Economic nationalism, the enduring lessons from Econ 101, and an argument against a federally mandated minimum wage
Its destruction is almost invisible, but if you look, you can see its devastating effects in virtually every aspect of your life.
That’s the response of most people with whom I’ve spoken about how destructive is the federally mandated minimum wage. I’ve been opposed to it ever since completion of the Economics 101 courses in my freshman year of college.
It is not because I don’t believe in a living wage for unskilled workers, but because jobs that provide entry into the workforce typically are not intended to be those out of which one makes a career or even a living, no matter how proficient one may be in performing its tasks.
For example, like most of us Baby Boomers and the generation(s) that followed – Gen X, Gen Z – I can’t keep them straight (nor do I desire to, particularly), the very first job held by a friend of mine was at a fast-food restaurant, a local franchise of Carl’s Jr. (mine was washing dishes at a local franchise of a large regional chain of restaurants).
As it turned out, she was able to understand what was being ordered in the drive-through better than anyone else. Yes, she could extract the customer’s order from the sound of that garbled voice in the two-way speaker. A most valuable skill that significantly reduced the number of orders incorrectly prepared – yet not something on which to build a career in the restaurant industry.
It might have been something that led to a career in another field involving linguistics, or something so-related, but not a career working the drive-through at a local burger joint.
Why a mandated minimum wage is destructive
A federally mandated minimum wage is destructive for the following reasons:
1. It establishes an artificial floor, and as a result, indirectly inflates the wages for every other job in the local labour market.1
2. It effectively bars unskilled workers from entering the workforce.2
Regarding reason number one, while this is the case for the state of Texas, it is applicable to every other state in the Union. As the article published by the Texas Public Policy Foundation states:
…the truth is that despite their good intentions the minimum wage is an arbitrary floor for labor services that ultimately harms the people it’s intended to help.
Government-mandated measures to address economic conditions that are unfavourable for any reason result in disaster, every time: Rationing of gasoline during the late 1970s for example; or the wage and price controls implemented by the Nixon administration earlier in the decade. In each instance, people and the economy were significantly worse off after each was implemented and either lifted or phased out as the law of unintended consequences demanded.
Whether the topic is raising the current federally mandated minimum wage, or establishing one where it did not previously exist, the people intended to be helped by such measures are the ones hurt the most. A minimum wage is harmful to those at the lower end of the spectrum because it forces an upward redistribution of income3 – in other words, the only real beneficiaries of a minimum wage are the ones already earning more than whatever that minimum wage may be.
As to reason number two, a minimum wage effectively bars unskilled workers from entering the workforce. To better illustrate this point, let’s examine raising the current minimum wage and its effect on unskilled workers. This article in Forbes puts it better than I ever could:
To understand why minimum wage hurts the most disadvantaged, you must imagine the person who is having trouble getting hired at a job paying $7 per hour or higher. They may not have had a job ever or have had one only in the past year. Their communication skills may not be adequate, or they may not be fluent in the language. They may not have finished basic schooling. They may not have learned to follow instructions, show up on time, or diligently complete tasks they don’t like.
There is more to say on this topic, and we’ll return to it, but first:
What I learned in and retained from Econ 101
I am no economist – I completed the two economics courses required to satisfy the general education requirement for my Bachelor of Science degree. That doesn’t mean that the content of those two courses didn’t resonate with me – it did. What I learned has been highly applicable in every-day life on more occasions than I can count, or even recall. Probably the single most important lesson learned was to distinguish between the quantity of supply and/or demand, and supply and/or demand.
The distinction is that quantity is a point on the curve at any given time, and supply and/or demand is represented by that curve. A change in the quantity is typically due to a change in the price, while a change in the curve (movement of the entire curve on the ‘x’ axis either toward or away from the ‘y’ axis) is due to changes in production, taxes, et al.4
This distinction is crucial when analyzing the labour market, because the labour market is always local. The example used to demonstrate this I read years ago, and it is relevant, still:
In a given community, there are four supermarkets that distinguish themselves from their competitors in any number of ways, but they are supermarkets, nonetheless. The hourly wage for baggers is $5/hr because each employer has learned that it can’t pay more than that and remain profitable for very long, and each one has learned that it can’t pay less than that and retain employees willing to do that job. From the prospective employees perspective (nice alliteration, huh?), he cannot demand more than $5/hr because the supermarket won’t pay it, nor can he accept less than that and pay his bills.
Let’s introduce a fly into the ointment, shall we? What if a new worker will work for less than $5/hr?
One must wonder why. Does this worker have an inequitable advantage over the other workers in the local market? If so, what might it be? Odds are that such a worker is likely in the local market illegally and will accept a lower rate for the benefit of staying in the country, and not being deported.
This is both dangerous and destructive as it disrupts the local market because if more than one of these workers is available, then the employer is going to hire them to lower the labour cost – and if the employer can hire enough of them at that lower rate, that is significant savings, and it is realized in a very short period of time (that drop from $5/hr to $4/hr represents a change in the quantity of supply, in this case labour. Introduce a fifth supermarket into the community, and the entire demand curve has moved).
The result, of course, is that unless those currently working for that $5/hr-wage are willing to accept the lower wage, they will be out of a job, entirely. This illustrates the strongest argument in favour of economic populism: American jobs for Americans, first. My preference is to identify it as economic nationalism, and to do so proudly, the media propaganda apparatus in this nation having been wildly successful in establishing a false equivalency between American nationalism (allegiance to one’s native or adopted country, and pride in the same) and Nazism – never mind that the two are as different as day and night, notwithstanding.
There is another cost to American jobs being lost to illegal aliens from Mexico, or other Central American countries – remittances that literally send US dollars out of the country. For example, in 2021, remittances to Mexico grew 27.1% from 40.6 billion dollars in 2020 to 51.6 billion dollars5 in 2021, marking a historic high.6
That equates to roughly 4% of GDP for the entire Mexican economy, compared to it being the equivalent of .002% of US GDP. On that scale, it hardly seems worth noticing, but that’s how the left minimizes the problem it represents.
HW Bush tried the same trick when it came to unemployment – anonymizing the affected real people – then-Gov. Bill Clinton of Arkansas eviscerated him for it, and rightly so, but consider what is actually happening: $51.6 billion exiting the country – if that doesn’t produce the giant sucking sound H. Ross Perot warned us about (even without that damned NAFTA), I don’t know what will.
What does a little more than fifty-one and one-half billion dollars look like?
Well, here is what one billion dollars looks like – all stacked and shrink-wrapped, on pallets.
Just imagine this fifty-one and one-half times again.
As an aside, HW’s advisors were all Ivy-league big-picture strategists hopelessly out of touch with normal Americans, who spoke of those unemployed as a nameless, faceless mass. As a result, he did the same and for that reason alone, he did not deserve to be re-elected, not to mention his broken promise of no new taxes.
What a sellout.
Thus far, this analysis has largely been focused on unskilled workers, and the jobs that remain unavailable to them because of the federally mandated minimum wage. One might wonder, then: What about those jobs that require marketing or information technology skills; or professional skills like accounting, the law, even medicine; or trade skills like plumbing, carpentry, or welding?
The market for jobs that demand these skills is still largely local, though there is probably an exception to be made when the discussion includes enterprises engaged in interstate or even international commerce – but even then, there is a type of minimum wage law in effect, in the form of laws that dictate equal pay for equal work, designed to eliminate wage disparity due to gender. Hence, there are two minimum wage laws in effect, even if only one is codifed. Disingenuous individuals contend that a gender wage gap still exists, but it is really a gender earnings gap. Women tend to earn less because they take time off to have children and take maternity leave – but I digress.
Returning to reason number one, above, a second effective minimum wage that established a floor for jobs requiring a technical skill set, also establishes a ceiling that in many instances prevents one from moving into that realm from that of the first, but the more harmful result is that ceiling is also a second artificial floor, indirectly inflating the wages for every other job in both the local and national labour market, leading to a forced upward redistribution of income.7
Consider that it has been thus for more than twenty years, at least, perhaps longer. That may be why, in many publicly held corporations, there is such a disparity between the ‘C’ suite and the middle and lower tiers of staff and line functions. From my vantage point, it appears to be Chaos Theory8 applied to labour markets. Granted, the evidence is almost purely anecdotal, but that doesn’t mean it is invalid.
Returning to the discussion earlier in this essay, let’s examine a little more closely how the minimum wage harms the most disadvantaged – specifically, how they may not have ever had a job or have had one only in the past year; their communication skills may not be adequate, or they may not be fluent in the language; they may not have finished basic schooling; they may not have learned to follow instructions, show up on time, or diligently complete tasks they don’t like.9
Now, as I write this, it seems that the case is being made to amend the current law to accommodate two natural, human flaws: laziness; and poor judgement. Each of these, if left unchecked, has devastating consequences both for the individual, and society at large, regardless of the circumstances in which those consequences are made manifest.
Let’s examine laziness. For the purpose of this discussion, let’s set aside the fact that many of the character traits that mitigate giving in to the temptation to be lazy are instilled and reinforced by parents.
In school, students are expected to apply themselves, persevere in schoolwork and homework, learn how to solve problems, and in the process gain a sense of self-worth. For some children, however, their parents frequently allow them to take the easy way out and give up. The consequences for that child when he or she has legal capacity to opt for dropping out of school are sufficiently harsh in and of themselves.
Now, let’s examine poor judgement: opting to drop out of school is among one of the prime examples of exercising poor judgement, at least vis-à-vis being able to land a job that leads to better employment, and enables the individual to make a material contribution to society.
A benefit of completing a high-school education and graduating with a diploma as proof is the promise of being better positioned to enter the workforce full-time, and with relatively greater ease than someone who did not graduate from high school. This may be true, and it may not be – it might seem true because it’s what we heard from our parents, teachers, and guidance counselors all out lives. Perhaps that is a significant part of the rationale behind the imposition of a minimum wage.
In theory, it is a valid hypothesis, except that kids continue to drop out of high school, and in so doing, limiting their immediate and future prospects. One problem with such a view is that it is unnecessarily harsh because that high-school age kid likely can’t comprehend the consequences of that decision, and there is no guarantee that he’ll later qualify for G.E.D. courses. Being able to work for an employer willing to take a chance on such a worker might ensure that he’ll develop the maturity to complete that G.E.D. coursework.
One question that occurs to me is: Why then, is the minimum working age, 16?
Working a job while still in high-school enables one to acquire the basic job skills while not yet a high-school graduate, seemingly having an edge on those who did not hold a job while still attending school. Why would that same job be available to someone who has not yet graduated high school, but not available to someone who has dropped out?
It occurs to me that were we to establish an equitable and even playing field, the minimum working age would be 18. That is an incentive to complete one’s high-school education even if one hates it. Why would one drop out of school if the likelihood is that one cannot get hired (legally)?
A minimum wage that is not the result of what the local labour market may bear is simply an illustration of the law of unintended consequences. Regardless of the good and/or noble intentions behind it, there is more than enough contextual data to demonstrate that it is not only a bad idea, but it results in the exact opposite of what it is intended to do.
I know it will never happen, but abandoning a governmentally mandated minimum wage would do wonders for this nation’s economy, and its ability to withstand the assaults on it by both wings of the UniParty.
So, what is to be done?
This is off of most everyone’s radar. It doesn’t seem to impact our daily lives for the most part and seems to be better suited for classroom discussion – except it isn’t.
When you consider that the forced upward redistribution of inflated income has a downstream inflationary effect on virtually everything that is purchased by you, the consumer, and has ever since it was imposed in 193810 – eighty-five years, now – it becomes very real.
Further, each increase in the minimum wage has a multiplier effect, and the value and quality of the work performed is diminishing at an exponential rate so that soon, we’re subsidizing abysmal performance if we aren’t, already.
Don’t believe me? Next time you visit a Lowe’s, Home Depot, Walmart, or Sam’s Club, pay attention to the typical employee who is wearing a “Fight for $15” button and other assorted flair on his apron. These are the ones who prove to be the most powerful argument against even a single-digit minimum wage, let alone an increase, if, “you get what you pay for” is true, because we’re not even getting that.
Yet, every politician of the Democrat wing of the UniParty cynically champions an increase of more than one-hundred percent as they pander to both the apathetically and willfully uninformed voter.
Here’s the relatively “good” news: A federally mandated minimum wage is going to come to an end, one way or another. Either more and more people become aware of this economic ricin, and a movement to legislatively abolish it reaches critical mass, or the coming world-wide financial collapse puts an end to it. Either way the aftermath is going to be ugly.
Perhaps the only thing to do is continue to mention it whenever a conversation or a discussion lends itself to the topic despite it being likely to remain a largely academic exercise. Maybe by just planting the seed, if enough people begin to really think about it, perhaps it begins to grow as a legitimate issue and others’ awareness of it increases.
The best I can leave you with today is to share that for me, the only real hope I have is that found in my relationship with my Lord. There is peace to be found there, too. There is no faith to be placed in men, governments, politicians, preachers, judges or priests.
Thank you, dear reader, for your indulgence. It’s been a while since I posted – mocking the denizens of Fantasyland by commenting on ridiculous news stories was just that. I began writing because there were things that I wanted to say, it is almost impossible to do that when mocking what others are saying.
Nonetheless, if you found this to be enjoyable, if it made you think, then it was an essay worth writing. Feel free to share it with others.
Until next time…
https://www.texaspolicy.com/ginn-raia-lifting-minimum-wage-would-harm-lowest-skill-labor-in-texas/
https://www.jec.senate.gov/public/_cache/files/e6663010-d095-4db8-9cb9-ae64da9fa165/the-case-against-a-higher-minimum-wage---may-1996.pdf
https://media4.manhattan-institute.org/sites/default/files/ib_36.pdf
https://www.investopedia.com/terms/q/quantitydemanded.asp#:~:text=Demand%20is%20just%20how%20many,demanded%20is%20a%20single%20point.
https://www.banxico.org.mx/SieInternet/consultarDirectorioInternetAction.do?accion=consultarCuadroAnalitico&idCuadro=CA79
https://www.wilsoncenter.org/article/infographic-remittances-mexico-reach-historic-high
https://media4.manhattan-institute.org/sites/default/files/ib_36.pdf
https://fs.blog/the-butterfly-effect/
https://www.forbes.com/sites/davidmarotta/2021/03/24/raising-the-minimum-wages-hurts-the-most-disadvantaged/?sh=59a97e842dc1
https://www.law.cornell.edu/wex/minimum_wage#:~:text=The%20national%20minimum%20wage%20was,Act%20(FLSA)%20in%201938.
What a beautiful analysis of the current economic conditions in the labor force. These issues are not just associated with entry-level jobs, but with jobs at all levels. For example, I have had people interview for jobs as a surgeon with my practice. I currently work seven days a week and take two weeks of vacation per year. I have to generate and collect all of the money for our practice. Nothing is given to me and I don’t want any sympathy whatsoever with that, said, the new doctors coming in without any skills want eight weeks vacation paid. They only wanna work six hours a day and they do not want to take any hospital called. They also don’t want to work on weekends. When I asked what they want for a salary to start, noting, they have no goodwill in the community, no definable skills, other than a medical degree and have not taken any risk in the community or hired any employees or taking out any bank loans? They wanna make more money than I am currently generating and being paid. My answer is if you can find a job like that then tell me and I’ll take it. That is the delusion of the masses. Every aspect of our society has been affected.
Funny story. The other half almost dumped me over an argument about just this issue. Oh, he wasn't especially political, but this is an ax he has to grind. He agrees with you by the way.
In theory, I understand the purpose of the minimum wage, and with our system the way it is, whether it's a greater evil than letting a very messed up market set wages? I don't know. I have a feeling you either set the minimum wage or you have a ton of people working full-time and on benefits because they aren't making it. But where as once I felt strongly about it as "solution," now I see the whole system as messed up and the minimum wage is a token "fix."
My problem with the minimum wage is my problem with Obamacare. They are both bandaids. They mask a systemic failure. Were we to, as you suggest, stop illegal migration along with recategorizing companies who are American in name only as something else so they don't benefit from the protection from tariffs for their foreign-made goods forcing them to "reshore" (what a funky word) manufacturing along with scaling back the system so behemoth corporations didn't have so much market share pulling money out of local communities . . . basically, we need to go back to a system where most all the money spent in a community stays in the community and most all the money made in the country stays in the country. Until you do that, everything you do, including raising the minimum wage, is just stalling an eventual collapse and re-serfing of the middle and working classes.