Thursday, November 11, 2010

Explaining Simple Concepts for the Left

(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.


Big Al said...

Good post Paul.
I guess you can say you're inspiring.

Paul Mitchell said...

Thanks Big Al. I was sent a link to your post yesterday in an all out attempt to heed the progress on this post of mine. For the longest time, I simply assumed that I was alone in the opposition to minimum wage, I am coming to the conclusion that there are actually people that have fought against it for longer than I have.

Keep hammering the word, brother!

Anonymous said...

I agree with the argument that a minimum wage doesn't help anyone, but I think that the tax rate presently imposed on the citizenry is the elephant in the room, never mind what's set to be imposed come January.
Something that needs to be addressed is the creation of The Fed, and the ballooning expansion of federal government intrusion into all aspects of everyone's life, both in the US and Canada.
All those people that work for the government and their underfunded pensions are going to be the demise of life as we know it. Unfortunately the house of cards needs to collapse before the spine is found to actually do what's necessary. They're all entitled to their entitlements and all that...

OregonGuy said...

In a period of three or four months, back when I was in my early 20's, I went from being a consultant, to managing a retail store, to pumping diesel at a truck station.

The consultancy was a contract job...when the contract ended, I was out of a job. But one of the people I made contact with during this job offered me a store he had built in a prospering city. I knew the product, took the job. Turned out my fella was a bit of a crook. So, the choice I had was to find a job to help pay bills. Went out to the truck stop, got hired working on the fuel line. Two weeks later, after the company looked at my resume (it was unheard of to provide a resume when applying for a fuel lane job) I was asked to work as an assistant to a division manager. Within a week I proffered my resignation. When pushed, I let them know that the division manager, my immediate superior, was cooking the books. I became division manager that day.

Yes, the wages I earned were commensurate with the skill set needed to perform those different jobs. And, actually, I think I had a better relationship with the blue-shirts when I became a white-shirt, since they knew me from my work on the fuel lanes. I never shirked, I never stood around, if there weren't trucks demanding fuel, I would grab a bucket of water and wash the pumps down. That I would vault past these gentlemen in terms of responsibility and wage was accepted, especially since my division leapt forward in profitability. Not all due to removing the shifty former manager. When you're not tied up in trying to cover financial mis-dealings, you can actually take some risks. I went through and drained the old inventory at pennies and re-stocked with new lines and new products.

Point is, I've never been concerned with the wage I'm offered, since work is either conditioned upon need--working fuel lanes--or on enjoyment, and I did enjoy my responsibilities for my new division. I'm sure I made less than the previous DM, but that didn't matter. It was a real nice wage, and a fun job.

But I've always felt that working beat the alternative. And I've had a lot of interesting jobs, from a car wash, to hotel lobbyman, to landscaping drudge, to nurseryman, to haberdash...and more. I've built swimming pools and decks. I've worked for large companies and worked for myself.

People who focus on the social value of the minimum wage forget a very important component of wages; if you've never done this type of work before, you really aren't worth all that much to me, today. Let me give you a small wage and I'll give you a try. Make me pay $8.40 per hour plus the other associated costs of employment, like workman's comp and other insurance coverages, and if you're not immediately qualified for the job, I'm not interested in taking the risk on you. It's far easier for me to simply work a little harder, than increase the costs of my business to satisfy some concept of social justice.

Paul Mitchell said...

Marc, I really do hope that everything doesn't have to go all Great Depression-y," but I think that you might be right. I really pray that you are wrong, though.

Oregon Guy, you just described my entire life in a nutshell. Right after I posted this rant, I started wondering if I needed to include the additional costs of employment, then went to the whiteboard and started pounding out numbers. In order to employ just ONE minimum wage employee, it costs over 35 dollars PER HOUR. Dude, that is insane. There is a really good chance that Marc is right.

Anonymous said...

Oh I do NOT want a great depression, it's that the entitlement class is so entrenched I don't see an other option to sever it.

The Canadian and US economies are tied at the hip. They're inseparable.
I wish for freedom, and the best for your county and mine.

OregonGuy, "good stuff"

Skunkfeathers said...

My working career was varied in my youth, but I never worked for a "minimum wage" before it existed, and not since. I'm not a rocket scientist, nor do I have upteen degrees in business, etc; I just put forth the effort to learn my job, and give it my best. So far, that's stood me in reasonable stead for almost 38 working years. I've never had the misconception that I was doing the business a favor by being tfavor by being their employee; I've always viewed as I was hired for their convenience, and if I give them a worthy, full day, they'll see the value in me. By and large, it's worked.

Welfare doesn't register with me. When I'm out of work, I get off my ass and find some.

More out there need to.

Skunkfeathers said...

LOL...some repetitive overwriting there, which suggests none of my jobs has been as a proofreader or technical writer ;-)

Paul Mitchell said...

Skunks, use all the extra words you need to, they don't cost nothing around this joint.

Andy has proven beyond any doubt over the course of the past four weeks that there is an abundance of work for someone that wants to work. I think that he has had three jobs in the last month or so.

Paul Mitchell said...

Marc, we know that you do not want a depression, but that might be the only danged way we can get back to where we need to be. Damned, I hope not, though.

Reaganite Independent said...

An illuminating post-

Everybody should see this... thus duly linked:

Perusing the Conservative Blogosphere...

Your ally,

Paul Mitchell said...

I just tried to comment at your blog, RR. I am getting the "Service Unavailable" all over the blogs this morning, though.

Anonymous said...

Maybe if we never broke away from England than we wouldn't be having all these problems.

The further away, from center of power (gov't) the more freedom a people have. So the act of breaking away from England was to put the power center closer to "home"...yeah what a good idea, lets give the local busy bodies power to "regulate" the rest of us.

I would argue with England so far away, there was more personal freedom...think about it, would the house of commons (or of lords) pass a new law based on what was going on in South Carolina?? The primary focus for English parliament is guess who...England, so if you're not in England you wouldn't be the primary focus for the busy bodies of England. But the house of reps (and Senate) in DC would since they are virtually next door.

The founding of the country made it worse for individual freedom since it put gov't in the backyard of the people, as opposed to being far far away, do you think England would pass a law in it's parliament making it illegal to teach slaves to read and write??? No but he state legislature of South Carolina would...see my point!, the closer to the power center your located the less personal freedom you'll the way do you know that 7 of the richest 10 counties in the US surround the DC area?? Yeah I could never have predicted that.

See fundamentally the problem is the location of the center of power relative to the individual. The further away the mandarins, the more freedom.
Which is also why we will never have as much personal freedom as the ordinary American pre-revolutionary war. (ability to drink alcohol...remember prohibition, teach slaves to read and write, interracial marriage..etc...)


Paul Mitchell said...

That is certainly one way to look at it, Roderick, but I think that you fail to see that what was applicable to England at the time, was certainly not applicable to the colonies at all. There was a vastly different economy and lifestyle.

That said, you are actually arguing to remove all of the local power from government and introduce that self same power to someone that doesn't know what the local economy is doing or needs.

I argue the exact converse of yours. Local government sees what needs to be done around home, DC has no clue what is even going on outside the beltway.

Paul Mitchell said...

And by "converse," I actually mean "inverse." I've got Chuck Taylors on the brain this morning for some reason.

Moogie P said...

Oooh. Do the Department of Education next!

Paul Mitchell said...

Moogie, Jimmy Carter really and truly set our country back 100 years. I really HATE HATE HATE that guy.

Editor said...

You can't explain anything substative to liberals

Paul Mitchell said...

Matthew, I am hoping that a couple of the Progs will come here, attempt to fisk what I write and then have an epiphany. My hopes are not that high, though.

Anonymous said...


You do realize that "local" gov't will just only keep passing laws to control the "local" can't do this, you can't do that..

Isn't it funny how the bill of rights is all about "negative" rights (what the gov't can't do to you) yet all "local" gov'ts are all about "positive" your not allowed to do as a "free" citizen.

How else do you think gov't justifies its existence??

Is that what you want, new law after new law being passed?? New laws for what??

See, they pass new laws so the population knows they are there...without passing new laws, does the gov't exist??

I am arguing for a gov't that is not about passing "positive" rights laws, but "negative" rights laws. Keep passing new laws stating what the gov't cannot do to you.


Anonymous said...

To add, I am not sure what I am arguing for but I am beginning to see the disconnect between freedom and gov't.

You can't have both.

I guess what I am saying is that if you accept gov't then you must also accept your loss of freedom because of the manifestation of said government. Local vs. Remote is not the real argument, it is the loss of freedom when you hand any power over your existance to others. I guess that is the point that has to be recognized.

True "freedom" would be a Mad Max type situation, that must recognized as well as absolute obvious restrictions on your actions (but just reactions based on the action of, you kill someone, their relative will kill you or someone in your family). I guess Afghanistan, or the Northern region of Pakistan exemplify this kind of real "freedom."

Do I want to live in those regions, no I don't but by saying that I must also accept my loss of freedom when I accept the authority of gov't.

With the acceptance of gov't I feel having it geographically as far away as possible is more local gov'ts (they will just keep pass "new" laws)...just DC passing all the laws(will limit the passing of new laws since those laws will apply to the entire nation...too many issues to resolve for a single body).


Paul Mitchell said...

Watch this very elementary video of governments, so you and I are talking about the same thing, Roderick.

Anonymous said...

The video was ok, alittle simplistic..but the one issue I have a problem with is how does government limit itself?? The video overly idealized the republican form of gov't.

I find it impossible for a gov't to limit itself.

Look at Cuba, they are allowing people to make money because they know they went too far. I guess it all goes in cycles. I guess it is best to just develop yourself and be able to survive in any system....look at China, the commies only lasted for about 37 years (1949 to 1976) until the Chinese premier opened up the economy...just like what Cuba is doing now. The sad part is that a large portion of the population is broken from that system but for the small minority that didn't lose the free market mindset (and passed it down to their children, subversively of course) they will do just fine.

The best defense against gov't is staring at you in the mirror. Let the gov't over reach, pull back, over reach, pull back...go through its normal cycle....just keep up your preparation (learn, study, practice).


Paul Mitchell said...

Yes, I said that it was very elementary, but the philosophy could not be more simple. You are responsible for you. I am responsible for me. When the "Majority" decides that I should not eat trans-fats, they are attacking my life and my property. It not only violates the Constitution of the United States of America, it also violates the Natural Law upon which the Constitution is based.

The reason that I argue for a more localized government is because those guys are next door to me and I can go whip their fucking asses if they try to take more of my money. You know, SELF-DEFENSE.

Skunkfeathers said...

Government closer to home is easier to regulate via the ballot box (or so the theory goes). With the lack of distance to insulate the decision-making, local pols tend to need to listen to the local constituency more. Not so on the national level, though in a number of states, deliberate ignorance proved NOT to be bliss, at least this time around.

Right now, DC is going through the kind of disconnect that England underwent with us pesky colonies a couple hundred + years ago. With the next CONgress in January '11, we'll see how we did by pulling most of Bela Pelosi's fangs, and undercutting zombie Reid's bulldozing tactics in the Senate.

Moogie P said...

Even if government closer to home doesn't prove easier to regulate via the ballot box, at least local government has to meet its constituency in the grocery store and get an earful, face-to-face, on a daily basis. Analyzing local governments make it easier to measure the character of a region, too. I, for one, would not choose to live somewhere the local government renders unlawful a child's meal in a legitimate business or tells me I cannot circumcise my newborn male child.

But that is pretty much the definition of a Republic -- which we are: a confederation of varying political entities who seek a common bond within a larger political entity, in limited arenas, such as defense. We are not a democracy, we are a Constitutional representative Republic.

No one can legitimately expect a nation of this size and diversity to have "one" political or social philosphy. That is one truism that Washington has swept under the rug of history in the last several decades. It's also one truism that the last election is pulling out from beneath that rug and dusting off: we are not cookie-cutter paperdolls; we are individuals living near those who are of like mind and we don't like being made into thralls or one-size-fits-all do-gooders.

As others have noted, it will indeed be interesting (and telling) to watch as the next Congress unfolds. I'm already ready to give another batch of them the boot.