This morning, on NPR, they were interviewing a “Republican Millionaire”, who was arguing for a minimum wage of $12.00 an hour in California. His reasoning was that people will be willing to take a job for $12.00 an hour that they wouldn’t take at a lower wage rate, and that by taking the job, these people will move off the welfare rolls, thus saving taxpayers money! Great idea! Except for the fact that it’s moronic!
First of all, taxpayers are consumers, too, so an increase in the price of goods and services to cover the government-mandated increase in wage rates is a form of tax–on the same group of people that the “Republican Millionaire” claims his proposal would benefit.
Second of all, basic economics tells us that raising the price of some good or service lowers the demand for that good or service. The “Republican Millionaire” made the oft-argued statement that “studies” (what studies? when were they conducted? were the conclusions really what minimum-wage proponents claim?) have shown that raising the minimum wage doesn’t really decrease the available number of jobs. He states that California raised the minimum wage by 35¢ and that the unemployment rate actually went down. I think he said this was in 1995. Since he didn’t qualify that statement, I infer that he is arguing that the price for labor and the demand for labor move in tandem, rather than being inversely related, as is commonly thought. To reiterate, he implies (or, at least, allows the listener to infer) that if the price of labor rises, then the demand for labor also rises, and that if the price for labor falls, the demand for labor falls. He is, of course, incorrect. He admitted during the interview that he has not ever taken an economics course, so maybe he can be excused for being ignorant of the relationships among price, demand, and supply.
I have no reason to doubt (and I have little incentive to research the question) that California did raise the minimum wage, and that subsequently the unemployment rate fell. So, why would this situation occur if the price and demand of labor is inversely related? The most likely answer is that the minimum wage hike did not push the wage above the market rate. That is, if the “general market rate” for labor were higher than the minimum wage, all other things being equal, then one would not expect to see the unemployement rate affected. I put “general market rate” in quotes because, in the end, not all labor is the same. You can’t fire your accountant and hire a burger flipper to do your taxes and expect to get the same quality labor. So, a hike in the minimum wage would not affect all types of labor equally.
What it would do is price certain low-skilled laborers out of the market. If an employer is considering hiring a non-skilled worker and a skilled worker, and he must pay the same regardless of which he hires, then he has little incentive to hire the non-skilled worker. The government has effectively denied the non-skilled worker the use of his competitive advantage–underbidding his skilled rival for the job. In addition, one could expect that skilled workers would be willing to bid for a lower-stress job that pays the same or just a little less than his current job.
Another thing of which the “Republican Millionaire” seems to be ignorant is that there are players at the margin. He talked at some length about how Wal-Mart would only need to raise its prices by 1% to cover the minimum wage hike he proposes. However, he does not speak of (and may not even have thought of) the smaller firms that would not be able to absorb the wage hike. The firms, like the low-skilled worker, must often compete by charging lower prices for their goods or services. In order to charge lower prices, they must maintain lower costs. An increase in the cost of labor will likely push the firms operating with thin profit margins into bankruptcy. It will also induce the owners of some firms that remain profitable to close shop, if the owners feel they could make better use of their time and resources. The point is that competition will decrease, and when competition decreases, prices rise and the quality of goods and services fall. A minimum wage is actually a boon to the larger firms, since it eliminates the competition provided by smaller firms.
Now, I am aware that President Obama is urging Congress to increase the minimum wage, while he also is promising to use an Executive Order to compel firms that bid on government contracts to pay a minimum wage of $10.10. A national minimum wage would have the same effect, of course; just on a national scale.
In the end, a minimum wage is a bad idea. It is an unwarranted interference in the lives of people, because it prevents them from making arrangements that they feel is in their best interests. It misallocates resources by incentivizing firms and individuals to allocate labor to less productive uses. It is a boon to larger firms because it eliminates competition. It is anti-humanity, because it pushes people out of the workforce and makes them dependent on government largesse. It increases the cost of goods and services, even if the increase may seem negligible. It is a bad idea.
Read the article here.
The author is basically relabelling the “Yokeltarian/Cosmotarian” argument that is being perpetually debated over at reason.com (Hit and Run). The argument goes something like this: there is a group of people (“Yokeltarians”, or, according to this author, “Calhounians”, after the former US Vice-President John C. Calhoun) who are culturally Southern and rural; they distrust the Federal Government because of the Civil War, and so are motivated to limit central government. The worldview of such folk is generally Christian and traditional; they tend to study the Declaration of Independence and the Constitution, oppose “social rights” like legal abortion and “same-sex marriage”, and are generally recognized by those living outside their inbred society as neo-luddite morons.
Then, there is another group of people (“Cosmotarians”, or, per the author, “Heinleinians”, after Robert Heinlein, an engineer and science fiction writer), who tend to be culturally urban and sophisticated, not to mention astonishingly intelligent and good-looking, who recognize that people need the “freedom” to murder children in the womb and invent new meanings for words like “marriage”. These people tend to study Science!, see the future, and are working on using science and technology to create utopia on earth, where there will be no disease or scarcity, and where “mother earth” will be cared for as she ought to be, and where death itself will someday be conquered.
The author (he calles himself “Hamilton”), makes some interesting assertions. For example, he describes President Obama as “sort of, kind of” libertarian, because he doesn’t seem to want to regulate the activities of the tech-savvy cosmotarians. He wonders how Christians can square what’s in the Bible with “what’s going on in Silicon Valley”. He asserts that technology, via the atomic bomb, “saved millions of American lives” (and thus shows a need for a strong central government that can arrange the creation and construction of atomic bombs). He is critical of Romney for scorning Newt Gingrich’s plan to colonize the moon. He points out that there is a reason why “gay marriage and free trade are always advancing”.
Well, President Obama isn’t regulating cosmotarian technology–yet. Just give him time.
What’s going on in Silicon Valley that I would need to “square” with the Bible? He mentions a proposal to fuse human consciousness with computers (my paraphrase). Well, it’s a proposal, not a reality, and I seriously doubt it could ever become a reality because, despite the adamant assertions of the Delusional Darwinoids, we humans are not just a mass of chemicals that exist due to a cosmic accident. Life has never been shown to come from non-living materials through natural processes. A better hypothesis is that life was created, by a Creator. I’m going to go out on a limb and say that human consciousness will never be stored in a computer.
As for the atom bomb, I doubt that it really saved “millions of American lives”. Japan had already been trying to surrender for about a year; Douglas MacArthur, the commander in the Pacific, opposed the use of atomic bombs to “get Japan to surrender”. In reality, the atomic bombs were to show Russia that 1.) we had them, 2.) we weren’t afraid to use them, and 3.) Russia better be satisfied with the portion of Europe it had already grabbed. I guess, in a sense, one could argue that the atomic bomb *did* save millions of American lives, by preventing a war with the Soviet Union, but such an argument would be, in the end, merely speculation.
Newt Gingrich also said that the people on the moon would vote to make the moon the 51st state. I recall a “Simpsons” cartoon where the children in Lisa’s class were shown a 1950-era film in which the claim was made that the moon “belongs to America.” Life imitates “The Simpsons”! In reality, Romney was quite right to criticize Newt’s idea: it was a stupid idea.
And the bit about “gay marriage advancing”? Well, while three states have had “same-sex marriage” approved by popular vote, the rest of the states that have legalized “same-sex marriage” have done so through legislatures or the courts. 29 states still have “bans” on the practice instilled in their state constituitons (though I doubt that a same-sex couple in Tennessee that decides to go ahead and “get married” without a state license will be going to jail).
About Free Trade, we don’t have it, except perhaps among the various states. All “free trade agreements” are actually government-managed trade treaties, so it’s a bit naive to think that Free Trade is “advancing”, even though that would be awesome. Also, trade is the one activity that almost all economists of varying political philosophies agree is unequivocably beneficial to all parties involved. It’s not a “left-right” issue, in other words.
He posits four “problems” with Calhounism. 1. The threat of foreign invaders necessitates a strong central government. 2. You can’t have the internet without a strong central government. 3. Calhounians are luddites. 4. Calhounians are ignorant luddites.
The challenge for Heinleinians is: 1. That they’re so darned smart. I’m talking wicked smart. These guys are going to figure out how to become immortal, for crying out loud. Also, they’re going to mine asteroids in space. 2. They’re so freaking rich, that, even when they inevitably discover the technological secret to immortality, they will be the only ones able to enjoy it, which will be a problem. 3. They sort of, kind of, like Progressivism, and would call themselves Progressives. 4. They just might turn into real-life versions of James Bond villains, which would make some people uncomfortable.
My reaction to all this? Meh. “Hamilton” is obviously a Cosmotarian, but he realizes that there aren’t that many Cosmotarians, and that for his movement to succeed, it needs to join with the icky neo-Confederate Sky-Daddy Worshippers. His preferred method would be to persuade the nCSDW crowd to drop the opposition to antepartum infanticide and preposterous notions like
“apple pies” made with peaches “same-sex marriage”. Sorry, but if you want people to join you, it is you who must drop the evulz, Ham.
Ultimately, Rand’s egoism is irreconcilable with both Christianity and capitalism. In fact, since the system fails to have any true explanatory value, it’s difficult to find any reason to adopt Objectivism at all. Fortunately, we don’t have to buy into Rand’s philosophical errors in order to appreciate her fiction. We just have to keep in mind that instead of reading a “novel of ideas”, we are reading a work of fantasy.