The Ghosts of Minimum Wages Past, Present, and Future - Granite Grok

The Ghosts of Minimum Wages Past, Present, and Future

minimum wage cartoon payneNew Hampshire Democrats, at both the state and federal level, are looking for a distraction from the lump of coal that Obama-Care put in America’s stocking this holiday season.  The misdirection they have settled on is an increase in the minimum wage.

According to the Valley news local Democrats are looking to promote a state minimum wage set to 8.25 per hour in 2015 that would rise to 9.00 per hour the year after.  At the Federal level Ann ‘Where is Benghazi?’ Kuster and Carol SEIU-Porter (along with Jeanne “Screw the Veterans” Shaheen) are supporting a national minimum wage hike to $10.10 per hour.

So the liberal lackey’s at every level appear committed to screwing over the people they claim to be helping….again.

We’ve provided plenty of evidence about why the minimum wage does more harm than good. Todd Allyn, associate professor of business and economics, had some thoughts about it as well, over at Cream City Radio.com

The government setting a price floor (a wage cannot be lower than the minimum) eliminates the ability of a business to manage their cost relative to the productivity of the worker. The increased cost of labor will cause companies to refuse to hire more employees, thus increasing the unemployment rate. Additionally, the increased cost for workers would eliminate those workers who have no-to-low skills in the labor market. Reason; poor jobs skills do not have the ability to produce the benefits a business needs in order to cover the increased cost. Therefore, there is no incentive for businesses to give those individuals an opportunity, and they would look for individuals who would be “worth” the increase in wages.

Historically, when the country had no minimum wage requirements, unemployment was less than 3 percent. Unemployment among blacks was lower than their white counterparts. Businesses had to compete for the best workers and they did so through wages. When there is no price floor, individuals have the ability to negotiate their worth, and the ability to look for the best opportunities to sell their labor. That’s not to say that there have not been abuses in the past, there have been. However, when viewed in its entirety, the overall benefits and impact that the free market has had on the standard of living for individuals has far exceeded the standards and limits imposed by central planners and progressives.

Professor Allyn tells us that the overall history of employment and opportunity without a minimum wage resulted in consistently lower rates of unemployment.  But history is not a liberal strong suit.  Nor is common sense.

More from the Valley News…

Jeff McLynch, executive director of the liberal-leaning Fiscal Policy Institute, has the opposite approach.

Increasing the minimum wage “would also have benefits for the New Hampshire economy because you’re putting more money in people’s pockets,” he said.

Putting more money in people’s pockets?  Mr. McLynch must be referring to that free money that magically appears out of the vacuum of space, having materialized after waving a legislative wand.

You’d think with a name like Fiscal Policy Institute, they’d be more honest about fiscal policy, but no, liberal illogical and political pandering trump common sense.

That money is diverted by force from somewhere to someplace else.   Before it can be put into one pocket the government has to pick it from a different pocket.  What they wont tell you is that this act of fiscal policy aggression toward one wage earner (the employer) has long-term detrimental prospects to the other (their employees).  And it is a signal to employers that Democrat don’t trust them, don’t like them, and are better suited to manage their business affairs for them, even though the outcome will be exactly the opposite of the propaganda they will deploy in exchange for “electoral” good-will from their short-term-populist pandering.

To make the point, let us look at it a different way.   If the legislature increased the costs of the parts/products from your companies primary supplier, whomever your boss buys materials from to which you then add value for sale to someone else, by 14% (in the case of the NH increase) or almost 40% if Kuster, Shea-Porter and Shaheen have their way, how would this increase in cost be paid?

There is no new money to pay for the parts or products.  That increased expense has to come out of the business owners pocket.   He or they will have to divert funds from other parts of the business, from investments in their own growth and infrastructure, from someplace.   If the business owner is forced by law to pay 40% more for something that cost him 40% less yesterday something somewhere has to give.

Raising the price of goods sold in any market can and often will reduce revenues by driving away customers.  Whether there is a good deal of competition or not (though more competition makes raising prices less tenable), that cost increase cannot be absorbed by just charging more for products or services.  Benefits, future wage increases, hours worked, and the number of employees will be reduced…in line with something Mr. Allyn brings up at the beginning of the article I quoted.

When applying this idea (Marginal benefit) to the notion of raising the minimum wage, we must look at the benefits and costs of both the business owners and labor. Those in the labor force who are receiving a minimum wage would want to maximize their benefits and reduce costs. In this case, the laborers would want to increase their income without increasing the expended energy of production in order to earn the wage at current demand for productivity. Said another way, labor wants increased wages for no increase in productivity. This is the classic model of someone getting something for nothing. Conversely, companies would increase the wages (cost) if they would be assured to receive increased benefit.

The Democrats would like to abandon this notion entirely despite the fact that the laws of economics will have to respond to their assault on marginal benefit and have lasting negative impacts on wages and employment, regardless of how well they make their case.  But that’s not the biggest irony of all.  Remember my example above, in which I suppose what might happen to your employer if the government were to mandate a 14% or as much as a 40% increase in costs to his supplies?  Raising the minimum wage will increase the costs of every supplier who is forced to increase wages.  Those artificially inflated labor costs will trickle down and impact every point in the supply chain.  This could result in increased costs, reduced availability of products or services, longer lead times, vendors dropping smaller customers to satisfy larger ones, all of which affect businesses throughout the state and the nation, in some cases driving employers of smaller businesses out of business.

Ignoring the value of labor will not only reduce employment it will begin by locking low and no skilled workers, teenagers, low-income, and unskilled immigrants  from entry-level opportunities that they would otherwise use to learn skills and increase their value.  Employers who can now only afford skilled workers who come with higher rates of productivity will negotiate for them at rates equal to or above the new minimum wage.  Everyone else will become unemployable.

So what the Democrats are doing is damning anyone without skills already to welfare and a life on the dole that includes Medicaid, more unemployment benefits for older and younger workers, medicare, and so on.  To pay for all of that they will have to increase taxes on a dwindling number of employers and working taxpayers.  Even with their “higher minimum wage,” taxes” (and prices) will go up so kiss that increase goodbye and hope you do not end up at a net loss after the fact, assuming you even still have a job.

Yes, the Democrats will try to fix this disaster by spending even more of your money by taxing everyone who can still be taxed to fund government managed incentives–where they redistribute tax dollars to favored businesses and industries (bribing them to make up the difference in marginal benefit) if they will just “hire” unskilled labor in entry-level positions for on the job training, something they would have done on their own if the government had not made the cost of labor artificially high in the first place.

The actual solution is to leave it alone.  If anything at all is to be done, the state should find ways to reduce costs to business owners so that they can then invest those savings into their businesses in ways that increases commerce which then justifies the need for more employees, and a willingness to pay more to keep experienced employees on staff.

Rather than pay attention to history and apply it to current circumstances for future benefit,  Democrats would rather create wage inequality, raise costs, reduce employment, and limit opportunity.  And this might be a good time to remind everyone that the original point of the progressive obsession with the minimum wage was social engineering;

During the progressive era there was a movement among progressives to create a wage structure within the nation.  A minimum wage.  Their desire for this arbitrary sum assigned to the cost or value of labor had a very specific purpose.  They knew that by using government to make labor more expensive it would result in fewer jobs.  That it would price out unskilled labor.  That it would keep “undesirable” people (primarily immigrants and blacks) from finding employment.

The minimum wage was (and still is) a form of  social engineering seized upon by early eugenicists to deny opportunities to low and unskilled workers by making them unemployable.  If the cost was too great employers would be forced to hire only more-skilled labor at higher rates of pay; people who would deliver higher rates of productivity to match the cost of the labor and make up for the decrease in available jobs created by the minimum wage.

Modern Democrats might be too dim to realize it but that makes no matter.  The negative impacts will affect real people and real lives whether you are a progressive era racist dabbling in economic eugenics to diminish the ranks of races and peoples you deem unqualified for your liberal utopia, or you are a modern era progressive wrecking people’s lives to trap them on your entitlement plantation.

These are people and families, mothers and children, to who you will do long and lasting harm, all for the appearance of good will?  Don’t take this the wrong way but that’s just evil.

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