Sunday, November 30, 2008

Wages of Power

Not only does the minimum wage not help whom it is intended to help, it actually hurts their prospects at finding a job. It also hurts those that have already found success beyond government mandated minimums. Lets look at the ‘evil’ corporation for example. If a chain of burger joints, (one that has been deemed evil let's say) is so evil and profiteering that they are only focused on their profit margin, wouldn’t it stand to reason that they would charge as much as possible for their burgers? You know, really stick it to everyone, just get every penny they could? Maybe $20, or $30 dollar burgers?

By the standard of the pro-government, pro-union, pro-minimum wage folks, that should be exactly what they are doing. But they can’t, there is this little thing called competition.

As of yet, the government does not run all business. They are using the current economic downturn to try and accomplish as much of that as possible, but at this point, there is still competition… therefore, even the ‘evilest’ of burger joints can only garner a certain price point for their burger, because if they could charge more, by the very nature of their evilness, they would.

Now, let's force them to pay their employees more, with either a government mandated minimum wage, or through a government protected union sponsored contract “negotiation." With these false price pressures, in the face of a now globally competitive market, any company, from a burger joint to a car manufacturer will have only three choices: raise the price of burgers, find technology to replace the now overpriced worker (if the union will let them), or close up shop and send everyone home. No one in their right mind would operate for any foreseeable period at a loss (proving again that government is not in its right mind).

So with the newly instituted wage increase, either the price of Things, everything, not just burgers, remember it is a mandatory minimum, goes up to cover the difference and keep everyone working, but now with less purchasing power because even though they make more, everything costs more, or, the company seeks out and implements some new technology that can do the job cheaper and people get laid off, or the company goes out of business and everyone gets laid off.

How will that help anyone raise their standard of living?

The only possible good answer is that once replaced by technology, the workers can now advance into a more lucrative and rewarding career, perhaps working for the new company that displaced their old job, but that is only likely for those earning the minimum wage that should have been: students and immigrants. These groups arrive, begin to work, and grow into greater things. Someone who has never amounted to more than minimum wage, even as those around them have moved on, or someone who has no desire to do anything more than the union wage contract said they had to do, if they are not willing to step up into job training or re-education, they will not be benefited by this technology displacement, they will simply go on the dole.

This is the best outcome possible from falsely standardized wages.

The most likely outcome is a short honeymoon for the politician that promised the new wage pressure, and then more inflation for everyone else, everywhere. And no new buying power for anyone the new wage was meant to help.