Raise The Minimum Wage—Have Prosperity

https://grantcoulson.files.wordpress.com/2014/04/incentiveseverywherepicturecorrect1.jpg?w=444&h=288

   Do not think about, write about or deal with  human behavior without determining the effects of incentives.

     The problem with economics and psychology is that almost all of the powerful  laws of economics and psychology are counter-intuitive. Below we have an example. Decreasing poverty is simply a matter of raising the minimum wage. The disastrous consequences of one of these intuitive “laws” is outlined below. This is part of the carcass theory of capitalism, the belief that there’s a large pot of money held by greedy people. If the do-gooders of the world, who have never had to meet a payroll, can just finesse the legislation enough, the poor will be elevated.

Seattle Wages War on “Very Wealthy” Small Business Owners
Michael Schaus

Seattle might end up having some trouble implementing their dictatorial decree that no employee is worth less than $15 per hour. The Emerald City, in some sort of utopian liberal fog, recently passed legislation raising the minimum wage… And there’s already a lawsuit pending.

Seattle is being sued by the International Franchise Association, because the law requires that “big businesses” – which will include any franchise business – must hike their wages sooner than other small businesses. As a result, franchise owners who operate small businesses throughout the region will be forced to adapt to the new wage requirement on the same increased timetable as large multinational corporations.

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     Whatever the size of the business, there is no large fund available for social justice.

The disproportionate impact this law will have on franchisees is in addition to the economically illiterate move for higher minimum wages. So, naturally, the city’s Socialist city council member (I’m not being disparaging – she’s actually a Socialist) feels that everything is right with the world:

Kshama Sawant argued at one public hearing that, “In order to be a franchisee, you have to be very, very wealthy.”

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    They have a large pot of money which must be distributed. How many of these politicians have ever run a business.

Um… No. You actually don’t. In fact, many franchise owners are just barely getting by. Take for example, Kathy Lyons who poured her life savings into her small franchise. According to Fox News:

Kathy Lyons [a franchisee] says she’s not even close to being rich. She took out a small business loan of $235,000 using her home mortgage as collateral to launch a BrightStar franchise. She invested her life savings of $200,000 into the home health care company and is now afraid she could lose it all.

But even if Seattle’s favorite Socialist councilwoman was right: So what? Most people don’t operate a business with the intention of losing money… As Steve Martin once said, “So… It’s a profit deal!” Business owners don’t offer jobs as a charity – workers are expected to contribute a value above and beyond their wage. That’s kinda how profits are made; and only profits enable businesses to hire workers in the first place. I mean, seriously, do these people think that business owners operate their franchise for the “fun” of balancing budgets, paying taxes, and following ill-informed government policies? Because I can think of far more entertaining ways to blow my life savings.

Maybe Emerald City Socialists don’t understand this fundamental aspect of business ownership, but some liberals get it. David Goldstein, a blogger and advocate for minimum wage hikes, admits that Seattle’s new law will cost jobs… But, apparently, he’s not too concerned:

“If some jobs are lost, but we lift tens of thousands of low-wage workers out of poverty, that’s a net plus in the long run,” said David Goldstein, who runs Horsesass.org.

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    I guarantee that no one wanting this law will study the effect of this law. It’s not their money, they don’t care.

Wow… His blog’s name is almost as moronic as his economically illiterate statement. According to David, 15 bucks per hour is all it takes to pull someone from poverty. I know this is trite and clichéd, but I’m going to say it anyway: Let’s make minimum wage 100 dollars per hour… Then we’ll really see some benefit; because, as David points out, wages happen in a vacuum, right? I mean, businesses won’t be motivated, in the slightest, to increase prices or anything… (Any word on that sarcasm font?)

A big part of what people like David seem to miss, is that business owners don’t ultimately bear the burden of labor expenses… Consumers do. Maybe this is a little too complex for readers of Karl Marx to grasp, but workers are not paid by a company or a rich guy with a cigar and pin-stripe suit. Ultimately, customers (including all those low-wage laborers who David and Kshama claim to champion) are the ones who provide the business with the profits needed to distribute payroll. With that in mind, what do you think will happen when payroll costs go up?

But, I guess “good politics” trump economic truths. This experiment in fascism (and, yes, I’m using that term with perfect accuracy) will do little more than hike prices, increase unemployment, and bankrupt job-creators.

But I guess after Kathy Lyons goes out of business, she can try to get a job flipping burgers for $15 per hour.

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   Each job has a value based on a number of factors. The difficulty of the job, number of applicants, skills required and etc. Only government jobs which by definition are political, have a constant wage because the money is confiscated. The purpose of a job is not to provide a comfortable living, but to get something done.

Government Job or Respect–Which’ll It Be?
Cheerio and ttfn,
Grant Coulson, Ph.D.
Author, “Days of Songs and Mirrors: A Jacobite in the ‘45.”
Cui Bono–Cherchez les Contingencies

 

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