Minimum Wage Raise Gives Republicans Chance To Turn The Tables

"We want economic fairness, we want economic justice, & we want it now. - New York Governor Andrew Cuomo (joined by Hillary Clinton) upon signing a law that will raise the minimum wage in NYC & its suburbs to $15/hr by 2021 & eventually set a statewide $15/hr wage floor (indexed for inflation & wage growth) for other parts of the state as well.  Current minimum wage in NY is $9/hr.

 

"Economically, minimum wages may not make sense.  But morally & socially & politically they make every sense, because it binds the community together & makes sure that parents can take care of their kids in a much more satisfactory way." - California Governor Jerry Brown upon signing a law that will raise the minimum wage in California to $15/hr by 2022 with indexation for inflation thereafter.  Current minimum wage in California is $10/hr.  See graphic below.

 

  click on graphic to enlarge

 

Neither Bernie, Hillary, or any other proponent of raising the federal minimum wage to $15/hr mentions that such a raise is pre-tax.  Taxes – federal, state, & payroll, plus lost or reduced government benefits all lower the $15/hr gross figure received by affected workers. 

 

For instance, Henry Schmid, writing in the WSJ - points out that a family of four with both spouses working @ the minimum wage in California (going from $10/hr to $15/hr) would see over one third of the wage increase going to government either as increased taxes or reduced benefits.  Mr. Schmid calculates that the couple's annual federal income tax will increase from $4,106 to $7,219, their annual Social Security payroll tax will increase from $2,579 to $3,869, their current $596 Earned Income Tax Credit will be eliminated, California state income taxes will increase from zero to $379/yr, & the annual $2,400 food-stamp credit will be lost.  These figures do not include the Medicare tax increase of $302/yr paid by the couple or the $1,591/yr paid by the employer as the employer's half of the Social Security & Medicare taxes on the wage increase – thereby making it even harder to believe the couple would retain employment with this added financial burden on the employer.  Add in the loss of other income-dependent welfare programs & added costs due to inflation resulting from the $5/hr wage increase means the $15/hr minimum wage rate is more accurately expressed as the gross hourly wage rate that needs to be corrected for inflation each month of the year.  Hardly the way Bernie or Hillary expresses it.

 

But the rise of the minimum wage from $10/hr to $15/hr is not done in a vacuum.  Every employee currently making more than $10/hr will demand raises so that the relative pay positions throughout all pay grades are maintained – this is just common sense & human nature.  As such, the cost of all goods & services will increase as a result of the minimum wage mandate unless there is a corresponding increase in productivity.  Since the subject minimum wage increase is the result of

an unreasoned, unsupported, groundless, & arbitrary order of

government rather than any real increase in economic productivity everyone will be in the same economic position when all the dust settles – except for the people whose jobs are eliminated along the way because of this higher priced economy – i.e., no one who is not worth $15/hr to an employer will be employed @ all.  This large an increase in wages will also make it that much harder for America to compete in the global economy.

 

In summary, the government mandated minimum wage is the bottom rung of the pay scale that everyone's compensation is based on – move the minimum wage up 50% & you move the entire pay scale with it.  Since the increase is based on government fiat & not value increasing economic principles such as productivity increases you also obtain the resulting inflation that keeps everyone pretty much where they started regarding purchasing power.

 

Union labor contracts peg their baseline wages to the federal minimum wage so that any increase in the federal minimum wage results in union wages rising also.  In addition companies with union & non-union sectors also increase the wages of their non-union portion when union wages go up.  All of this adds to a rising inflation pressure.

 

"We cannot distribute more wealth than is created.  We cannot in the long run pay labor as a whole more than it produces . . . The more the individual worker produces, the more he increases the wealth of the whole community.  The more he produces, the more his services are worth to consumers, & hence to employers.  And the more he is worth to employers, the more he will be paid.  Real wages come out of production, not out of government decrees . . . wages are basically determined by labor productivity."  Henry Hazlitt – Economics In One Lesson – pages 139 & 140

 

The last post pointed out that "a

ll of the presidential candidates in the two main political parties have tax plans in one form or another but none have detailed spending plans that will make a difference in reducing taxes & the national debt."  It is the non-existent spending reduction plans of our Republican presidential candidates that is uninspiring. 

 

In this same light the Republican presidential candidates only go so far in promoting their vision of "jobs, jobs, jobs."  They talk about undefined economic growth & a promise of possible rising wages.  Again uninspiring.

 

A successful candidate will use the minimum wage issue to explain to the uninformed & those who have forgotten exactly what a job is under a free enterprise system – namely,

an opportunity by an employee to create more present or future value for an employer than it costs to maintain the worker in the job.  If the employee's value drops below the cost of maintaining the employee the job disappears & that of course includes minimum wage jobs.  This understanding reestablishes the beneficial partnership of employers & workers in that both are trying to create value for each other which in turn means value for their customers.  This is the basis of economic growth – a win, win, win situation.

 

This message has to become second nature to the point that every time we hear the term "creating jobs" we understand that only entrepreneurs create value producing jobs & that no entrepreneur has ever had the objective of "creating jobs" – his only motive in starting or running a business is to make a profit.  In fact entrepreneurs not only do not want to create jobs they constantly seek to eliminate them.  If any jobs are created in the process there is no way to avoid it.  This is the mindset needed to restore prosperity to the American people.  No other stimulus is necessary.  Thanks to Bill Burbage for making this clear.

 

Of course this reverses the brainwashing of the last eight years - none of BO's, Hillary's, or Bernie's policies create one job that results in wealth creation - how do you create sustainable wealth-producing jobs by taxing income?  How do small businesses expand when you increase taxes?  What economic freedom principles are enhanced when you raise taxes?  Answers – you don't, they don't, & none.

 

The Democrat pleas to make the federal minimum wage a living wage is a false hope for many people who will lose their jobs in the process meaning that the real minimum wage for them is zero.

 

Does the American worker only aspire to do government mandated minimum wage menial jobs?  If so we should realize we have given up our place in the world already.  All that is left is for us to watch the deterioration set in as the global economy swallows us up.

 

Republicans have the chance in this presidential election year to go back to basics & campaign like they really believe it – that the general Welfare of the United States is best served by people – men & women, homosexual & straight, Hispanic, Black, & Asian, – working in the cooperation that is the free market capitalistic system – this is the inclusive message that Republicans never clearly deliver.  America's brightest future will be realized when all of the really unclever gamesmanships that BO, Hillary, & Bernie play are not just put aside but are unmasked as the domestic enemy of America that has infected our country with the clear intent of ruining everyone's chance @ the American dream – like pretending that a raise in the federal minimum wage is the answer to a better life for everyone.  Republicans have to show government dependent Democrats – "Romney's 47%" of the people who are dependent on government, believe they are victims entitled to government handouts, & pay no income tax - that they are not getting anywhere.  Republicans have to positively reach these people to improve their lives with free market policies they undertake.

 

To have any chance to return to the excellence of the prosperity of our founding we have to throw off the collectivist veil – in this case raises in the federal minimum wage - that has been put upon us & once again "secure the Blessings of Liberty to ourselves & our posterity" that allow us to cherish individual rights that are the bedrock of America as defined in our Constitution.

 

Reference post:  An Analysis - Raising The Federal Minimum Wage