Posted by
JDComments on Friday, December 22, 2006 7:19:17 PM
The United States' economy is a miracle, a wealth producing machine the likes of which has never been seen before, a product of our embrace of capitalism and free markets. Therefore, whenever I see politicians attempting to make "better" something about it , I cringe. Raising the minimum wage is right up there on the top of my list as an insidious form of wealth redistribution which can only do harm.
First, let me say that my embrace of the free market is predicated not on some mystical faith that Adam Smith knew what he was talking about, which he obviously did, but on information theory. Before your eyes glaze over, let me explain this simply as recognizing the economy as a vast, complex computer which is constantly getting input from buyers and producing output from sellers. As an integrated whole this is almost an unfathomable system, but on an individual basis, that is broken down to its constituent parts, it is manageable and understandable.
This is what the market does: it devolves decisions down to the most efficient level, which is the individual businesses. It is parallel processing using a multitude of microprocessors instead of a main CPU , the government, which is not up to the task. It is the collective intelligence of the components of the economic units, the businesses and the buyers, as opposed to the top down fiat issuing of a small group of experts who are anything but.
To tinker with this system is almost always foolish. To do so regarding the minimum wage is especially so for a number of reasons.
As Ivan Osorio writes in an article in the American Spectator which criticizes Bush for endorsing it, the minimum wage increase will price many of those with little or no skills out of the market and thus eliminate their chance of acquiring on the job skills which will help them to do better.
As an employer myself, I will tell you that the price rise will also ripple upwards, because an office clerk who now makes $7.50 /hr will not be willing to work for what is essentially the new minimum wage. Thus the entire lower end pricing structure will be shifted up and payrolls will increase much more than is expected [or perhaps the proponents do expect it but are smart enough not to mention it.].
The last thing that will happen is that businesses will raise their prices, and the famous push-pull of salary increases and price inflation will occur, and of course the consumer will suffer. I guarantee Big Macs go up in price anywhere this minimum wage increase affects salaries.
Lastly, if someone wants to work for $5.15/hr they should be allowed to, and if they don't they shouldn't. This is what makes capitalism function, the market determination of prices and wages,and any effort to tinker with it invariably incurs the law of unintended, and bad consequences.
Raising the minimum wage is just another stealth socialistic step for the Liberals, and having Bush endorse it is very disappointing. Our economy is the envy of the world for a reason. Making it more like the ossified economies of Europe doesn't just make no sense, it is criminal, like me doing a tune up on a Ferrari. Believe me, that car would never be the same again.