A Popular, But Stupid, Idea

I feel it is fair to say the majority of financially oriented individuals are strong on analysis tending to discount emotion.  Unfortunately, most people are not financially oriented falling for emotion over analysis.

Which leads us to a popular, but stupid, idea which I shouldn't even go to, just let it go as one of life's stupid little quirks.  As Ariel Sharon said, When a problem eludes solution, it is not a problem, it is fact. 

But I'll give it a shot and then let it go.  Because George Will tackled it.  And George is a Cubs fan so...

The popular, but stupid, idea is the minimum wage.  Forget terrorism, the war in Iraq, cancer, world poverty, global warming.  The issue of the day is the minimum wage which means absolutely nothing.

As Will points out--labor is a commodity and government makes a mess of things when they try to regulate commodities.  More importantly George points out that government has its hands full delivering the mail and defending the shores.  In other words, the government has better things to do.

Ok, that didn't work so how about some facts.

-Most of the working poor make more than the minimum wage.

-Only 1 in 5 workers earning the federal minimum wage live in families below the poverty line.  Translation--4 of the 5 are probably teenagers working at McDonalds or Target.

-60% of those earning the minimum wage work part time.  Full time workers don't work for the minimum wage.

-60% of those earning the minimum wage or LESS work in restaurants and bars earning tips on top of the wage.  Anybody that has done this knows the big money is in the tips.

Ok, enough.  But here is a schocker that really makes sense--quoting George here--"Raising the minimum wage predictably makes work more attractive relative to school for some teenagers, and raises the dropout rate."

Aha, so a group of politicians that spout off about improving education for our youth are actually encouraging kids to drop out of high school by raising the minimum wage.

Enough.  The real point is that wages are commodities and can only be set by the marketplace.  The government has better things to do than mess with the markets.  But for now that is exactly what they are doing.  Form over substance.  If it makes you feel good, do it.

Lots of fun but not leadership.

Comments

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[Jeremy Jankings]

I saw another stupid idea last week, it's called "The TOP of the internet" and tries to be the highest page of the internet. The owner wants to rip of peoples money in return for a place on this top of the internet. See this stupid site at: http://thetopoftheinternet.com

[Stingy Student]

I agree with your main point that wages are commodities and can only be set by the marketplace, but does that mean they should be set by the marketplace? I'm not sure where you stand on issues such as illegal immigration and job outsourcing, but that is essentially what is happening in those cases - people hire illegal immigrants and ship jobs overseas because it's cheaper for them to do so. If we eliminated the minimum wage here, wouldn't the quality of life for those at the bottom become more comparable to that of people in developing countries? Whether this is right or wrong is a different matter, but do you follow my logic? I really enjoy your articles by the way, keep up the good work!

[John M]

The key is wealth distribution. A flat tax with a negative income tax component would be more effective in distributing wealth to the working poor, without trying to regulate a commodity.

A negative income tax works by giving all taxpayers the same credit to start with. For example lets say we had a flat tax of 28% and a income tax credit of 10,000. Someone making 20,000 would get a check from the government for 4,400 ( 20,000 x .28 = 5,600 tax payment, plus 10,000 credit). Someone making 60,000 would pay 6,800 in taxes (60,000 x .28 = 16,800 tax payment, plus 10,000 credit).

This is just one alternative to a problem that requires creative thinking and politicans who truly work for the people. I believe most politicians have been tainted so that they do not truly care about the people.

[JD]

You're right, the minimum wage is pretty useless. But I think that's mostly because it's so ridiculously low.

There needs to be a "living wage", perhaps with a separate minimum wage for under 18 workers? Adults shouldn't have to work full time for anything less than a living wage. That'd certainly hurt certain industries, but I'm a believer that if a business depends on cheap labor to exist then it's probably doing something wrong anyway.

[NCN]

Hey Bill,
Could you change my link and drop the blogspot? Thanks,
www.ncnblog.com
NCN