2013 June 23 Sunday
Nick Hanauer Proposes $15 Per Hour Minimum Wage
Dylan Matthews of the Washington Post opposes the large minimum wage increase advocated by venture capitalist Nick Hanauer.
But no one’s proposal goes quite as far as that of Nick Hanauer, a venture capitalist worth hundreds of millions of dollars who’s made a name for himself as an extremely wealthy critic of economic inequality. Hanauer proposes raising the minimum wage to $15, a more than doubling of the federal minimum.
Even $15 per hour isn't much. Let us put this in perspective. You might be shocked to learn (courtesy of venture capitalist Peter Schaeffer's calculations) that medical costs in America work out to about $12 per hour across the 245.65 billion hours worked per year in the US economy. Anyone who does not achieve a career average earnings per hour way above $12 isn't even covering the medical costs of their life. This is, btw, a reason to keep out low earning immigrants. They can't pay the costs of their medical care, let alone the education of their children, their use of roads and highways, policing, fire departments, and assorted other government services. America is not a low cost society. Nor is it a society where the mentally less able have a future in the work force. The era of the zero marginal productivity worker has already arrived (and I keep trying to get people to look at this link).
Dylan Matthews, being a liberal writer for the liberal house newspaper of the US government, instead wants to subsidize parasitism thru the tax system. You work hard and others live off your labor. EITC is Earned Income Tax Credit. EITC recipients do not earn. They just get a tax credit. This is a major source of welfare payments in America.
If he wants to help poor workers and not subsidize corporations, then he should advocate expanding the EITC and funding it with a new tax on corporations.
Dylan Matthews points out that EITC helps single moms, as if that is an advantage. What about the long run? Right now anything you subsidize you get more of.
A high minimum wage offers a few advantages:
- Few low skilled people will enter the country because the demand for their labor will collapse.
- Businesses will be incentivized to automate tasks that suddenly become much more expensive. Productivity will rise.
- The focus on education will shift toward training for skills that enable someone to get work for at least $15 per hour.
- Those making less than $15 per hour who keep their jobs will pay more in taxes and will qualify for fewer government hand-outs.
My guess: in the long run the net taxpayers of America (those who pay more than they get back) will be better off with a $15 per hour minimum wage.
By Randall Parker at 2013 June 23 09:48 AM
"Few low skilled people will enter the country because the demand for their labor will collapse."
Wishful thinking. Employers will just pay them off the books. This is already the way it works here in Farmland in the Upper Midwest. This time of year, I see crews of Hispanic laborers out in the fields all the time. Legal? Illegal? Minimum wage? Or less? Nobody ever checks. The farmers around here (who mostly vote Republican) like it that way.
"Businesses will be incentivized to automate tasks that suddenly become much more expensive. Productivity will rise."
True. But unemployment will rise also, as will welfare, food supplement usage, subsidized housing and all the other nanny-state goodies. Most of the workers making much less than $15 will lose their jobs and never find another, unless they work off the books. The permanent underclass will swell.
"The focus on education will shift toward training for skills that enable someone to get work for at least $15 per hour."
Pretty much true. But what if you're too dumb to acquire the skills for a job that pays $15 per hour?
"Those making less than $15 per hour who keep their jobs will pay more in taxes and will qualify for fewer government hand-outs."
By definition, nobody will make less than $15 per hour if that is the new minimum wage, unless they work off the books, in which case they will pay no tax at all. Single people with no children working full-time and making $15 per hour pay around $3300 in US income tax, hardly a windfall for the Treasury. Individuals who become unemployed or who work off the books (and who therefore don't report any income) because their contributions are not worth $15 per hour receive lots of government benefits.
I agree that Dylan Matthews is an idiot. The EITC is a form of welfare, heavily skewed to favor those with children (up to three). A lot of these are single mothers, with all the social and economic dysfunction that that brings with it. And the US already has one of the highest corporate tax rates in the world (35%). Remember the recent kerfuffle about Apple not paying any US taxes? The high corporate tax rate incentivizes companies with a large international presence to move revenue (and jobs) offshore to friendlier locales, such as Ireland or Bermuda. But we were treated to the wonderful spectacle of Senator Carl Levin (fortunately retiring next year) demogogging the issue by grandstanding against Apple for legally minimizing its taxes by following the laws that Levin and his fellow congress-critters wrote.
Obviously I think the minimum wage is a bad idea. If there is an "ideal" minimum wage, what is it, and why? And if a small increase is good, why isn't a larger increase better? Do we really have confidence in our corrupt, morally bankrupt politicians to determine a minimum wage? Or will they just use the issue to buy votes, as they do with everything else?
Between 1938 and 1974 Canada had a State Bank. They issued money directly into the economy in the form of public works. Waterways were built, the national railroad, infrastructure, etc. So, this is a form of direct investment that left behind productive public commons. In 1974, the IMF and other international bankers put the experiment to a halt, mostly by bribing government. The four modes of production are: Labor, Capital, Land, and Public Commons.
This was money spent into the economy, so it could jump from pocket to pocket, mediating transaction to transaction. It had no compulsion to return to the bankers ledger to pay down debt. Therefore, it was a twofer, it created ongoing wealth, and it allowed transactions to be mediated debt free (read inexpensively). In other words, the lack of debt overhead costs of the money supply created efficiencies such that both medical care and college was free. Yes, a properly constructed economy with the right kind of money can easily afford free college and free medical care. The main secret of China is their four state banks, which use credit to lure industry, and then forgive the loans. In effect, a State Bank can use this forgiving debt scheme to keep bank money debts at a small fraction of the money supply.
The Canadian state bank also oversaw and used strong arm tactics to keep private banks from issuing too much bank money. Bank money (also called credit money) comes into existence when you take out a loan. Today, 97% of the money supply is created as credit, and only 3% as money (in the form of coins and some bills). Bank Money must return to the bankers double entry ledger. It is a positive number that cancels out a liability. A positive number cancels out a negative number, hence the former bank money disappears from existence. The debt overhead on this form of disappearing credit is estimated at 40% by Margrit Kennedy. In that 40% cost to Labor, is a shift away of labor energy toward those who own or can create money. Bank Money comes into existence at the moment of hypothecation (the loan creation) and disappears when it returns to the ledger. No extra money is created by this scheme to pay for the usury.
In our current money scheme, usury is paid during depressions, when the former bank money is released from its obligation to return to the ledger. Legal bankruptcy allows the fomer hypothecated asset (house usually) to be grabbed while the former credit money then is released to remain in the supply. Also, when government deficit spends, this form of money does not have to be paid off, as the debt is rolled over year after year. The FED rebates 95% of its profits to the treasury, allowing the roll over private debt money scheme to perpetuate itself. Look up Wright Patterson for some history on when he forced the fed to rebate.
Usury flows vector into the private banks, where they are captured and become stagnant capital. The form of capital waits and seeks out investment. This is why our credit money supply velocity cycles only about 10 times per year, instead of 100's of times per year as it would in a healthy economy. It is held and then awaits for labor to give up its goods and services for cheap. It is important to keep the sheeple confused and thinking that money must be scarce. That way, their output can be taken by legal theft.
Interestingly, since 1906 or so, Western Private Banks have conjoined with government and legislated that their bank money also be good for paying taxes. But, the reverse is also true. Money spent directly into the economy can also vector into the private banker's ledger and buy down debt. In other words, in our current balance sheet recession, where most people are carrying overhead in the form of private bank debts, they need money in the supply. Money has no force vectors on it, like banker debt money does. Bank money has leverage ratios and usury, and requires the money supply to grow exponentially in accordance with usury, i.e. rolling over debt in compound interest cycles.
There is plenty of work to do, and the $15 dollar an hour minimum wage is a distraction from the real problem. When a money supply becomes efficient, (the 40% losses to overhead), then labor can work at very low wages and still make a living. The elephant in the room is our money system.
Ask yourself, how it is we just put the industrial revolution into hyperdrive, producing more goods and services than ever...yet we are getting poorer? The advent of computers and high speed telecommunications has made industry more efficient, but that has efficiency has been capitalized and captured in the form of debt flows. We have to ask about minimum wage, yet there is an infinite amount of work that can be done?