My Rant on the Minimum Wage

[BEGIN RANT]

I can’t help it. Here’s my rant on this braindead plan to raise the minimum wage in the U.S. God help us.

Labor Department statistics:

1. Average family income of those under 25 who are receiving minimum wage: $64,000 annually. (How? Because many people working for minimum wage are kids or part-timers supplementing family income)
2. Percentage of people on minimum wage 24 years old or under: 53%
3. Percentage of people on minimum wage over 24 years old who are working part time: 65%

Of those who aren’t teenagers or part-timers, a large number of minimum wage earners are single young people starting out and they will be earning minimum wage for a very short period of time.

Why does our economy have to subsidize fast cars for every working teenager in America just to help the tiny fraction of minimum wage earners who live in “poverty”? As usual, it would be far less expensive to just give some money to poor people.

What I don’t understand is why people don’t make a few basic inferences about economics. Why don’t people ask questions like: why are wages higher in the U.S. than in Tanzania? Do people *really* believe that it is because governments pass minimum wage laws or labor laws? Here in Mexico the government produces industrial quantities of unenforceable laws that don’t do a damn thing. That is a pattern that is typical of poor countries. Posturing politicians passing feel-good laws that get their names in the paper and only succeed in providing opportunities to bureaucrats to extract bribes from people.

The U.S. has higher wages than Tanzania for LOW SKILLED LABOR, not because of government fiats like minimum wage laws, but because of our higher productivity!! Our phones work, our roads work, our commerical law is rational (we don’t require people to have a license to go to the bathroom like many 3^rd World nations where politicians are passing lots of laws to help the only industry that works: the corruption industry), our electric and water utilities work, our banks work, our government is efficient compared to 3^rd World governments, we don’t allow labor unions to have a stranglehold on entire industries, and so the result of all this is labor is more productive. Labor is worth more here

HIGH PRODUCTIVITY MAKES LOW SKILLED LABOR MORE VALUABLE and therefore MORE EXPENSIVE. The labor of a waiter who serves some genius entrepreuneurs in Silicon Valley is more valuable than the labor of a waiter serving an aid worker in a restaurant in Tanzania. People see this as a function of wealth (not asking where the wealth came from) but it would be more accurate to see both high wages and wealth as a function of productivity.

Minimum wage laws follow the pattern of 3^rd World economies where people are convinced that the only way to get their hands on a bit of the national wealth is to use some kind of personal or political influence. There is no concept of raising the price of labor in general. In such nations, people are determined to raise the price of their own labor by any means possible through personal and political tricks, and the notion of raising the price of labor in general is completely alien to them. I have a friend here in Orizaba who is planning to use the power of his labor union to BEQUEATH his job as music director of the Instituto de Bellas Artes de Orizaba to his daughter. When I goodnaturedly accused him of “feudalism” (this is a socialist friend who loves controversy), he replied that his ability to “recommend” his replacement was a “conquest of the worker”. This is the logical result of the cheap and shallow “compassion” of people who advocate higher and higher minimum wage laws: nepotism and other forms of jobs by theft.

First world nations, like France, that have elaborate labor laws and extremely rigid labor markets (high minimum wages and restrictive labor laws that prevent employers from firing anyone) develop TWO TIER SOCIETIES in which one group has the juicy jobs where you earn a lot and don’t have to work too hard, and another group that has a hell of a time entering the work force, because there are no entry level jobs, only wonderful high-paying, easy jobs with rigid employment guarantees. Everyone praises Sweden, and Swedish GNP keeps climbing (due to the success of their large companies) but the dysfunction of the economies in societies like Sweden and France is masked by the fact that they have aging populations with fewer and fewer entry-level (i.e. young) workers. This puts a veil on the dysfunction. If there were more children in those countries, their incapacity to find new jobs for entry-level people would be more apparent. Where the dysfunction *does* show up is in their failure to employ immigrant workers (mostly muslims), whence the riots in France, etc.

As usual, the choice we face is the one Plato pointed out, 500 years before the birth of Jesus of Nazareth: should we be good, or simply attempt to appear to be good? Do we want to really help people? Or do we want avoid taking correct positions that are not well understood, so that others will praise us for how compassionate we are? The fact that 83% of Americans support a “higher” minimum wage (What’s “higher”? $10 / hour? $20 / hour? Why not $100 / hour?) is proof that most of humanity vastly prefers to appear good rather than be good. Vainglory is the defining characteristic of human beings (see William Miller’s Faking It), and the popularity of posturing left-wing “compassion” is definitive proof of this.

Here we are, with our real estate markets tottering on the brink and with our savings ratio and long term grow rate in the toilet. If we could have gotten meaningful tax reform (say a Fair Tax that would have injected 250 billion in compliance savings into the economy) or some kind of solution to the long term problems with our pension system, we might have energized our economy. But knuckleheads like Nancy Pelosi and her projects like the minimum wage just might nudge us into long term economic decline, and ultimately, lower wages for everybody.

[END RANT]

I guess since I’m in a minority of 17% of the U.S. public, not too many people see the wisdom of my arguments, huh? ;-)