. Many government contracts specify that all workers must be paid the "prevailing wage" for each profession in that area. This wage is often expressed as a multiple of the minimum. (This is another way of stating that no government project manager will ever have to spend any significant time looking for a good deal.)

Fun fact #4. Cost Of Government Day (how long the nation has to work each year to pay for all government spending) was on July 16th in 2008.

So what does all this mean?

It means that the comedy team of Reid and Pelosi are doing as much as they can to devalue the dollar. Yes, everyone gets more dollars, but they're only worth fifty cents.

Milton Friedman liked to talk about the four types of spending.

1) When you spend your money on yourself. What you do with the after-tax remains of your money.
2) When you spend your money on other people. What you do when you purchase a birthday present.
3) When you spend other people's money on yourself. What you do with a yearly budget in a "use it or lose it" situation (sorta). What you do when you find a $50 gift certificate on the street. What you do with a government subsidy.
4) When you spend other people's money on other people. Also known as government spending.

These are ranked in order of efficiency, BTW. People make their best money decisions with category #1 decisions. They make their worst decisions in category #4.

The Colorado voters who passed this minimum wage legislation thought they were creating a new category:

5) Forcing other people to spend more money on other people.

They were mistaken. Once inflation is taken into account, they've merely given more power to the people in category #4. And guess which people wind up with most of this money?

Hint: it's not minimum wage earners.

Back to The Libertarian Party of Colorado blog (and I think they might have been inspired by the closing line of this rant at another source....)

Next year the headlines will read "unemployment rises", and the people will never put 2 and 2 together.


Anonymous said...

We did both make the same point about the unemployment connection to the minimum wage, but I expect that we were both just approaching the topic from the same perspective more than any plagiarism.

The Whited Sepulchre said...


No plagiarism implied, and I'm sure that none was intended.

I was trying to show that a concensus is building around the Cause And Effect Cluelessness of the politicians who advocate these policies.