{"id":53526,"date":"2014-06-30T19:38:22","date_gmt":"2014-06-30T23:38:22","guid":{"rendered":"http:\/\/countingpips.com\/?p=53526"},"modified":"2014-06-30T19:38:22","modified_gmt":"2014-06-30T23:38:22","slug":"minimum-wage-maximum-stupidity","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2014\/06\/minimum-wage-maximum-stupidity\/","title":{"rendered":"Minimum Wage, Maximum Stupidity"},"content":{"rendered":"<div id=\"inves-615481682\" class=\"inves-below-title-posts inves-entity-placement\"><div id =\"posts_date_custom\"><div align=\"left\">June 30, 2014<\/div><hr style=\"border: none; border-bottom: 3px solid black;\">\r\n<\/div><\/div><h4><span style=\"font-size: small;\">By Doug French, Contributing Editor, Casey Research<br \/>\n<\/span><\/h4>\n<p>The minimum wage should be the easiest issue to understand for the economically savvy. If the government arbitrarily sets a floor for wages above that set by the market, jobs will be lost. Even the Congressional Budget Office admits that 500,000 jobs would be lost with a $10.10 federal minimum wage. Who knows how high the real number would be?<iframe loading=\"lazy\" src=\"http:\/\/trk.caseyresearch.com\/f\/?content_id=910&amp;code=PIP&amp;editorial=minimum-wage-maximum-stupidity-1\" width=\"1\" height=\"1\" frameborder=\"0\"><\/iframe><\/p>\n<p>Yet here we go again with the \u201cRaise the minimum wage\u201d talk at a time when unemployment is still devastating much of the country. The number of Americans jobless for 27 weeks or more is still 3.37 million. And while that\u2019s only half the 6.8 million that were long-term unemployed in 2010, most of the other half didn\u2019t find work. Four-fifths of them just gave up.<\/p>\n<p>So, good economics and better sense would say, \u201cmake employment cheaper.\u201d More of anything is demanded if the price goes down. That would mean lowering the minimum wage and undoing a number of cumbersome employment regulations that drive up the cost of jobs.<\/p>\n<p>But then as H.L. Mencken reminded us years ago, \u201cNobody ever went broke underestimating the intelligence of the American public.\u201d Which means the illogical case made by Republican multimillionaire businessman Ron Unz is being taken seriously.<\/p>\n<h3><strong>We Don\u2019t Want No Stinkin\u2019 Entry Level Jobs<\/strong><\/h3>\n<p>Unz says the minimum should be $12 and recognizes that 90% of the resistance is that it would kill jobs. So what\u2019s his answer to that silver bullet to his argument? America doesn\u2019t want those low-paying jobs anyway. In his words, \u201cCritics of a rise in the minimum wage argue that jobs would be destroyed, and in some cases they are probably correct. But many of those threatened jobs are exactly the ones that should have no place in an affluent, developed society like the United States, which should not attempt to compete with Mexico or India in low-wage industries.\u201d<\/p>\n<p>He doesn\u2019t think much of fast-food jobs either. But he knows that employment can\u2019t be shipped overseas, so Mr. Unz\u2019s plan for those jobs is as follows:<\/p><div id=\"inves-308285720\" class=\"inves-in-content inves-entity-placement\"><hr style=\"border: 1px solid #ddd;\">\r\n<div id=\"inpost_ads_header\">\r\n<p style=\"font-size:10px; float:left; color:#666;\">Free Reports:<\/p><\/div>\r\n<div id=\"inpost_ads\"> \r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/1ApBOV\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2018\/06\/graph_techs_PD.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t     <a href=\"https:\/\/goo.gl\/1ApBOV\"><b><u>Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p><br><br>\r\n<br>\r\n<br>\r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/f3RrHX\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2019\/01\/cot_pie_80.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t    <a href=\"https:\/\/goo.gl\/f3RrHX\"><b><u>Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p><br><br>\r\n<\/div>\r\n<hr style=\"border: 1px solid #ddd;\">\r\n<br><\/div>\n<p style=\"margin-left: .5in;\">So long as federal law requires all competing businesses to raise wages in unison, much of this cost could be covered by a small one-time rise in prices. Since the working poor would see their annual incomes rise by 30 or 40 percent, they could easily afford to pay an extra dime for a McDonald\u2019s hamburger, while such higher prices would be completely negligible to America\u2019s more affluent elements.<\/p>\n<h3><strong>The Number of Jobs Isn\u2019t Fixed<\/strong><\/h3>\n<p>He believes that if all jobs pay well enough, legal applicants will apply and take all the jobs. This is where Unz crosses paths with David Brat, the economics professor who recently unseated House Majority Leader Eric Cantor.<\/p>\n<p>Brat claims to be a free-market sympathizer and says plenty of good things. However, in his stump speeches and interviews, Brat says early and often, \u201cAn open border is both a national security threat and an economic threat that our country cannot ignore. \u2026 Adding millions of workers to the labor market will force wages to fall and jobs to be lost.\u201d<\/p>\n<p>That would make sense if there were a fixed number of jobs, but that\u2019s not the case. An economics professor should know that humans have unlimited wants and limited means, which, as Nicholas Freiling explains in\u00a0<em>The Freeman<\/em>, \u201crenders the amount of needed labor virtually endless\u2014constrained only by the economy\u2019s productive capacity (which, coincidentally, only grows as the supply of labor increases).\u201d<\/p>\n<p>An influx of illegal immigrants may or may not drive down wages, but even if it does, that\u2019s a good thing. Low wages allow employers to invest in other things. More efficient production lowers costs for everyone, producers and consumers, allowing for capital creation. In the long run, it is capital investment that creates jobs.<\/p>\n<h3><strong>Employers Bid for Labor Like Anything Else<\/strong><\/h3>\n<p>Mr. Unz claims that low-wage employers are being subsidized by the welfare state. \u201cIt\u2019s a classic case of where businesses manage to privatize the benefits of their workers\u2014they get the work\u2014and socialize the costs. They\u2019ve shifted the costs over to the taxpayer and the government,\u201d writes Unz.<\/p>\n<p>It makes one wonder how the businessman made millions in the first place. Wage rates aren\u2019t determined by what the employee\u2019s expenses are. \u201cLabor is a scarce factor of production,\u201d wrote economist Ludwig von Mises. \u201cAs such it is sold and bought on the market. The price paid for labor is included in the price allowed for the product or the services if the performer of the work is the seller of the product or the services.\u201d<\/p>\n<p>Mises explained that a general rate of wages does not exist. \u201cLabor is very different in quality,\u201d Mises wrote, \u201cand each kind of labor renders specific services. each is appraised as a complementary factor for turning out definite consumers\u2019 goods and services.\u201d<\/p>\n<p>Not every job contributes $12 an hour in production benefits toward a finished good or service. And many unskilled laborers can\u2019t generate $12 an hour worth of output. The Congress that created the minimum wage knew this and carved out the 14(c) permit provision in the Fair Labor Standards Act of 1938, allowing an exemption from minimum wage requirements for businesses hiring the handicapped.<\/p>\n<p>That Congress included in the act this language:<\/p>\n<p style=\"margin-left: .5in;\">The Secretary, to the extent necessary to prevent curtailment of opportunities for employment, shall by regulation or order provide for the employment, under special certificates, of individuals &#8230; whose earning or productive capacity is impaired by age, physical or mental deficiency, or injury, at wages which are lower than the minimum wage.<\/p>\n<p>Entrepreneurs must purchase all factors of production at the lowest prices possible. No offense to labor\u2014that\u2019s what customers demand. All cuts in wages pass through to customers. If a business pays more than the market wage rate, the business \u201cwould be soon removed from his entrepreneurial position.\u201d Pay less than the market, and employees leave to work somewhere else.<\/p>\n<h3><strong>Who Picks Up The Tab?<\/strong><\/h3>\n<p>First, Unz says, \u201cAmerican businesses can certainly afford to provide better pay given that corporate profits have reached an all-time high while wages have fallen to their lowest share of national GDP in history.\u201d So, instead of taxpayers supporting the poor, Unz wants business to pay. No, wait: later he writes that consumers will support the poor by paying higher prices.<\/p>\n<p>\u201cMcDonald\u2019s and fast-food places would probably have to raise their prices by 8 or 9 percent, something like that. Agricultural products that are American-grown would go up by less than 2 percent on the grocery shelves. And those sorts of price increases are so small that they would be almost unnoticed in most cases by the consumer.\u201d Walmart would cover a $12 minimum wage with a one-time price increase of 1.1%, he says, with the average Walmart shopper paying just an extra $12.50 a year. So it\u2019s consumers\u2014who are also taxpayers\u2014who get to be their brother\u2019s keeper either which way with Unz\u2019s plan.<\/p>\n<h3><strong>Walmart Must Be Offering Enough<\/strong><\/h3>\n<p><em>Fortune<\/em>\u00a0magazine writer Stephen Gandel appeared on\u00a0<em>Morning Joe<\/em>\u00a0this week, making the case that Walmart should give its employees a 50% raise (his article in\u00a0<em>Fortune<\/em>\u00a0on the subject appeared last November). According to him, the company is misallocating capital by not paying higher wages. He says investors are not giving the company credit for the lower pay in the stock price, so they should just do the right thing and pay their employees more.<\/p>\n<p>But Walmart does pay more when it has to compete for employees. In oil-rich Williston, North Dakota, the retail giant is offering to pay entry-level workers as much as $17.40 per hour to attract employees.<\/p>\n<p>Walmart isn\u2019t alone. McDonald\u2019s is paying $300 signing bonuses to attract workers. The night shift at gas stations in Williston pays $14 an hour.<\/p>\n<p>By the way, whatever Walmart is paying, it must be enough, because it has plenty of applicants to choose from. In 2005, 11,000 people in the Bay Area applied for 400 positions at a new Oakland store. Three years later near Chicago, 25,000 people applied for 325 positions at a new store.<\/p>\n<p>Last year a new Walmart opened in the DC area. Again, the response was overwhelming. Debbie Thomas told the\u00a0<em>Washington Post<\/em>, \u201cIt\u2019s hard to live in this city on $7.45 or $8.25 an hour. I\u2019ve lived here all my life, and I want to stay here. In the end, I\u2019m just glad Wal-Mart\u2019s here. I might get a job.\u201d<\/p>\n<p>Throughout history, people have had to relocate to find work. Today is no different.<\/p>\n<p>In the long run, as the minimum wage increases, capital will be invested to replace labor. We\u2019ve seen it for years. Machines don\u2019t call in sick, sue for harassment, require health insurance, or show up late. Now patrons pour their own drinks. Shoppers scan their own groceries and pump their own gas. Soon we\u2019ll be ordering from electronic tablets at our tables in sit-down restaurants to cut down on wait staff, and the cooks will be replaced by automated burger makers.<\/p>\n<p>Unz may well believe what he proposes would be doing good; however, it means kids and the unskilled go unemployed and in the end, are unemployable.<\/p>\n<p>You read an excerpt from the <strong><em>Daily Dispatch<\/em><\/strong>, Casey Research\u2019s wildly popular e-letter. Stay in the loop on big-picture trends, precious metals, energy, technology, and more. <a href=\"http:\/\/www.caseyresearch.com\/go\/v8ue9-2\/PIP\" target=\"_blank\">Sign up here<\/a> to receive the Daily Dispatch free of charge in your inbox.<\/p>\n<p>&nbsp;<\/p>\n<div id=\"xvMdV95u77zU\" style=\"clear: both;\">The article <a href=\"http:\/\/www.caseyresearch.com\/go\/v8u2a-2\/PIP\" rel=\"permalink\">Minimum Wage, Maximum Stupidity<\/a> was originally published at <a href=\"http:\/\/www.caseyresearch.com\/go\/v8u5b-2\/PIP\">caseyresearch.com<\/a>.<\/div>\n<div style=\"clear: both;\"><\/div>\n<div style=\"clear: both;\"><\/div>\n<div style=\"clear: both;\"><\/div>\n","protected":false},"excerpt":{"rendered":"<p>By Doug French, Contributing Editor, Casey Research The minimum wage should be the easiest issue to understand for the economically savvy. If the government arbitrarily sets a floor for wages above that set by the market, jobs will be lost. Even the Congressional Budget Office admits that 500,000 jobs would be lost with a $10.10 [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-53526","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/53526","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=53526"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/53526\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=53526"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=53526"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=53526"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}