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