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International Forecaster Weekly
The Ugly Truth About the Minimum Wage
And just to add extra salt to the wounds of those who are fighting for $15, those corporate mega-chains are increasingly turning to a 21st-century option for ridding themselves of the low-wage worker problem once-and-for-all: automation.
Economy Jobs Money
James Corbett | July 7, 2017
OK, here's an idea no one's thought of before. You know how fast food workers are organizing in the US right now to fight for a $15/hour minimum wage? That's stupid. They're still going to be just scraping by on a wage like that. So why not make it something that'll really make a difference? Why not $150/hour?
"Think about it: At $150/hour they'll only have to work a few hours a week to make the same money they're making working full time right now. Or if they continue to work full time then they'll be earning a six digit annual income! Pretty soon everyone will be rich!
"Brilliant, right? Fight for $15? Pffffffffff, that's for slaves. Fight for $150, that's what I say!"
You might think this is a parody of the "let's raise minimum wage" school of bad economics. You might even think this is a sophisticated meta-parody of the people who parody the Fight for $15 movement. But sadly, neither of these are the case. This is the actual, honest-to-goodness "argument" of genuine economic illiterates like Vox.com "journalist" Matthew Yglesias, who dropped these gems on the Twittersphere last week:
"Maybe we should just go to a $150/hour minimum wage with no phase-in period and let the Fed figure out how to make it work. You'd have a big burst of inflation, nobody would lose their jobs, a lot of old debts would be wiped out, and we'd be better off for it."
Excuse me? Could you repeat that?
"Let the Fed figure out how to make it work."
"Nobody would lose their jobs."
"You'd have a big burst of inflation and we'd be better off for it."
Now, to be fair, Yglesias is rather notorious for his gorilla journalism approach of throwing a whole bunch of steaming crap at Twitter and then deleting the turds that don't stick, so take these particular droppings with a grain of salt. But the sad thing is that, as much as this line of reasoning has become the go-to reductio ad absurdum to reveal the economic stupidity of the Fight for $15 movement, it is still unironically put forward by some of that movement's proponents as a legitimate idea.
It's heartening that some of the responses on Twitter have accurately identified various parts of this insanity:
"Yay! I paid off my mortgage!...Also, why does a pizza cost more than my mortgage? I'm hungry."
"What are you saying; this is GENIUS! All the Fed has to do is acquire powers it doesn't have and faithfully bring to scale a 17 trillion dollar economy. What could possibly go wrong?"
But for those who prefer their economics to come from economists rather than social media, you're in luck. A brand new paper from a University of Washington team studying the effects of Seattle's minimum wage laws has just been published by the National Bureau of Economic Research. Unlike the previous literature on the minimum wage laws (the ones that earnest socialists like to cite when arguing for the minimum wage hike), this study separated out low-wage workers from the general working population. When they did so, they found that Seattle's recent minimum wage hike from $11/hr in 2015 to $13/hour last year "reduced hours worked in low-wage jobs by around 9 percent, while hourly wages in such jobs increased by around 3 percent." The net result? "Consequently, total payroll fell for such jobs, implying that the minimum wage ordinance lowered low-wage employees' earnings by an average of $125 per month in 2016." In other words, the very poorest of the poor were made poorer by a significant chunk because the loving central planners had attempted to "help them out."
But wait, it gets worse!
A new working paper from a team of Harvard researchers finds that not only do minimum wage increases negatively effect the earnings of the poorest workers, they also specifically hurt low-end restaurants that cater to those very working poor while leaving the high-end restaurants enjoyed by the wealthy unaffected. Specifically:
"Our point estimates suggest that a one dollar increase in the minimum wage leads to a 14% increase in the likelihood of exit [i.e. closure] for a 3.5-star restaurant (which is the median rating) but has no discernible impact for a 5-star restaurant (on a 1 to 5 star scale)."
That the minimum wage laws in fact end up hurting the poorest of the working poor and the humblest of small businesses should be no surprise to those with a modicum of economic understanding or historical context. Indeed, government intervention in the market is always and without fail used to prop up mega-corporations and the already-wealthy at the expense of local mom-and-pops and their low-wage employees.
It was true when the VP of the largest healthcare insurance company in the US drafted Obamacare to insure the market dominance of the healthcare insurance giants.
It was true when the major meatpackers conspired to pass the Federal Meat Inspection Act in order to protect their oligopoly from small business competition.
It was true when the Morgan and Rockefeller banking interests met on Jekyll Island to conspire in the drafting of what was to become the Federal Reserve, lending an air of governmental legitimacy to their banking cartel and insuring that small financial institutions who were not part of their clique could ever compete.
And it's still true when minimum wage laws are passed, forcing mom-and-pops out of business, lowering the wages of the working poor, and further cementing the market share of the big corporate mega-chains. And just to add extra salt to the wounds of those who are fighting for $15, those corporate mega-chains are increasingly turning to a 21st-century option for ridding themselves of the low-wage worker problem once-and-for-all: automation.
We don't have to speculate about this point or engage in complex statistical analysis. It's right there in black and white. "Last year was tough — 5 percent wage inflation," lamented Wendy's chief operating officer, Bob Wright, during a presentation to investors and analysts earlier this year. He went on to note that this year looks just as difficult, with a further 4 percent wage inflation expected. The answer? Who needs burger flippers when you've got robots! Wendy's will install self-ordering kiosks in 1,000 of its stores by the end of the year, allowing them to trim dozens of more hours from the time cards of their minimum-wage workers. This is on top of the 31 hours per restaurant that they've already managed to cut from their payrolls since they began belt tightening in response to the minimum-wage hikes last year.
And Wendy's is not alone, of course. The former CEO of McDonald's USA suggested last year that the golden arches would follow suit (although the current CEO denies this), and the automation trend is taking off in every sector and industry, from industrial workers to life insurance accountants.
But we still haven't reached the very worst part of this whole scam. The worst part is that while almost everyone who advocates for the minimum-wage hikes today are doing so under the misguided view that they are really helping the poorest of the poor, the progressive progenitors of the minimum-wage idea in the early 20th century advocated for it specifically because they wanted to make the poor even poorer.
No, you didn't read that sentence incorrectly.
As economic historian Thomas C. Leonard noted in "Retrospectives: Eugenics and Economics in the Progressive Era," a study published in the Journal of Economic Perspectives in 2005, the fact that minimum-wage laws actually increase unemployment among the poor, low wage workers was perfectly well understood by the turn-of-the-century progressive reformers who advocated for them. More than that, the fact that they increase unemployment was actually seen as a key feature of those laws. As Leonard explains:
"Progressive economists, like their neoclassical critics, believed that binding minimum wages would cause job losses. However, the progressive economists also believed that the job loss induced by minimum wages was a social benefit, as it performed the eugenic service ridding the labor force of the 'unemployable.' Sidney and Beatrice Webb put it plainly: 'With regard to certain sections of the population [the 'unemployable'], this unemployment is not a mark of social disease, but actually of social health.' '[O]f all ways of dealing with these unfortunate parasites,' Sidney Webb opined in the Journal of Political Economy, 'the most ruinous to the community is to allow them to unrestrainedly compete as wage earners.' A minimum wage was seen to operate eugenically through two channels: by deterring prospective immigrants and also by removing from employment the 'unemployable,' who, thus identified, could be, for example, segregated in rural communities or sterilized."
Did you catch that? By the logic of the true religion of the progressives and their ilk, eugenics, the poor must be made completely unemployable so they can be made wards of the state, segregated and ultimately sterilized for the crime of being born with "inferior genes," or, in the pseudoscientific gobbledygook of the time, "defective protoplasm." Minimum-wage laws were actually designed to keep the poor out of the work force specifically so they would be at the mercy of the eugenicists.
As shocking as this may be to our modern sensibilities, living as we do in an era where eugenical ideas have gone out of fashion and now must be masked by a veneer of kindness and good intentions, the black-and-white nature of this issue for the early minimum-wage advocates leaves no doubt what these laws were intended to achieve.
Take Henry Rogers Seager, a Columbia economist and president of the American Association for Labor Legislation who wrote a key paper on the minimum-wage law in 1913. As Leonard relates:
"Seager wrote: 'The operation of the minimum wage requirement would merely extend the definition of defectives to embrace all individuals, who even after having received special training, remain incapable of adequate self-support.' Seager made clear what should happen to those who, even after remedial training, could not earn the legal minimum: 'If we are to maintain a race that is to be made of up of capable, efficient and independent individuals and family groups we must courageously cut off lines of heredity that have been proved to be undesirable by isolation or sterilization...'."
Or take Woodrow Wilson's Commissioner of Laborer, a Princeton economist by the unlikely name of Royal Meeker. Again, Leonard notes:
"Meeker preferred a wage floor because it would disemploy unfit workers and thereby enable their culling from the work force. 'It is much better to enact a minimum-wage law even if it deprives these unfortunates of work,' argued Meeker. 'Better that the state should support the inefficient wholly and prevent the multiplication of the breed than subsidize incompetence and unthrift, enabling them to bring forth more of their kind.'"
This is the real history of the minimum-wage idea, and it is one that is not even known, let alone understood or acknowledged, by the well-meaning dupes of the crypto-eugenic, centrally-planned technocratic slave state of our era. The entire point of the minimum wage is to remove the poorest people from the labor pool in order to better mark them out for sterilization and, ultimately, elimination.
Think about this the next time your socialist collectivist friend lectures you about how virtuous they are for joining the Fight For $15 movement and how people who don't sign on to their economic idiocy don't care about the poor. The truth is (as always) the exact opposite of the mainstream consensus.
Bob Chapman
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