The idea of raising the minimum wage – in Polk County, Iowa, or anywhere, is an emotional issue. Wouldn’t it be nice if everyone earned a “living wage”? On the logical side, just remember that raising the minimum wage will result in more people not being able to find work – especially the least skilled workers. Also know that it will put upward pressure on prices that will further raise the cost of living – which will put more political pressure to further raise the minimum wage. Increasing the Earned Income Tax Credit (EITC) is a better idea. It is paid for by all income tax payers and targets those who have real need, without putting further upward pressure on prices.
Category Archives: Minimum wage
Our liberties we prize? Our rights we will maintain?
Recent Iowa Polls have found: A majority of Iowans prefer to use the force of government to require fellow citizens to buy gasoline that has ethanol blended into it whether the buyer wants it or not. A majority of Iowans prefer to treat fellow citizens as criminals if they use drugs that are not favored by the majority, even if such use harms no other person. A majority of Iowans want to force businesses to pay a minimum wage, even though it means that the least skilled people may not be able to find work. A majority of Iowans prefer to use the force of government to prohibit vaping in privately owned businesses, even if the owners, customers and employees prefer that it be allowed. Iowa should change its motto to: Our liberties we prize and our rights we will maintain, unless, of course, the current majority disagrees, even if you are a peaceful person and do no harm to others.
Income inequality is not the problem.
Madeline Cano conflated income inequality with poverty in her recent letter letter to the editor in the Des Moines Register. (Hunger is symptom of income inequality. 10/15/2015) Poverty is the problem, not income inequality. Rich people earning even more does not make poor people earn less. Cano did not actually advocate taking money from the wealthy and redistributing it to the poor. She simply repeated the erroneous meme that income inequality is the problem.
Cano correctly identified that, “…Iowans are not earning sufficient incomes to support themselves and their families.” Increasing the incomes of Iowans in a sustainable way to reduce hunger in Iowa should be a priority. The best way to do that is through education, work experience, and opportunity, not through an increase in the minimum wage.
Raising the minimum wage definitely hurts most those who have no job and those who have the fewest skills. It makes it more difficult for them to get a job and, at the same time, has a tendency to make things more expensive.
To the extent that we want taxpayers to subsidize low income earners, it is better done through the current Earned Income Tax Credit, which targets benefits to those with real need, and excludes those with higher incomes or who are claimed as a dependent by others.
Income inequality is not the problem.
Income inequality is not a problem in and of itself. As long a people earn their income through honest, peaceful and voluntary exchange, then there is no moral reason for our government to redistribute that wealth. What is a problem is when government places its thumb on the scale and unfairly helps the rich to get richer, or hurts the poor and makes them poorer. To the extent that a person gains wealth by unequal preferential treatment by government, it is morally correct for government to use its force to take away that wealth.
One good example of the many unfair government policies that wrongly favor the rich is the special low income tax rate on “carried interest” income earned by hedge fund managers. They call it carried interest, but it is nothing more than a bonus based on performance. In any other situation, this type of income is taxed at regular income tax rates. Somehow, hedge fund managers have sold politicians on the idea that carried interest is a special kind of income that should be taxed at lower rates. Another example is the Oil Depletion Allowance for oil companies. Another is farm subsidies for rich farmers. We do not need to raise tax rates on ordinary income, we do need to do away with the unfair preferences, tax breaks, and subsidies that go mostly to the wealthy.
A good example of government policy that hurts poor people is that of keeping interest rates low in order to prop up housing prices. If housing prices had been allowed to fall to their free market levels, housing would be much more affordable for poor people. Instead, our government tries to fix the problem that it helped to create (unaffordable housing) by giving rent subsidies to the poor – creating more dependency on government, but not fixing the underlying causes of the problem.
To misquote Walter Scott, “Oh what a tangled web we weave when first we practice to use our government to achieve social goals.” The solution to many of our economic problems today is to reduce the size and scope of our government. Many unfair crony capitalist subsidies and tax breaks exist because our government has expanded far beyond its Constitutionally limited powers. The primary just powers of government are to protect our lives, liberty and property; and to resolve disputes. The scope and powers of our current federal government are clearly way beyond the limited government that our founding fathers created. Lets start by closing unfair tax breaks and lowering spending to match.
Walmart jobs are beneficial.
Contrary to the letter to the editor in the Des Moines Register by Doris Render on 11/23/2012, “Taxpayers subsidizing low-wage businesses”, all private businesses, including those that pay low wages, add wealth to our community. People take jobs at Walmart because their next best option is a job that pays less, or possibly no job at all. There is no reason to believe that if our government stopped providing welfare benefits to poor people, that employers would start paying higher wages and benefits. Government welfare helps poor people, it does not subsidize business.
If businesses like Walmart were forced by government to pay higher wages and benefits, then prices will go up correspondingly. Those higher prices will hurt low income families the most. Sure, those who keep their jobs will benefit from a higher minimum wage. But those who are most vulnerable, those with the least skills, will lose their jobs as automation and foreign competition become more economical because of the higher wages.
History has proven that government attempts to control wages and prices are doomed to failure. Even today, our slow economic recovery is due in no small part to our government’s attempts to prop up housing prices and force all employers to pay for health insurance. Good intentions are no excuse for bad policy. The unintended consequences of government actions must always be considered when government uses force, (i.e. laws and regulations), to manage our economy.
Link to Register article: http://www.desmoinesregister.com/article/20121123/OPINION04/311230033/Letter-to-the-editor-Taxpayers-are-subsidizing-low-wage-businesses?Opinion&nclick_check=1
Iowans don’t live in poverty.
Contrary to the picture painted by the recent series of articles in the Des Moines Register, very few Iowans actually live in poverty. What we have is families who whose incomes, before counting any welfare benefits received, are below government established guidelines for poverty. We measure “food insecurity” because very few Iowans are actually go without food for any extended period of time. Taxpayers provide food stamps, Medicaid health insurance, subsidized housing, and much more. Charitable organizations provide food banks, clothing, shelters and much more. For children, taxpayers also provide pre-school, meals before, during and after school, subsidized child care, and much more.
We clearly have an effective and extensive safety net. The relatively few who fall through the cracks either don’t know about the benefits or won’t ask for help. It appears quite clear that we do not need to spend more taxpayer money to expand welfare benefits. It’s actually hard to imagine that spending for welfare programs cannot be reduced. There has been much anecdotal evidence of fraud and abuse in our welfare programs by both recipients and providers.
Today, the best way to help the poor is by having a vibrant, growing economy with enough jobs for those who are willing to work, not by expanding welfare benefits. To encourage a growing economy, we need for our government to stop regulating businesses in areas not related to employee and public safety or pollution of our environment. Government should not mandate pay levels or benefits. Government should not provide corporate welfare (subsidies) to artificially prop up favored industries. Just as with individual welfare, corporate welfare breeds competitive weakness and dependency on government.
Minimum wage hurts low skill workers the most.
The Guest View , “Fix the minimum wage”, by Elizabeth Rose, published in Cityview on 9/6/2012, was emotionally appealing, but logically misguided. Wouldn’t it be nice if we could simply raise the minimum wage without any unseen negative effects.
What we see are those people who get and keep jobs at the new higher minimum wage. What we don’t see are those people who just don’t get jobs because they are not economically viable at the new higher wage. Some jobs are lost because customers will simply not pay higher prices, some are lost to automation because the new higher wage makes automation economical, and some are lost to offshore outsourcing. Typically, those with the least skill are the ones who can’t find jobs.
Many of the government laws and regulations regarding employment protect big, established businesses from competition by new, start-up competitors. Established businesses are often the ones who lobby for regulations that increase costs for would-be competitors. This is much the same as unions wanting government to require a high “prevailing wage” on construction contracts – to protect the union’s higher wages. These types of laws and regulations are primarily intended to protect existing vested interests.
As we continue to have downward pressure on wages and benefits because of international competition, it is possible that the cost of living will decline too. If wages dropped 10% but the cost of living dropped 15% what would be wrong with that? At the same time, our government is doing everything it can to increase the cost of housing (housing prices) – and then subsidizing those with low incomes. It would be better for those with low incomes if our government let housing prices fall to their natural level. Many cities don’t allow homeowners to take in borders – which could lower the cost for both the owner and the tenants.
Morally and philosophically, we should not allow our government to use its force to prohibit peaceful and honest people from voluntarily agreeing to employment terms. It would be considered immoral and illegal if you used force or fraud to make someone pay you a higher wage. The same thing done by a majority through government is still immoral. The purpose of government is not to create jobs. The proper role of government is to protect our lives, liberty and property against those who would use force or fraud to take those things from us.
And If you still feel that government and taxpayers must subsidize those who earn low wages, then the Earned Income Tax Credit, which already exists, is much better than an increase in the minimum wage.
Libertarian Perspectives 