Saturday, May 23, 2015

The Case For A $100 Minimum Wage, Right Here, Right Now In The City of Angels

The City Council of Los Angeles, in a stirring show of solidarity for their comrades in the City of Seattle, voted yesterday to set a city-wide minimum wage of $15 by 2020.  The figure of $15 was chosen for enhanced effect of the aforesaid show, and the year 2020 was the perfect choice for a number of reasons: 5-year plan, 20/20 vision, and perhaps for one of the numerological meanings identified with the number "20."   "To seize and hold," perhaps?  Loud cheers, the tolling of bells, and cries of purest joy were heard throughout the City of Angels, at least within the sound-proof interiors of the luxury cars listening to public radio while driving between Santa Monica and Beverly Hills.  The residents of Fifth and Sixth Streets between S. Los Angeles and S. San Pedro prepared for longer lines and more competition for sidewalk space.   What justice!  What sagacity!  Soon the nation will follow!

At this point, the script calls for classical liberals, libertarians, and paleo-conservatives to gasp in horror and complain "Not again!  Raising the minimum wage just cuts down viable businesses and jobs, and opportunities for low-skilled workers!"  To which the retort of the central-planning comrades is "Not so, you heartless tax-subsidized crony-capitalists!  Studies show that the minimum wage has no discernible effect on employment!"  As a libertarian with leftist leanings, I say: throw away that script.  No mas!  It has not been working very well since at least about 1940. 

After all, the progressives DO have a point about tax subsidies for crony capitalists.  A close working relationship between big business and big government has been the rule since the Great Depression.  Who would work for less than it costs to live in Los Angeles, were it not for the enormous subsidies given to the working poor in the form of SNAP, health insurance subsidies, earned-income credits, Section 8 housing subsidies, and such like?  Who would take a demeaning, subsistence-level job at a corporate fast-food chain or big-box retailer, if the alternatives were not pretty much limited to a risking an even more dehumanizing stay in a heavily tax-subsidized prison by engaging in some sort of illegal trade, going deeply into debt to finance an education that is grossly overvalued because of government subsidies, living on the street at the mercy of strangers, or if you're lucky, staying in your mother's basement?  And who profits from these subsidies, if not the profit-driven crony capitalists and exploiters of the poor, large and small?  It's high time to throw in the towel, and admit that there's no saving the centrally-planned economy by holding down the minimum wage.  Advocating for a stagnant minimum wage just makes one seem mean, to the multitudes who do not understand the One Lesson of economics.

There is a better way.  Instead of playing the dependable foil for progressives wishing to seem compassionate, it high time we make THEM oppose higher wages for the lowest-paid workers.  Or at least, to call their bluff.  If raising the minimum wage to $15 is a good idea, why stop there?  How about an even rounder number, like $100 per hour, equivalent to about $200,000 per year?  Make the central planners defend a poverty-level minimum wage of $30,000 per year.  We should be arguing for $200,000 as the new minimum, which will still barely qualify for a condominium loan in these parts, depending on the level of one's student loans.  If the minimum wage has no effect on employment as the central planners' own studies show, then it should be set at a rate that guarantees at least a middle-class existence.  I'm not just joking around.

Despite appearances, $15 is not really very generous, and will more or less only maintain the status quo.  Per the poster above, the Federal minimum wage was $1.45 in 1970.  That might not seem like much, but according to the Bureau of Labor Statistics, $1.45 had the same purchasing power as $8.84 does in 2015.  By the same token, if inflation continues at the same rate for the next five years,  $15 in 2020 will have the same purchasing power as $13.82 does today.  So we are really talking about raising the minimum wage by just about five bucks, in real terms -- only $0.82 in 1970 dollars.  This might be too much for Topeka, but in Los Angeles, the illegal day laborers hanging out in parking lots of hardware stores are already demanding $10 cash, tax free, per hour - plus lunch and transportation to and from the job site.  Figuring a combined corporate tax rate of about 44%, the tax benefits of of the additional expense deduction make up for extra cost.  Or something.  The point is, $13.82 pre-tax is actually less than $10 cash after tax, once the 44% tax rate is considered.  So the central planners want to limit minimum wages to that of a illegal day laborer! Outrageous and just plain mean!

We should stand for the little guy, and demand at least a $100 minimum wage, NOW!  Think of the benefits: everything that is not worth at least $100 an hour will either disappear from the local economy, will be available only on the free (so-called "black") market, or from a self-employed owner-operator or general partnership.  Only the highest-value service jobs will remain, and everything else will have to be supplied by owner-operators with no employees.  Demeaning, low wage jobs will disappear entirely.  Employers will have to offer decently-paid jobs, or none at all.  Thus, a huge sector of the economy will have to be deserted by crony capitalists with their tax-subsidized ways, and left for the free market to handle without creating low-value jobs.  Every thing at the low end will have to be provided by independent contractors, free agents, or general partnerships without any low-value employees.

That would be epic.  Disruptive and painful at first, to be sure, as all epic things are.  The future would look more like Uber, and less like the taxi companies.  More like the street vendor or Eastern bazaar, and less like the big-box stores.  Only owner-operators or true partnerships would be able to operate in the low-value space.  Every fast-food joint and retail store, every janitorial service, every gardening service, nearly every restaurant would go out of business -- but wait!  Either demand will push the value of undervalued services up, or these services would only be available from owner operators or general partnerships whose income depends solely on profits.  The low-wage boss would disappear.  There would be an explosion of micro-entrepreneurs in the low value space, each keenly aware of the need to turn a profit and minimize taxes.  A substantial fraction of this low-value work would thus find its way to the free market, teaching sound economic principles and the benefits of voluntary exchange as only a community of equal market participants can. 

On top of all that, does anyone whose labor is worth less than $100 per hour really deserve to live in the glorious City of Angels anyway, unless as a pure charity case or entrepreneur?  Are these people really doing anything that more valuable people can't do for themselves, or program a robot to do?  $100 is less than a good BMW mechanic makes already.  Why should people with economic value have to tolerate people who lack the self-motivation to start a business or learn a more valuable skill cluttering up their streets, demanding public services, and emitting all that CO2 that is warming the Earth?  Why should people with valuable skills waste their time supervising people with no skills?  If the job is not worth even $100 an hour, anybody should be able to figure it out on their own, without some boss lording over them. Tongue planted in cheek, here.

Yes, $100 should be the new minimum, if there is to be any minimum.  That's what I say.  If the central planners want to argue for a lower minimum, I'll let them.  But as far as I am concerned, no hourly rate is too high for a crony capitalist to pay.  Free the entrepreneurs!

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Photo Credit: "Minimum Wage, 1967"
by Dr. Monster  
Photo and essay are subject to Creative Commons License

Wednesday, May 13, 2015

Leviathan The Great Caterpillar

The state will wither away from the Earth, or so it has been intuited.  The departure has been predicted for centuries.  Not just by the Marxists and Anarchists.  At least as early as the Jewish prophet Daniel, writing of the fate of empire from the perspective of ancient Babylon.  Recall his dream of the great idol of golden head, silver torso, iron legs, and clay feet, crushed to smithereens by a meteorite.  The beast will be slain.   All the empires of the Earth will fall, whether by natural, supernatural, or human hands, eventually.  That is a mathematical certainly.

Whether humanity will survive the death of the state and empire as a reoccurring phenomenon is an open question.  Some of us choose to believe that it will.  Some of us choose to believe that one day, a more enlightened humanity will lay the idea of state on its deathbed and allow it to slip into an eternal slumber, never to rise again among humans.  What a happy day that will be!

Death as a final destiny is not the only allegory that might be applied to the future of the state.  When a caterpillar undergoes metamorphosis does it die?  In a sense, yes: the caterpillar and all of its behaviors are no more.  The emergent moth is an almost unrecognizably different creature, both in physical form and behavior.  In a sense, no: the identity of the moth as an individual is traceable through its metamorphosis from its prior identity as a caterpillar.  If we hope for a post-apocalyptic society in which humanity will thrive, metamorphosis is a more useful analogy than death.

Some ancient seers foresaw the caterpillar or "worm" Jacob climbing the ladder to heaven, and being reborn as a divinely led body.  Whatever your beliefs regarding prophetic utterances, you can probably recognize that widely held beliefs about the future have real consequences.  We undoubtedly influence our futures by first imagining them.  We can chose to imagine that great worm Leviathan, comprised of all the nation-states, undergoing metamorphosis and emerging transformed and liberated.  We can imagine a new world in which the machinery of war, rule by force, deceitful politics, privilege and taxation are in the distant past, and widely abhorred.  We can imagine that if any such transformation is to occur, it must come from within.  If the transformation is imposed by force or fraud, it has not occurred.  Liberty by imposition is an impossibility.  If believed, it can only be delusion.

If you believe metamorphosis to a stateless society to be possible, whether you ascribe it to a divine plan or to a multitude of complex and coordinated conscious choices by billions of individuals makes no real difference.  One is as miraculous as the other, and both can be simultaneously true.  Either way, we as individuals make up the DNA of the Great Worm.  We as individuals possess the only cellular machinery capable of transforming the Worm into a stateless society that frees all people to thrive in greater harmony and peace.  We all have equally important jobs to do.

All of these imaginings are based in hope, and contradict much of the evidence at hand.  Today, the power of the state seems to be growing ever more pervasive, invasive, and far reaching.  Enumerating all these unfortunate realities is not my present purpose, nor do I mean to count all the counter trends providing a rational basis for hope, however slim. We are free to hope that the state will eventually be reduced to dust, displaced by a more rational and just scheme for organizing society, however long that takes.  We are always free to hope.

What survives the death of the state?  Bare subsistence as hunter-gatherers?  A pre-industrial agrarian society?  An advanced post-industrial society that supports dense and fulfilling urban living, sophisticated division of labor, and technological advancement?  Why only one?  All three of these and more might co-exist in ways both surprising and conventional.  We cannot know what the endpoint will be, nor is it necessary to know it.  We can know only that the future stateless society will lack the characteristics of state, by definition, by whatever name such characteristics are called.

When it is recognized that transformation to stateless society must come from within, the idea of the state as enemy must be discarded.  State is not enemy.  It is precursor.  We would be foolish to wish for its destruction, because its fabric is us.  State would not exist were it not for the fears and lusts of humanity, and cannot be destroyed without the destruction of humanity.   If we are wise, we will wish only for its transformation.

All that may seem like a lot of mumbo-jumbo, but there is a practical point. We who have taken the red pill and absorbed some stark lessons about the nature of power may naturally resent the continuing slumber of our fellows.  There is an impulse to excoriate those who still cling to that great fiction by which (as Bastiat wrote) everybody tries to live at the expense of everybody else.  Excoriation has its place, but has not proven terribly effective in bringing about a new stateless society, or even in restraining the worst excesses of the state.  People cling to the current order, not because of ideology, but out of practical self-interest.  They do not see enough viable alternatives. But where they do see less regulated environments that provide some benefit, they flock to them.

This dynamic runs the world.  There is a voluntary sector, where all production occurs and most innovation emerges.  And there is a compulsory sector, that extracts a substantial portion of the wealth produced by the voluntary sector, and redistributes that wealth to its favored constituents.  The success of the modern state rests on that at which it truly excels: deception and coercion.  It has proven itself able to stealthily extract a tremendous fraction of the total wealth of the voluntary sector, by using tools such as central banking and compulsory fiat money systems, credit expansions, complex taxation systems, and vast regulatory bureaucracies that invade almost every crevice of human activity.  So subtle are the mechanisms of wealth extraction by the state, that most people are unable to comprehend how they have been robbed.  On the contrary, a great many people credit the state with being primarily responsible for their prosperity and security! Somehow, the state has managed to convince most of us that we are its beneficiaries, and therefore it deserves our protection.  The state is not adept at producing goods and services that people will voluntarily buy, but is the master of coercion and deceit.

It follows that mere participation in the voluntary sector will do nothing to transform the leviathan. Silent acquiescence just plays into the current servitude, and emboldens constituents of the state to take a greater share.  Deliberate activism is required.  That activism can take many forms, but in evaluating its likely efficacy, we might ask this question:  Does the activism increase the fraction of real economic and beneficial life activity that takes place voluntarily, and diminish the fraction that passes through the coercive or deceptive mechanisms of state?  More simply, does the activism promote processes for justly meeting human needs that reduces the entanglement of coercive government in meeting those needs?  If so, the activism is transformative, and worth doing.  If not, it is likely not worth doing, and is counterproductive to liberty.  With, and only with, enough transformative activity by we its constituents, Leviathan will certainly be transformed, and the Worm will die.

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Photo Credit: "Metamorphosis: Free as a Butterfly and Ready to Fly"
by chekabuja   
Photo and essay are subject to Creative Commons License