People who should know better but don't are arguing for a higher minimum wage in the United States. What would this really accomplish, and what are the real alternatives?
A recent headline in the Financial Times reads Higher US minimum wage makes sense. Lots of things make sense: a moratorium on murder, rape, assault and burglary makes sense too, then we could empty the gaols and the police could all go home, but that ain't gonna happen either.
It should surprise no one and will certainly surprise no Libertarians that this suggestion was made by a correspondent writing for a major financial newspaper, because these people understand nothing of real world economics, for them it is all about making money and creating jobs. Nothing else. There is no doubt that the individual who wrote this article means well, but the road to Hell is paved with what? Here are two quotes from it:
"Raising [the minimum wage] to $9 would add about $3,000 a year to the annual income of a low-paid worker on a 40-hour week."
"Boosting the incomes of the low-paid would translate into stronger demand because of their higher propensity to consume."
Are these statements true? The first one is simply a mathematical truth. It's a bit like saying that if you put one apple in a bag then another there will be two apples in it. Everyone would like a pay rise, but if an employer pays his workers more, his profits will fall, he may not be able to reinvest money in his business, or invest at all. He may even go bust.
The second statement is not necessarily true: give one worker a pay rise, and he will probably have a higher propensity to consume. Give a million workers a pay rise, and if they all consume more, prices will rise as well. This is basic economics.
Here is a simple video by a Libertarian which explains the fallacy of the minimum wage in under five minutes. Pay particular attention to what he says towards the end about a minimum wage of $100 an hour.
One thing he doesn't mention in this video is public sector jobs, the government and indeed local government can create any number of these and pay said workers generously, but where does the money to do so come from, and what effect does this sort of thing have on taxes and rates?
You may have noticed that our Libertarian friend is black; whether or not he comes from a privileged background, he has inherited the prejudices and outlooks of the privileged people with whom he works - fellow academics - including that people who don't want to work for peanuts are bums, or if not that then near enough.
In the United States, especially its inner cities, there is a large underclass, much of which is black, which allows opportunists and people who don't know any better - including at least one who writes for this site - to racialise the problem. The solution proposed to this problem is racial quotas, affirmative action and such, which creates more jobs for lawyers and others, but not for the people at the bottom. In order to appreciate the real problem, we have to take race out of the equation. And jobs!
The reality is that as technology advances, we have and need an increasingly highly paid technologically advanced workforce in order to build and program computers and such. We are also seeing the destruction of unskilled and low skilled jobs. This latter is definitely good news, but if the jobs disappear and the unemployable underclass are unable to step up to the more highly skilled jobs, they still need an income. The solution is basic income, or what Major Douglas called Social Credit.
In the UK, the green movement and even elements of the Liberal Democrats have been coming round slowly to this point of view.
So where is the money for this to come from? First and foremost, the government must remove the power to create credit from the banks including the Federal Reserve and place it in responsible, accountable hands, which in the US means Congress.
Another important step is to get rid of all those useless, make-work jobs. These include anyone involved in the war on drugs. Legalising all recreational drugs and emptying the prisons would save enormous sums of wasted money.
Then there are all these non-jobs in the misnamed financial services industry: pension fund, unit trust and hedge fund managers. Sack them all or get rid of them all and allow people to manage their own pension funds. These people make money, but they produce nothing.
Finally, what is the big one for America, dismantle the empire, bring all or virtually all the troops home. Pull them out of Afghanistan, the Middle East and elsewhere, all of them. There will be then be plenty of real money available for real jobs such as rebuilding America's infrastructure - rail in particular, and massive investment in alternative, renewable energy such as wind, wave and especially solar power.
This threefold step would also massively reduce the burden of taxation which would lead to prices falling dramatically, which would in effect give all workers, especially the lower paid, more money in their pockets, and create more, real new jobs, something that will have all the benefits of a hike in the minimum wage without the unavoidable negative effects.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com