Ron Paul's OpEd: Government Policies Hurt Low-Wage Workers
Ron Paul's article is from here. Ron Paul's words are in italic followed by my explanations;
Fast-food workers across the county have recently held a number of high profile protests to agitate for higher wages. These protests have been accompanied by efforts to increase the wages mandated by state and local minimum wage laws, as well as a renewed push in some states and localities to pass “living wage” laws. President Obama has proposed raising the federal minimum wage to ten dollars an hour.
I disagree with President Obama here as I think the wages should be tied to inflation. So if the wage was $1 per hour in 1913 before the Federal Reserve starting it's inflationary policies then the wages should be at $23.70. I've heard of economists say the $21 would be a better wage & if the math adds up then I'm fine with that number.
Fast-food workers across the county have recently held a number of high profile protests to agitate for higher wages. These protests have been accompanied by efforts to increase the wages mandated by state and local minimum wage laws, as well as a renewed push in some states and localities to pass “living wage” laws. President Obama has proposed raising the federal minimum wage to ten dollars an hour.
I disagree with President Obama here as I think the wages should be tied to inflation. So if the wage was $1 per hour in 1913 before the Federal Reserve starting it's inflationary policies then the wages should be at $23.70. I've heard of economists say the $21 would be a better wage & if the math adds up then I'm fine with that number.
Raising minimum wages by government decree appeals to those who do not understand economics.
This starts out as an insult which is something I understand given many Government policies however, being a gynecologist and reading a few economics theories doesn't make one an expert in economics or even an adept at econ 101. One of my majors in college was in economics and I studied it for 4 years before that so I have far more experience with economics. Lets see if i can find any flaw in Ron Paul's logic here.
This appeal is especially strong during times of stagnant wages and increased economic inequality.
Wages are always "sticky" as business has no incentive to increase them (their primary purpose is to maximize shareholder revenue not care for workers) and with inflationary policies and non-rising wages the income inequality just continues to increase.
But raising the minimum wage actually harms those at the bottom of the income ladder.
Here is where Ron Paul goes from basic economics to basic nonsense. Why? Because economics is an experimental science. That means that if you have an economics theory you THEN have to test out the theory in the real world or look for parallels by which you can get some empirical data.
Basic economic theory teaches that when the price of a good increases, demand for that good decreases.
Correct. Using a simple model elastic demand and elastic supply (& only under these conditions) what Ron Paul said is true. If the demand is inelastic, i.e. if like with cigarettes an increase in price does NOT decrease demand by a large amount you are dealing with a situation that has a somewhat inelastic demand and this particular model used would no longer apply. Not something a non-economist understands very well, apparently.
Raising the minimum wage increases the price of labor, thus decreasing the demand for labor.
If Ron Paul is right that the one type of model that he knows about demand and supply applies to all things then this would be true. But as I'm about to show this doesn't apply here in any sense.
So an increased minimum wage will lead to hiring freezes and layoffs.
Once again, only if the assumptions Ron Paul has made are correct, something for which we have no proof. In fact we have proof of the opposite as before the 2008 economic collapse minimum wage had been increased a number of times and unemployment was at a stable 5% (all economists know that full employment is unrealistic especially when you take into account people between jobs and seasonal work).
Unskilled and inexperienced workers are the ones most often deprived of employment opportunities by increases in the minimum wage.
It's actually the opposite. Unskilled and inexperienced workers gain the most by a minimum wage increase as it increase the value of the dollar comparable to inflation making their income higher than it would be than if we just allowed it to depreciate forever. Such things like food and rent become more affordable and they can still go out to the movies once in a while and live like free Americans and not indentured slaves.
Minimum wage laws are not the only example of government policies that hurt those at the bottom of the income scale. Many regulations that are promoted as necessary to “rein in” large corporations actually hurt small businesses.
I don't understand where Ron Paul is going. Right now we have a model of corporate welfare which is not designed to reign in large corporations but is designed to make it more difficult for competition.
Because these small businesses operate on a much narrower profit margin, they cannot as easily absorb the costs of complying with the regulations as large corporations.
Large corporations have less regulations, and as we have seen in Louisiana and many other places, can easily buy votes to get thier way. Something a small business can't do. Sounds like he might be listening to the forked tongue of a Fox Business charlatan.
These regulations can also inhibit lower income individuals from starting their own businesses. Thus, government regulations can reduce the demand for wage-labor, while increasing the supply of labor, which further reduces wages.
Yes, Government regulations CAN reduce the demand for labor, such as with the NAFTA bill which makes the job situation bad for all citizens in just about every field except fast food and healthcare as people are now competing with sweat shops and other forms of indentured servitude for their jobs which is of course, immoral.
Perhaps the most significant harm to low-wage earners is caused by the inflationist polices of the Federal Reserve. Since its creation one hundred years ago this month, the Federal Reserve’s policies have caused the dollar to lose over 95 percent of its purchasing power—that’s right, today you need $23.70 to buy what one dollar bought in 1913! Who do you think suffers the most from this loss of purchasing power—Warren Buffet or his secretary?
Answer: Warren Buffet secretary suffers most with this policy that's why wages should be tied to inflation so the amount received is always the same as well as cutting out the lower tax rats for rich people and no tax rate for capital gains (i.e. no taxes on using money to make money!).
What Ron Paul unintentionally did here is prove that we have a century of inflation behind us so a $1 of wage in 1913 would have to be $23.70 for it to be the same as it was in 1913. So by supporting no minimum wage Ron Paul is saying we have to return to the money value of 1913 and that's the only alternative. Increasing wages to make the situation fair by taking into account inflation is not acceptable. What sort of logic is that?
It is not just that higher incomes can afford the higher prices caused by Federal Reserve. The system is set up in a way that disadvantages those at the bottom of the income scale.
True. Not having a minimum wage tied to inflation means that has the value of money diminishes only the poor and middle class suffer because either wages are not increasing while large corporations do better and better...
When the Federal Reserve creates money, those well-connected with the political and financial elites receive the newly-created money first, before general price increases have spread through the economy. And most fast-food employees do not number among the well-connected.
Not only are fast food people not well connected they don't even get support from a Constitutionalist who claims to want equal rights for all people. If corporations are people then regular people should have the same rights as corporations.
It is not a coincidence that economic inequality has increased in recent years, as the Federal Reserve has engaged in unprecedented money creation and bailouts of big banks and Wall Street financial firms. As billionaire investor Donald Trump has said, the Federal Reserve’s quantitative easing policies are a great deal for “people like me.” And former Federal Reserve official Andrew Huszar has called QE "the greatest backdoor Wall Street bailout of all time.”
True. The ridiculous things that have happened with Wall Street since 2008 have defied all explanations except that the politicians concerned are bought and are thus intentionally being unfair (corrupt).
Many so-called champions of economic equality and fairness for the working class are preparing to confirm Janet Yellen as next Chairman of the Federal Reserve. Yet Yellen is committed to continuing and even expanding, the upward redistributionist polices of her predecessors. Washington could use more sound economic thinking and less demagoguery.
Ron Paul's expertise is Foreign Policy as it doesn't require complex graphical visualization skills. I don't think he understands the inconsistencies in the economics theories he spouts. I think Fox Business and the other media "business" shows have allot to do with his misunderstanding of how minimum wage is different from corporate welfare. In this circumstance Ron Paul certainly isn't being a champion for the working class no matter how much he would like to think he is.
By increasing unemployment, government policies like minimum wage laws only worsen inequality.
Ok. So Ron Paul is convinced of his theory despite providing no evidence that this is in fact how a policy of a minimum wage increase would work. Now I will provide verifiable evidence that this isn't so and Ron Paul is simply mistaken or confused by the corporate media whose primary purpose, it seems, is to attack everyone except the 1%.
Economists use something called purchasing power parity to estimate what costs in one coutry are compared to another. One particularly useful method is to use Mc Donalds in the many different countries to determine what the standard of living is like in each country. For example if a $ cheeseburger costs Rs. 100 in India then $1 = Rs. 100.
In the same way we can compare wages and standard of living based on measuring employment variables using Mc Donald's data. We already know of Australia's minimum wage of $16 and their economy is still running smoothly... what about another country?...
Those who are genuinely concerned about increasing the well-being of all Americans should support repeal of all laws, regulations, and taxes that inhibit job creation and economic mobility.
To do this we have to determine what actually does inhibit Job Creation. Ron Paul doesn't know and as I've shown above his theories lack that VERY important component in economics called "evidence".
Note: Specific jobs should contain guaranteed hours and whether you work those hours or not you should be paid for those hours (there's almost always enough work to fill up hours).
To do this we have to determine what actually does inhibit Job Creation. Ron Paul doesn't know and as I've shown above his theories lack that VERY important component in economics called "evidence".
Note: Specific jobs should contain guaranteed hours and whether you work those hours or not you should be paid for those hours (there's almost always enough work to fill up hours).
Congress should also end the most regressive of all taxes, the inflation tax, by ending the Federal Reserve.
Congress is busy being the least productive Congress in all of our history. Ron Paul is barking up the wrong tree.
Permission to reprint in whole or in part is gladly granted, provided full credit is given.
Done.
Congress is busy being the least productive Congress in all of our history. Ron Paul is barking up the wrong tree.
Permission to reprint in whole or in part is gladly granted, provided full credit is given.
Done.
NOTES
Some weird arguments against raising the minimum wage...
THE DAILY SHOW: Slumdogs vs. Millionaires - Moral Hazard - The conservative media lauds the end of unemployment insurance fraud, which is totally different from Wall Street fraud. (04:59):
Objections from Fox News range from the silly to the ridiculous;
1. 'Do you think someone out of high school deserves a higher wage' Fox News Anchor - Answer should be: It's irrelevant because inflation makes modern wages obsolete and outdated.
2. 'Why stop an 15$ as hour? Why not raise the wages to a hundred thousand dollars an hour' Fox News Opinion Guest - Answer should be: The wages should be raised according to the depreciation of the value of currency which means minimum wage should be at approx $23.
3. Unconscionable: Despite a reasonable economic solution to the problem of having welfare paying just enough to survive and minimum wage paying just enough to survive (i.e. Solution: Raise the wage to $21-23, so the money multiplier effect can get to work and provide a boost to the economy using it's workers... while providing us with the kinda wages we made in 1913). Fox News anchors only solution seems to be to make the living conditions of US Citizens worse in every way possible!
1. 'Do you think someone out of high school deserves a higher wage' Fox News Anchor - Answer should be: It's irrelevant because inflation makes modern wages obsolete and outdated.
2. 'Why stop an 15$ as hour? Why not raise the wages to a hundred thousand dollars an hour' Fox News Opinion Guest - Answer should be: The wages should be raised according to the depreciation of the value of currency which means minimum wage should be at approx $23.
3. Unconscionable: Despite a reasonable economic solution to the problem of having welfare paying just enough to survive and minimum wage paying just enough to survive (i.e. Solution: Raise the wage to $21-23, so the money multiplier effect can get to work and provide a boost to the economy using it's workers... while providing us with the kinda wages we made in 1913). Fox News anchors only solution seems to be to make the living conditions of US Citizens worse in every way possible!
After bailing out the banks we seem to forgot it was our taxes they were bailed out with...
From The Guardian: When this financial crisis began nearly four years ago the story seemed simple. The banks were broke and they told our leaders that unless the taxpayers bailed them out and took their private debts on to the public account, then the world would end. Our politicians believed them. We took on huge debts and bailed out the banks. Right or wrong, at least the story seemed straightforward: they owed us huge sums of money. Then as the crisis continued, a new group most of us had never heard of appeared – the bond holders. It turned out the banks owed huge sums to the bond holders too, and so did we. The story of who owed whom began to change.
Gradually the story became less about the banks owing us money and more about owing the bond holders.
It seems to me that our governments and their financial advisers from the banks have a double standard when it comes to debt and its repayment; one which greatly benefits the financial world and punishes the taxpayer.
On the one hand, the debts of private banks and those who own that debt, the bond holders, are being protected from any losses by the publicly funded bailouts. Public debt, on the other hand, at the insistence of the same banks and bond holders we have bailed out, is being paid down at breakneck speed, no matter what the cost in unemployment and the destruction of social services.
As it is when central banks pursue a "Quantitative Easing" policy they are using supply side economics i.e. it favors the already rich and is bad for the poor and middle class workers (both salaried and wage earner). Here is a study on that;
From The Guardian: "Real wages and salaries have fallen by £4bn. Profits are up by £11bn. The spoils of the recovery have been shared in the most unequal of ways."
Joshi adds that this also helps to explain why sales of high-end luxury goods have continued to soar, while many consumers have been forced to tighten their belts.
"High-income earners are more exposed to profits as owners of businesses or shareholders. Low-income earners are dependent on wages," he says." - .
Joshi adds that this also helps to explain why sales of high-end luxury goods have continued to soar, while many consumers have been forced to tighten their belts.
"High-income earners are more exposed to profits as owners of businesses or shareholders. Low-income earners are dependent on wages," he says." - .
Such Pro rich & anti wage earner policies have been pursued since Reagan with his "supply side economics" (also known as "voodoo economics") and into the 90's and beyond...
DOCUMENTARY - FRONTLINE The Warning: Long before the meltdown, one woman tried to warn about a threat to the financial system.