Inequality Solved!

Recently, a friend of mine sent an email to Senator Bernie Sanders, Socialist From Somewhere Other Than Vermont, regarding the minimum wage and the recent vote on the Fair Minimum Wage Act. Let’s leave alone, momentarily, how a “minimum” can be considered “fair”, since the word minimum seems to indicate the least possible wage. Unless fairness is now defined as paying someone the least that can possibly be given, which might be a well-deserved result for those who put words like “fair” into every piece of legislation written.  As if there’s a universally-accepted definition of what constitutes “fairness” in any situation, of course, but even worse, a legislator thinks that by slapping the word into a document spat out by the bumbling loads in DC that somehow, fairness will magically rise from the American tundra like summoned golems.

But that might be a digression.

Instead, let’s tackle the economically-confused Senator’s words as he’s given them to us, shall we? The text (and our magical journey of economic illiteracy) begins:

Dear Mr. XXXXX (the name is changed here to protect the wage slave, er, the “innocent”):

Can I be a wage slave if I get to learn Kung Fu?

Can I be a wage slave if I get to learn Kung Fu?

Thank you for contacting me regarding the federal minimum wage. I appreciate the opportunity to respond to you on this important issue.

What’s interesting here is that the word “federal” really means state-based, not the Leviathan that our government has morphed into.  Even though he’s a Senator, I don’t think Bernie’s interested in the rights of states, other than the state’s right to say “yes” to whatever it is that he wants to happen.  The Appreciator continues:

As poverty rates continue to increase and the gap between the very rich and everyone else is growing wider and wider, the time is past due to raise the federal minimum wage, which is now less than it was in 1968, when adjusted for inflation.

Poverty rates continue to increase?  Is that because the metric used by Senator Opportunity is inherently flawed?  Or is it because, depending on which dates you use, you get different outcomes?  From the US Census, using the Official Poverty Rate metric:

The poverty rate in 2010 (15.1 percent) was the highest poverty rate since 1993 but was 7.3 percentage points lower than the poverty rate in 1959, the first year for which poverty estimates are available.

In other words, the poverty rate (as measured by the flawed OPR), is higher than 1993, or 20 year ago, but is roughly 30% lower than 50 years ago. So whether or not poverty is getting worse or better seems to depend largely upon the metric one chooses to use. 10 bucks is yours if you can guess which metric Sanders uses.

Maybe the OPR rate is higher because the additional federal spending designed to offset poverty is strongly correlated with increases in the poverty rate? Is that because when more free money is made available by federal programs, more people sign up for it?  Is that possible?

Increasing minimum wage rates will ensure this chart continues its glorious climb.

Increasing minimum wage rates will ensure this chart continues its glorious climb.

Oh, and what constitutes “the poor” seems to miss the point that if you’re at the bottom of the distribution, you fall under a politician’s convenient category of poor, but you have a place to live, two TV’s, air conditioning, a car, an Xbox, a cell phone, and you are receiving additional assistance (which is not counted as income, the only metric that put you into the poor category in the first place), that increases the total amount of wealth in hand in any given year. In other words, the “poor” in this definition is so broad, and ignores the actual living standards, that the word “poor” itself becomes meaningless – other than as a cudgel to demand an increase in federal spending.

But wait – Sanders is proud of himself:

I am proud to co-sponsor the Fair Minimum Wage Act, which would raise the minimum wage to $10.10 per hour over a three-year period, in equal steps of 95 cents per year. This legislation will also link the minimum wage to the cost of living, providing automatic increases in future years as the cost of living increases. Moreover, the bill would raise the minimum wage for tipped workers to 70 percent of the regular minimum wage.

Increasing the minimum wage increases unemployment. Why? As you increase the cost of labor, the cost of the product or service being sold increases as well, which decreases demand. Increased rates for existing employees means it might become cost-prohibitive to hire the next worker, even if you sorely need more help.  In terms of a larger macro-economic benefit, however, the effect of raising the minimum wage will have a hugely inconsequential effect, since minimum wage earners constitute only 5% of the total workforce.

But what the minimum wage does, at core, is prevent entry into the labor market for those low-skilled workers who want to work at a wage rate lower than the minimum wage, because the government says you cannot pay anybody less than X dollars per hour. This means that a 19 year-old college student, who might be willing to wash dishes at a restaurant for $6/hour for 10 hours a week spread over 2 shifts, for a little extra cash each week, cannot do so – the restaurant cannot legally hire this person to do the work they are willing to do, at that rate of pay. So that person remains unemployed, simply because the state says that regardless of the skill-level requirements for the job, you must pay a person X, even if they are willing to accept less than X.

The most obvious effect of this approach is that it increases the unemployment rate for the low-skilled worker, the very people that the minimum wage law is supposed to be helping.  Every time the minimum wage goes up, some number of low-skilled jobs will disappear, because the government is out there helping.

What is most at odds with economic realities is that Sanders wants to raise the cost of labor during a recession (insert a series of exclamation

I grew this tall to demand $10.10 per hour, bitchez!

I grew this tall to demand $10.10 per hour, bitchez!

marks here), when aggregate demand is already down, and unemployment is the highest it has been in decades (at least partially due to the existing minimum wage laws themselves).  So many people are willing to work for whatever they can get, or even work a 2nd part-time job, yet the laws created to help the American worker make it harder for him or her from getting a job they want, at any wage rate.

Of course, there’s more self-congratulations oozing forth from the taxpayer-supported piehole of no one’s favorite flatlander Senator:

I was also the sponsor of an amendment to the budget resolution recently passed by the Senate, which endorses the goal o f reducing income

inequality in America by increasing the minimum wage.

Shockingly, Sanders’ Supreme Body of Budget Resolving fails to note that his august corps (men) of narcissists had failed to pass an actual budget for almost 4 years, but hey, he sponsored an amendment that will increase unemployment!  Time for Bernie to kick the ol’ taxpayer-funded shoes off and wallow in his own crapulence for, say, a week or two, until it’s time to sponsor another amendment to some resolution or other that makes it even harder for Americans to find a job.

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