Wednesday, October 5, 2016

Globalist Economics No. 37: Raising the Minimum Wage, or How to Make Water Flow Uphill

Western liberals hate it when it's pointed out that their globalist policies create poverty in the developed nations by putting the Western workforce in direct competition with the billions of poverty-stricken workers of the Third World: from Bangladeshi garment-industry workers employed in collapsible factories for pennies and hour, to Chinese electronics assemblers employed in factories with anti-suicide nets, and Indian IT technicians earning in a year what a similarly qualified American or European might earn in a month.

So what to do?

Raise Western wages by fiat. Legislate a higher minimum wage.* Easy, hey! And sure to win the hearts and minds of every economically illiterate voter, which is to say most people.

What, after all, could go wrong in ordering greedy, fat-cat employers like Donald Trump to pay their workers more?

Waterfall by M.C. Escher.
Actually, a great deal. In economics there is something called the law of supply and demand. This is the basic fact of economic science. Indeed it is probably the only definite fact known to economic science. It is the fact that, in a free market, the supply and demand for anything come into balance through adjustments in price. Which means that, if you prevent the market from freely working to determine the price of something, you will create an imbalance between supply and demand.

Thus, if your fellow-creature-loving liberal dictates by law an increase in the minimum wage, he will create a shortage of demand for labor, meaning a rise in unemployment.

Western nations have a mass unemployment crisis. America has 94 million working-age citizens not in the workforce, tens of millions of them being unemployed workers too discouraged to continue seeking work. Greece has an unemployment rate in 2016 of around 25%, and most of those unemployed people have been unemployed for more than a year. In Greece and Spain, the youth unemployment is around the 50% mark.

But, never mind. Crackpot liberals and globalist shills will nevertheless call for a rise in the minimum wage.* To the extent they are successful, three things will automatically follow:

1. Unemployment will rise. Think of all those struggling retail store chains that are closing outlets, in the US, Macy's, Men's Warehouse, K-Mart and many, many others. Then think how much longer the list of store closings will be if the wage bill those stores face is jacked up by 10, 20 or 30%. Same of course with hundreds of thousands of small businesses. Forced to pay higher wages? For many that will mean it's time to call it quits and let the staff go.

2. The black economy will grow. Running a small business and having a struggle to meet a payroll? But if folks want to pay with cash, then no prob., we can give a better price (no records to keep, no sales tax to pay, no payroll tax to pay, no income tax to pay, and a pocket full of folding money with which to pay an illegal alien — below the minimum wage, obviously.)

3. A vacuum that sucks in immigrants, legal and otherwise, thereby screwing the native workforce even further.

Oh, yeah, some people will benefit from the increased minimum wage. Successful, outfits like StarBucks that pay minimum wage plus a bit, will pay the higher rate plus a bit, but the increased cost will affect their plans not only for store closings but for store openings. It will also accelerate the drive to eliminate labor. This, this and this location no longer pay their way at the new wage rates, so close them, or don't open them, but these we can save by cutting staff.

Raising minimum wages is a globalist scam. It does not help the working class, it hurts them by raising unemployment, driving millions of workers into a much lower paid black economy, and sucking in immigrants who create low-wage competition for the indigenous workforce, in large part by entering the unregulated, untaxed, black economy that undercuts legitimate firms that abide by minimum wage laws and pay their taxes.

In a high-wage, high-cost economy there are just a couple of things you can do that will directly raise wages, or at least prevent real wage rates from falling.

One is to impose import tariffs, especially on high-labor content goods and services, but also on resources that compete with domestic resource industries, for example, oil from Africa and the Middle-East that competes with America's growing domestic oil industry.

The other is to subsidize wages by the taxpayer: a reverse income tax, or job subsidy program such as I have spelled out several times elsewhere. Such programs allow the labor market to operate freely, thus bringing the supply of labor into balance with demand and eliminating a labor surplus, other than that due to the so-called frictional unemployment resulting when workers change jobs.

Benefits of such programs, other than the immediate one of providing a living wage to every worker, include:

1. The opportunity for Western nations to compete internationally in a much broader range of manufacturing industries despite their high labor cost. This in turn has the following benefits:

a. Preservation of manufacturing technologies, in textiles, engineering, electronics and IT. These technologies are being rapidly lost by the West, where they were first developed, and these technologies, once lost, will be virtually impossible to recover.

b. Retention of process technologies, i.e., not just the manufacturing industries themselves, but the expertise and technology that supports manufacturing, for example, the machine tool industry, or the highly specialized firms and technologies used in the construction of silicon-chip- or solar-cell- manufacturing plants.

c. Preservation of the educational infrastructure for high tech industry. Without jobs to go to, why would young people bother with hard subjects like math and physics, when miscellaneous courses in Political Correctness, Grievance Studies, Eng. Lit. (provided its without Shakespeare), and Psychology require so much less time, intelligence, and self-discipline.

* Currently, access to from appears to be blocked. Hence the links to Ron Unz's article, in which he advocates an increased minimum wage as a means to stem the flow of immigration to the US, are via the WayBackMachine. 


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1 comment:

  1. "The black economy will grow."

    IS growing. At the speed of light.

    In the USA, people of a certain age with pain issues are totally out of the "official" medical system, so much of a zoo the FDA and DEA have made of pain drugs. All doctors in America are now effectively agents and snitches for the DEA.

    For a good time, check out "kratom". A natural alternative to high-potency and addictive painkillers for those of us with arthritic conditions that can't be repaired is being criminalized by the DEA because one it contains (by nature) a trace amount of an addictive substance.

    This is like banning cherries because the pits contain (by nature) a trace amount of cyanide.

    But look on the bright side. When the whole rotten system collapses, minimum wage and all, lots of us will know more than the giv'ment screws who call themselves "physicians" now. Might make things turn out for the best, we'll see.