Saturday, January 11, 2014

Pretending to Measure the Immeasurable in order to keep the Unseen from being Seen

There is a big push going on by Big Labor and advocates for the "Working Poor" (sic) to raise the U.S. Minimum Wage to $15.00 per hour.  I think they are aiming that high in order to make President Obama's target of $10.00 per hour appear to be more reasonable in comparison.  Proponents for this increase are trotting out the tired, old tearjerkers - "No one can support a family on slave wages!" - once again and, if anything else but ignorant, they are at least consistent.

Some of them have dug up a new weapon to use against fiscal-conservatives, free-marketeers, and libertarians like myself, to refute the logical economic argument that artificially increasing the cost of labor will result in less labor being purchased or employed.  They like to refer to studies completed and compiled by the Economics Department at the University of Chicago that supposedly show that there has rarely been an increase in unemployment after a new increase has been made to the country's minimum wage.

I've covered before how price floors cause surpluses in the product whose price is being supported (a surplus in labor is measured as involuntary unemployment) and such floors for labor usually harm most those that advocates for such floors purport to be helping.  Now dismissing the possibility, if not the high probability, that the government statistics used in these reviews and surveys are heavily manipulated for political reasons (No, no, say it isn't so!) let us shine a little light on that which, as Frederic Bastiat referred to it, is Unseen that they are trying to hide with that which they think is Seen.

First off, there is usually a large amount of lead time from the point that the government decrees that there will be a raise in the minimum wage and when it actually goes into effect.  During this time period is when businesses begin to trim the fat by firings, lay-offs, and natural attrition.  If measured properly as the employment participation rate (how many working-age Americans are actually working) this will show an increase in unemployment.  Government figures might actually show this, but the figure will stabilize long before the actual increase kicks in.

Let's say the government has measured the unemployment rate at 7% when the new law is passed.  As the date approaches, the unemployment rate climbs to 10% and stays there for a few months.  Then the new rate goes into effect and the next month unemployment is announced to have gone down to 9.8%.  The proponents of the increase will shout from the rooftops that this is proof of their position that the minimum wage does not cause higher unemployment though they are only measuring the amount of the unemployed that are seeking new employment after the new rate goes into effect and not those lost their employment beforehand.

Secondly, though those who are currently employed might keep their jobs, mostly because the majority of them are already working for a wage above the minimum, there are those who are coming up after them that will not be hired because of the prohibitive costs of purchasing labor.  As the economic law of supply and demand shows, if one artificially raises the cost of something, there will be less demand for that commodity.  Though someone is not necessarily "disemployed" (fired, laid off, or mandatory retirement) because of the wage increase, there will be someone who is not hired because of it and, though a logical certainty, that situation cannot be measured in any way because it is a non-event.  Though non-events, by definition, cannot be measured, able-bodied persons of an employable age that are not members of the country's work force can be measured in the employment participation rate and those figures are at their lowest point in thirty five years.

And there are plenty of studies that refute the findings of the Chicago studies, so it appears the myth that needs busting is the one that the proponents of a higher minimum wage are pushing.  Interesting that these folks who claim to be wanting to help the little people never call for an equal increase, by percentage, for those poor folks on fixed incomes coming from government "entitlements" or retirement contracts.  Imagine an increase between 38% ($10.00 minimum wage) to 107% ($15.00 minimum wage) for Social Security recipients, government retirees, and disabled veterans.  Even they must realize that if the government must pay more, then it must steal more first and nobody wants that, or so we like to think.

One of the newest tactics I've seen these people employ (all puns intentional) when asked that old stand-by, fiscal-conservative counter-position question - "Why not raise the minimum wage to $20.00, or even $50.00, or $100?" - they respond by ridiculing the questioning party and refer to the question itself as absurd.  Just to make sure we're all on the same page, the answer as to why they don't create that much of a jump in the minimum wage is that the damage to the economy, like tiny cracks in a window that can only be seen when the light hits them just right, must be kept to a minimum so people aren't able to notice what carnage is being wreaked upon the labor force to wreck the economy.  If the minimum wage was raised to these supposedly "absurd" levels, then the damage would be so great that even a blind man could hear the destruction as the window and its frame are torn from the wall in which they were set...


  1. Thanks OGG. Grandson of yours is getting big!

    1. If you are referring to the boy in the photographs, that is my youngest son for whom I write this blog in order that one day when he and his age-based peers are old enough to understand, they can read here what went wrong...

  2. From Robert (qslv)

    These jobs were never meant to finance a family, or even rent and food for a single person. Minimum wage jobs introduce youngsters into the labor force while still in school and / or living with parents. My first job on the books was for the A+P down the street. I was 16 and spent a few hours after school and on weekends cleaning the bathrooms, hunting rats in the cellar, packing shelves and shucking the brown ends off the lettuce and celery in the back by the dumpster. I learned that money must be earned and was shocked when I saw the taxes taken out of my tiny paycheck. Welcome to the real world! LOL. These jobs are a right of passage every young person needs to experiencee, Not a way to finance a family or set up an independent household.