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.
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 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.
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.