Wages in Equality v. Wage Inequality v. Capitalism

With rash thrusts of emotion pioneering social issues, the thresholds lining freedom’s prepositions are blurring the functionality of a minimum wage.

The governing system of the United States of America was created in an effort to exercise the God-given and natural right to freedom. Over two centuries of time has permitted mindsets to migrate from ‘freedom from government’ to ‘freedom by government’. Those who have used America’s advantage to reap self-earned rewards have an unattached relationship with their government. They nod to its existence for being less intrusive and more opportunistic – an understood ‘thank you’ for leaving them alone. Others have failed to mark their territory in America, and see the government as a compensating machine to hand out what they cannot earn. Somewhere in the middle are laborers. These people work the jobs that were swept under the rug by Uncle Sam but are still necessary for human functionality: janitors, cashiers, bus boys, coffee-runners and burger-flippers among many other maintenance pseudo-trades. These jobs are mandatory occupations; someone has to do them. In fact, both my mother and I work minimum wage jobs for different reasons: pocket change and experience, respectively. Today, many Americans find themselves living solely off the wages earned by these smaller positions. There is incredulous controversy regarding the argument on whether or not raising their minimum wages would benefit or hurt the economy. Americans are losing sight of the difference between rationality and euphonious noise. 2016 Presidential candidate Bernie Sanders glamorizes one perspective, saying, “The current federal minimum wage is starvation pay and must become a living wage”. A massive amount of citizens are raging into battle wearing the same armor, and it is an attack popularly unrivaled.

Raise-the-Minimum-Wage-logo-header

The official logo for the popular movement, depicting a rotated American flag with red and white vertical arrows

Minimum wage was a valid issue in the early 1900’s. Before any government involvement, the salaries handed out for low-income jobs fluctuated. Intervention was necessary when maximum wages unfairly decreased and forced labor was inhumane. President Franklin Delano Roosevelt pushed the Fair Labor Standards Act of 1938 to combat the injustice wrought upon lower-waged workers. The proposed solution, as reported by the U.S. Department of Labor, was “applied to industries whose combined employment represented only about one-fifth of the labor force” and “banned oppressive child labor and set the minimum hourly wage at 25 cents, and the maximum workweek at 44 hours”. Today’s argument proposed in favor of a wage increase adopted Roosevelt’s reasoning, as he noted, “Do not let any calamity-howling executive with an income of $1,000 a day, …tell you…that a wage of $11 a week is going to have a disastrous effect on all American industry”. The crux of this argument is a fallacy of composition that is spreading across a generation of unskilled laborers like an airborne plague. Although the legal minimum wage, as dictated by the government, was intended to be a fair reward for labor, it was tacked on to a preexisting establishment that is contradictory to the common conception of what the jobs are meant to do. Realistically, they exist to execute the less glamorous tasks deemed necessary by society. However, as they stand in the timeline of personal economic growth,their function is to provide a starting point for people to spring forward, not stay put.

Today, people are living with minimum wage jobs and making no further advancements. Because of this, the term ‘living wage’ is thrown into the front line of every battle with the current law. Politico journalist Nick Gass reported an example of this, saying, “Bernie Sanders rallied fellow members of Congress, supporters, fast-food workers and labor advocates outside the U.S. Capitol on [July 22, 2015] for a bill he introduced that would raise the federal minimum wage to $15 per hour”. Clearly, the implied thrust is to allow people to live solely on the jobs that would act as a platform to acquiring another, but are not being used that way.

fightfor15

Laborers fight for liberation from the starting wage they’re already guaranteed at the lowest level of performance

By all means, the ‘living wage’ campaign is designed in an effort to help people. No one is ill willed when preaching this solution. However, I view the conclusion on the topic to be counterproductive and de-evolutionary towards the country. Like many solutions to mend emotional terror, this is an ephemeral fix to an eternal problem. If people are to earn ‘living wages’, we should concentrate energy towards creating jobs that yield such wages. Instead, many want to redefine an existing category of jobs while eliminating the aspects that define what they currently are: minimum wage jobs. In this scenario, there is no low level platform to be eagerly offered by business owners. There’s only the ‘living wage’ – a wage too high for employers to offer to entry-level workers, but too low to accommodate the needs of a family. It’s the Golden Mediocrity. This solution will not stimulate growth. The mantra can be simplified to taking money from the whole and handing it only to some people instead of finding a way for some people to generate more money for the whole.

The predictions go beyond theory and mathematics when cycled through the real workplace. I spoke with two political radio show hosts, Rick Trader and Kevin Wade, who both have experiences in dealing with minimum wages. Mr. Trader, embodying the minimum wage success story as a former exterminator, sees low-income jobs “as not the ‘be-all end-all’, but just a step in making yourself a better person”. Former U.S. Senatorial candidate Kevin Wade contributed to this point, saying, “It’s simply a wage applied to your starting job. If you make it too expensive, who would hire a[n unskilled teenager who does not] know anything of any value to the wide world?”. These points are not assumed; they come from the mouths of those in a position to be assumed about. They are the employers; they are the business owners.

While advancing to a greater job is not a plotted point on this graph of inequality, it is important to understand what minimum wage jobs could be if they were used properly today and not turned into ‘living wage’ jobs. Mr. Wade continued, “what you do in the starting job is to learn how to become a little bit more valuable, so that someone else says ‘I want you to come work for me and I’ll pay you 50 cents an hour more’, or, ‘I’ll give you health insurance’. You build up your own skills”. By expediting ‘living wages’,  there are no skills to build and no greater contribution to society. The ‘living wage’ would be a metaphorical bulldozer to bury each minimum wage worker under the opportunity of becoming better. There’s no need to advance if you’re ‘living’ on your mediocre wage. Whether or not that is life-fulfilling is one’s own prerogative.

Greater benefits from lower expectations also deters and almost rewards ignorance to seeking higher education. The incentive of education paired with the value of such education is degraded when exploring these new ‘living’ suitable career choices. Mr. Trader added, “certainly you wouldn’t expect someone to support a family on a minimum wage job and some people would say ‘well, see, you’re making the argument for us”. The problem is that these jobs have socially outgrown the title of “minimum wage jobs”. Originally, the wage was implemented to ban inhumane treatment of workers. Since this is no longer an issue, the minimum wage should only ever be a cherry-on-top to the experience that would further your career. In other words, Trader says they are “starting jobs where people can learn the skills and get the talent to make themselves better, and that’s when they will be able to support their families”. Minimum wage jobs should be left to those who do not have families to support. The ‘living wage’ movement inadvertently advocates for family supporters to not seek better jobs, rather to stay in a slightly buffed lower tier. There is no longer an incentive to make one’s self and one’s earnings greater. One has no desire to be better when the incentive is nonexistent.

The ‘living wage’ utopia seems to be incentivizing a lack of incentive. In a critic’s eyes, this position would instantly be taken as one against small businesses. To learn more about the incentives of small business, I interviewed Bill Bresnan. Bill is a 74-year-old veteran of Wall Street. He started working on Wall Street when he was 15 years old. He continued working there for over 20 years, as he says, “functioning in literally every aspect of the financial world”. Bill once worked for a brokerage house as a pure incentive arbitrage, trading between exchanges and markets to earn a portion of the money that his trading accrued. If he made no money for the firm, he earned no wage. Bill invigoratingly evoked his passion for earning his dues, saying, “What did no wage give me? It gave me a driving incentive”. He remarked on what a minimum wage increase would create within the mind of a low-income laborer, saying, “overpaying somebody takes away from that drive”. Bill offered the most realistic observation of the minimum wage war, detailing how each kind of business would handle the payroll increase. He stated, “I think [raising the minimum wage] is a double edged sword. If you force big, giant companies to pay a minimum wage, that’s one thing. But if you enforce a minimum wage on everybody, you’re going to take small business and drive them out of business…. [Small businesses are] not going to be able to afford to take somebody who is getting 7 or 8 dollars an hour and pay them 15 dollars an hour. They’re not making enough profit for that”. This point identifies both Franklin Delano Roosevelt and Bernie Sanders’ fallacy of composition. Not every business is a “giant corporation that [has] 25 or 50 thousand employees”, Bresnan says. He continued, “Let them pay the minimum wage. They can afford it”. However, if small businesses were to tackle the same demand with less supply, Bresnan says “you’re going to have small companies, small businesses, and start up businesses destroyed, and big companies will afford it”.  What the country is left with is a lack of competition. Small businesses would no longer be able to offer their concentrated services, but more room for damaged large corporations and chains would be available. It is scarily the first step towards eradicating small business and socializing the marketplace.

The laws of economical supply and demand render an equilibrium when matched, but create a rift when disoriented. The ‘living wage’ would rally a demand while suppressing the supply – increasing the gap in which unemployment manifests. There is no saving grace for the market to ever clear under such a format.

chart.png

A supply and demand graph labeling unemployment in the void between the price floor’s actual supply and demand

Economics sees no remorse for emotion; neither does truth, facts, evidence, or reality. It is effectively a socially driven politician’s worst nightmare – the bane of the pity existence of such a person who swallows sorrows as support.

no feelings

The result of government mandating a higher price floor as opposed to the market clearing itself is larger room for unemployment. No feelings or emotions contributed to the truth of this hypothetical simulation.

What made America so stocked with opportunity was competition; monopoly only existed on the shelves of toy stores in the form of a board game. Under an economy with virtually no experimental jobs that offer pocket change, only the largest corporations will survive. For example, the options for where one can purchase that Monopoly board game could be limited to only Toys R Us. While there is no problem with the Toys R Us chain, smaller toy outlets will be chased off the market. Chain stores will not be left unscathed either. While it is hypothetically assumed that businesses like fast food chains would raise their prices in coordination with payroll, there is actual evidence of this happening. Mark J. Perry of the American Enterprise Institute reported, through an “equity research report issued to investors by global investment banking and wealth management firm William Blair on Chipotle Mexican Grill, Inc. (NYSE: CMG)”, among the many stores that selectively increased their pricing, San Francisco’s Chipotle “saw across-the-board price increases averaging over 10%” when higher minimum wages were enforced. Tim Worstall of Forbes.com recognizes this report as an issue that “doesn’t help minimum wage earners”. He states, “Demand curves really do slope downwards. Thus [,] some unknown but knowable number of people will not be employed to produce said food”. This issue has evolved from a hypothetical assumption into a feasible math equation. The numbers show that, if implemented, “a rise in the minimum wage really does destroy jobs”, says Worstall.

Money is like energy; under most circumstances, it is neither created nor destroyed. However, it is free to move and change forms. If a larger sum of money is mandated to move to people’s pockets, it will not be going towards paying the bills of the business. The compensation needs to occur somewhere. It will either be born in the form of raised cost of products or increase of unemployment and fired workers. When the increase in cost of labor does not rise consistently with the value of such labor, there is a lot of money leaving the business without a lot coming in. And it hurts the little guy the most. To harness the truth of the legitimate repercussions suffered by a business in turmoil of increasing their payroll, I spoke with Durrell Alexander Washington. Washington is President at the Washington Consulting Group, LLC, providing personal, residential, and business financing. For 21 years and counting, he has appeared on several radio shows to offer financial expertise, and hosts his own show, titled “Your Money & More”. Having assisted with new-business start up, business expansion, and operating his own business for 33 years, Mr. Washington has lived through the regimentation of operating a business. His insider’s perspective offers substance to the boneless threat of simply stating, ‘minimum wage kills small business’. Washington noted that a mandated payroll increase simply become a detriment to the opportunity to operate as a business. He explained that non-business owners frequently overlook capital expenses. He proposed a scenario in which a business would need to carry out a forty or fifty thousand-dollar repair. He said, “if your payroll is structured as such that you don’t have that resource [to execute a costly repair], and when you don’t show a certain profit on a business side, it lowers your credit grade”. Not only are businesses rendered unable to meet certain quotas, but also, the government inadvertently punishes them for something the government did itself. A low credit grade yields an inability to apply for business loans because of “something called ‘income sustainability’”. This situation also shape-shifts into simple arithmetic: “when the payroll goes up, the reserves go down and the credit grade goes down with it”, says Washington. Businesses cannot succeed when Capitalism is suffocated with a mask of social redefinition.

In America, businesses are free to do what is necessary, under jurisdiction of the law, to prosper and contribute to the growth of the nation. Businesses rise and fall under their own faults, and the jungle that is the free market thrives this way. Every government mandate is like a rampage of pesticides spread throughout this jungle, and places these businesses in chokeholds against the will of their rights to operate. By restricting functionality and expediting the loss of money, the government would indirectly take more money out of the pockets of business. Former U.S. Senatorial candidate Kevin Wade contributes to this point, saying, “Someone who doesn’t work at all, but could because he’s healthy, has no privilege and no right to reach into your pocket and take your money”. It is an indirect paper route, but an inevitable one when raising the minimum wage. In simpler terms, the government is telling businesses that they must give more money away as a priority above functioning as a business and bringing money in. Wade finalized his point, saying, “That’s called theft. That’s not called social justice”. Businesses are not made to hand things out. They are made to generate revenue, turning labor and services that people want or need into profit. Durrell Alexander Washington reflects this idea, saying, “Nobody goes into business thinking about how much money they can pay to their employees. [They are] focusing on meeting certain milestones of profitability to themselves”. Businesses employing workers is beneficial in two ways: assisting the labor, and contributing experienced workers to the workforce. Businesses benefit in no way by succumbing to a dictation to spend more dollars while earning a non-increasing amount of dollars. One side of that scale increasing is good for the economy, one side is good for workers, but one side increasing without the other creates an imbalance where someone is neglected of the American opportunity.

The focused verdict on the campaign to increase minimum wage is that it is an innocent effort to move in a direction nonnative to the functionality of the United States of America. The U.S.A. is a Capitalistic society. The countries that reflect the direction and motives of the wealth redistribution are socialistic societies. Options exist for people to choose. America’s option was never intended to be nor should ever be repurposed. People want a ‘living wage’ to come hand-wrapped with a job that should never be a worker’s final destination.

Realistically, an actual realized living wage would take the form of full time workers earning closer to 25 dollars an hour in a 40-hour work week through means other than increasing the minimum wage. A ‘living wage’ is more plausible when rounded near the Real Median Household Income in the United States. This number, according to FRED Economic Data, bounces around the 50,000-dollar mark every year. A real living wage would be relatively closer to this yearly wage. This movement appears to be a cluster of hopeless promises and economic disaster all shrouded beneath the logical fallacy of Appeal to Emotion; anyone who values their morality would believe activists when they preach that these workers need a ‘fair wage’. What they are not telling people is the disclaimer of what will happen to other workers and businesses if this wish were to be granted. It is a careless shout into a crowd of hopeful souls who will always rally for something they believe is in their grasp. The movement is giving people a misconstrued vision of America’s opportunity and it will depreciate our value of labor should it become law.

So many are riding the bandwagon on a cause that preaches freedom by giving free things. Bill Bresnan concluded that, daily, we “become a welfare state where government is dictating to everybody”. The ‘living wage’ campaign wants to further the dependency on government by eliminating the opportunity of seeking a starter job that offers pocket change in exchange for an experience. When a business is obligated to pay 15 dollars to a kid who has no experience, they will not hire. No one wants to pay a lot for a little help. However, if businesses are free to pay out what the labor is worth, opportunities become available and incentives for learning and growth are revitalized. That is when the market clears.  A ‘living wage’ is an anti-solution that keeps America anchored instead of open to swim in an endless ocean. If the minimum wage is in fact increased, the price of labor increases against the demand for it. Less of a demand results in less job opportunities. If someone does not have the privilege of working a first job, there will never be a second job.

Bernie Sanders, among others, is making government look appealing to people who could actually achieve more without its ‘help’. ‘Could’ is a word that pioneers the American dream. ‘Can’t’ is a word that some politicians bury underneath their ideas to renovate that dream.

Looking at only the vocabulary in the pitch for a ‘living wage’, it implies that millions of Americans will begin to earn a wage to live on without making greater leaps in society. This conclusion cannot be realized, as only a socialized government could ever grant that many people an equally mediocre opportunity. Wages in equality are perceived as the only solution to wage inequality, since any real solutions require an indirect route of job creation and demand satisfaction. The truth is, in order for capitalism to work, it needs to be capitalism. The current administration of the United States of America has rewritten several gears of the market’s motors – and the ‘living wage’ would botch another pivotal part. If anyone wants to bring anyone out of poverty, we needs to create jobs instead of destroying them.

 

-MI

Leave a comment

Your email address will not be published. Required fields are marked *