Thomas Sowell writes:
One of the simplest and most fundamental economic principles is that people tend to buy more when the price is lower and less when the price is higher. Yet advocates of minimum wage laws seem to think that the government can raise the price of labor without reducing the amount of labor that will be hired[...]
Switzerland is one of the few modern nations without a minimum wage law. In 2003, "The Economist" magazine reported: "Switzerland's unemployment neared a five-year high of 3.9 percent in February." In February of this year, Switzerland's unemployment rate was 3.1 percent. A recent issue of "The Economist" showed Switzerland's unemployment rate as 2.1 percent.
Most Americans today have never seen unemployment rates that low. However, there was a time when there was no federal minimum wage law in the United States. The last time was during the Coolidge administration, when the annual unemployment rate got as low as 1.8 percent. When Hong Kong was a British colony, it had no minimum wage law. In 1991 its unemployment rate was under 2 percent.
As for being "compassionate" toward "the poor," this assumes that there is some enduring class of Americans who are poor in some meaningful sense, and that there is something compassionate about reducing their chances of getting a job.
Most Americans living below the government-set poverty line have a washer and/or a dryer, as well as a computer. More than 80 percent have air conditioning. More than 80 percent also have both a landline and a cell phone. Nearly all have television and a refrigerator. Most Americans living below the official poverty line also own a motor vehicle and have more living space than the average European -- not Europeans in poverty, the average European.
Why then are they called "poor"? Because government bureaucrats create the official definition of poverty, and they do so in ways that provide a political rationale for the welfare state -- and, not incidentally, for the bureaucrats' own jobs.
Advocates of minimum wage laws do not think that the government can raise the price of labor without reducing the amount of labor that will be hired.
ReplyDeleteThey know that lowering the real minimum wage via inflation will reduce unemployment.
Inflation hawks seem to think that lowering the real minimum wage will not reduce unemployment. They fail to grasp the simplest and most fundamental economic principle which is that people tend to buy more when the price is lower and less when the price is higher.
You would not be having this discussion if the subsidies to the F.I.R.Economy were extinguished thereby lowering the cost of living(for everyone)....overheads would come down and business formation and sustainability would increase...but no one wants to focus on that....just the poor.
DeleteBring down everything and let's see who's grovelling....the poor already know how to live on less....does everyone else?
Schmucks...................
"Advocates of minimum wage laws do not think that the government can raise the price of labor without reducing the amount of labor that will be hired."
DeleteYes, they do. Advocates of minimum wage laws have made this argument many times.
"Inflation hawks seem to think that lowering the real minimum wage will not reduce unemployment."
No, they don't. Inflation hawks have never made this argument.
Try again, Jerry.
I read parts 1 and 2 of min wage madness. I agree with Dr. Sowell's principles but I don't understant the "being priced out of a job". Could someone give me a simple explination on this?
ReplyDeleteIf the price of labour rises, but the employers revenue or budget for labour doesn't, then either an employee is going to be laid off or there isn't going to be any future hires.
DeleteWhy doesn't Sowell use his intellect to write pieces against this?...hmmm...
ReplyDeleteJPMorgan Gobbles Lion’s Share From Federal Home Loan Banks – a Program Meant to Aid Small Housing Lenders
On June 24 of this year, Senator Elizabeth Warren was incensed. She wrote to the Federal Housing Finance Agency (FHFA), the federal regulator of the Federal Home Loan Banks as well as Freddie Mac and Fannie Mae. Warren had just learned that Sallie Mae, a Fortune 500 company engaged in making private student loans, had obtained an $8.5 billion line of credit from a Federal Home Loan Bank. Sallie Mae had been borrowing on its line of credit at 0.23 percent, then making student loans at 25-40 times that rate according to Warren.
Warren reminded the federal regulator that “Congress established the Federal Home Loan Bank System to serve as a reliable source of funding to local banks and other community lenders that offer families home mortgages.” Warren cited a report from the Consumer Financial Protection Bureau showing that significant levels of student debt pose a barrier to Americans trying to buy their first homes.
With housing stalling and mortgage credit still tight for many borrowers, Wall Street On Parade decided to delve into the financial filings of each of the 12 Federal Home Loan Banks and see who else might be getting a windfall from a program set up to help local lenders compete with the big boys. According to the Federal Home Loan Bank of Boston, the system’s mission is as follows: “By supporting community-based financial institutions, the Federal Home Loan Bank System helps to strengthen communities. The System directly benefits consumers by helping to ensure competition in the housing-finance market.” Got that – competition.
The mission, like so much else that Wall Street touches, seems to have run off the tracks. As of June 30, 2013, three of the giant, global, Wall Street banks are the largest borrowers from the Federal Home Loan Banks, with JPMorgan way out in front with borrowings of $61.840 billion. And it’s not borrowing from just one FHLBank, it’s borrowing from three and grabbing 65.8 percent of all advances from the FHLBank of Cincinnati, which services Kentucky, Ohio, and Tennessee.
http://wallstreetonparade.com/2013/09/jpmorgan-gobbles-lion%E2%80%99s-share-from-federal-home-loan-banks-%E2%80%93-a-program-meant-to-aid-small-housing-lenders/