30 December 2013

Inflation

Well, it seems that since we only send lawyers to Congress instead of Scientists, Engineers and Economists, we're going to get a stupid-huge increase in the minimum wage.

Oh my Gods the fallacies flying from the lips of the idiots advocating for the increase.

In the first place they have no idea why jobs exist in the first place.  A business is hiring because of one or both of two related things.  Either there's too much work for the owner to do themselves, or the owner doesn't want to be bothered with doing the work at all.

Those are related because they are both indications of a successful business.  A business that's doing so much business that it takes more labor than the owner has to fulfill the customers demand or one that's doing enough business the owner can indulge in the luxury of not doing the actual work any more.

In the latter case, if the government mandated cost of hiring the luxury employee is too great, that job ceases to exist and the owner returns to it.  In the former case, if the increase in cost of the employee exceeds the amount of money coming into a business the owner has to make his business smaller to allow the work do be done without the employee or go out of business.  Notice how there's no job for our minimum wage earner now?

Even assuming that cranking the minimum wage through the roof doesn't result in mass firings the benefit from the increase is like a gossamer net stopping a freight train.  With sensitive enough instrumentation, you could see that the train's velocity was altered by the resistance of the net, but realistically there was no effect.

The same is true of the price of labor.  Labor is a cost.  Increase costs, prices increase.  This is Econ 101 stuff.  This is basic ledger stuff.

What the advocates all don't seem to know (or care) about is that the unskilled labor rate establishes the cost of just about everything.  Tripling the price of that labor triples the price of everything, and pretty soon everyone's wages are tripled too to accommodate the increase in costs.  There is zero difference between making $10 an hour when a burger is $5 than making $30 an hour when a burger costs $15.  It still takes a half hour of labor to earn the price of a burger.

Look around you and think hard; because the "I guess I just won't be going to McDonalds" solution isn't.  The place that hires the most unskilled minimum wage workers in your local area is the grocery store.

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