Increasing the minimum wage is the wrong answer.

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.

Advertisements

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.

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.

AFL-CIO president is wrong.

The letter to the editor in the Des Moines Register on July 4, 2012 by Mark Cooper, president of the South Central Iowa AFL-CIO,  makes clear that he refuses to recognize the laws of economics and want government to tip the balance in his favor.  He bemoaned, “The closure of more than 50,000 manufacturing facilities, the loss of nearly 6 million manufacturing jobs, and chronic trade deficits are all signs of our diminished industrial and innovative capability.”  In fact, over the past 30 years manufacturing output has more than doubled after adjusting for inflation.  U.S. manufacturers are very innovative and have increased capability.  Innovation and improvements in technology have allowed higher output with fewer jobs – especially fewer unskilled jobs.  It used to be that an honest, hard working person with few skills could get a job in a factory that paid well.  Over time, machines have been developed to do the strenuous, repetitive and dangerous tasks.  It is specifically innovation, not international trade and low wages in foreign countries, that has caused most of the job losses in manufacturing.

International free trade does put downward pressure on wages, but it also has the benefit or lowering the prices we pay for many products and services.  There have been real losses in jobs and manufacturing since the recession started in 2008, but the recession was caused by a government abetted speculative bubble in the housing market, not international trade.  Minimum wage laws price out of the market those with the least skills, and at the same time tends to keep prices high when they otherwise might fall.  What exactly would be wrong if wages fell 25% but prices fell by 50%.  Unfortunately, our government has a vested interest in making sure that we have inflation in our economy.  They are working very hard to push up the prices of houses, which probably has the biggest negative effect on relative poor people who don’t have a home but would like to buy one.

Philosophically, people should be free to peacefully and voluntarily exchange their labor and their property without interference by government.  When government gets started in regulating trade, those with the most political power will get protection and everyone else will pay higher prices.