Thursday, January 04, 2007

Raising the Minimum Wage = Tax on the Poor?

George Will writes an article on the folly of government-mandated minimum wage hikes in the Washington Post today; he sums his point up nicely:

...the minimum wage should be the same everywhere: $0. Labor is a commodity; governments make messes when they decree commodities' prices. Washington, which has its hands full delivering the mail and defending the shores, should let the market do well what Washington does poorly.

Captain's Quarters does a better job clarifying the colossal economic ignorance of the Democrats here:

They [the Democrats] aren't giving away money, not from their checkbook, at any rate. They're distorting a market for a short-term political benefit that will do nothing to raise the standard of living for the people they supposedly want to help. Arbitrarily raising the prices of services and goods in a marketplace causes inflation, not an increase in real value. They're forcing consumers of labor to pay more for the same service, from which they will get no increased benefit -- and that means that they will have to pass the costs along to the consumers of their goods and services, all through the distribution chain.

Whose money is getting given away? Yours and mine, and all 479,000 minimum-wage workers, that's who. I can absorb the incremental loss of buying power, but the people at the bottom rungs cannot...More likely, some of their jobs will get eliminated as businesses have to support the cost increase in some other fashion than price hikes.

And it's not even the working poor that gets helped in the increase. The working poor may have started at minimum wage, but they move up as they progress in their jobs. It is an absolute fallacy to argue that minimum-wage workers have not gotten a raise since the last federal increase of the minimum wage; they get raises as they increase their value to their employer, not from Uncle Sam.

Economics 101, but the Democrats have always been best at keeping the poor, well, poor...that's how they keep them in the party, I guess. Another small businessman laid it out to me this way:

Small business - profits $100K/year
4 employees, minimum wage $5-/hr (I'm rounding a bit), 10 hours a day
New government mandated wage $7-/hr.
Extra cost $80-/day, $480/wk (assuming six days), $24,960-year

Profit declines to $75K/yr (incidentally, government revenues decline as a result of lower taxable income, but that's only a side disaster).

Does the business owner:
-take his loss, maybe sell his home, pull a kid out of college, put off buying new equiptment/car (that'll help the economy, Nancy!), or reduce his standard of living?
-raise his prices and hope he doesn't lose customers, thus further harming his business?
-Does he fire one of his workers, recovering $22K of $25K lost?

How will that help the poor, Nancy? Whatever benefit they see from an increase in minimum wage will be offset by price increases, layoffs, and limited job opportunities.

I guess that's why the Democrats are the party of the poverty stricken - 'cause they certainly are good at eliminating wealth, opportunities, and free-market trade - you know, all that stuff that makes people poor and keeps them poor!

And keeps them looking to the government for help, which allows the Democrats to raise taxes to create new "jobs programs" and other sundry handouts, which then winds the cycle up (or down, as far as the economy goes) anew...


Anonymous said...

Nice analogy - but no matter how many ways you parse it to the Dems, they will simply get all misty eyed, and say, "But-But we are helping the poor! Don't you want to help the poor, or are you some cruel heartless Republican bastard?"
The morons in the media fall for this claptrap hook,line, and sinker - seems like the nation as a whole is as well.

Anonymous said...

Nicely done.

The JerseyNut said...

Thanks Jim!
242AM? Get some sleep, bro!