E-Newsletter No. 3
March 2014
If not us, who?_____If not now, when?
Last month, we talked about President Obama’s State of the Union speech and the lack of any plan to address the country’s growing debt problem. We also reported on the legislation that was passed by the US House of Representatives and US Senate to suspend any limitation on the amount of US debt until March 2015.
In this month’s newsletter, we would like to address the president’s proposal to increase the federal minimum wage from $7.25 per hour to $10.10 per hour. As discussed elsewhere on our website, our Foundation promotes the concept of personal responsibility, rather than another government program. In addition, our Editorial Board hold(s) the following truths to be self-evident –
– Poverty sucks – – it is estimated that approximately 46 million citizens (roughly 15% of the population) live in poverty
– The current poverty level for an individual (as published by the US Government) is $11,490
– The current poverty level published by the US government for a family of four is $23,550
– For 2,080 hours of work (no overtime or vacation time) $7.25 per hour is $15,080
– For 2,080 hours of work (no overtime or vacation time) $10.10 per hour is $21,008
– From a purely monetary perspective, a “minimal wage” job (however defined) sucks
– From any perspective, wanting to have a job, but not having a job, really sucks
– In a [primarily] free-market, capitalistic economy, prices are affected by supply and demand
– In a free-market economy, economic decisions are made after consideration of costs and benefits
– The US participates in the global economy, and the level of globalization is increasing each year
Our Editorial Board believes that an individual’s personal economic well-being is a personal responsibility. But for every belief, there can be an alternative contrarian belief. As we noted on our website, Mitt Romney once made the following observation – There are… people who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it. That’s an entitlement. The government should give it to them.
However, as we noted in that Conversation Piece, our Editorial Board does not believe that the number of people who feel they are a victim totals 47%. But the proponents of the two opposing viewpoints (Personal Responsibility versus a Government Program) have (and hold on to) their own personal beliefs. Our Editorial Board believes that a proposal to increase the minimum wage issue is a very effective “sound bite”- – it speaks to each of us as a caring person and our tendency to want to “do something”. However, as we have noted elsewhere, we believe that there are way too many examples of government programs that “sounded good”, but then we subsequently find out that all of the implications were not thought through very well, and we find ourselves in a situation where we have “unintended consequences”, and the president’s proposal is one more example.
Our Editorial Board believes that increasing the minimum wage is counter-productive in solving poverty problems. There are two basic, fundamental (and generally accepted) economic realities (supply and demand, along with “cost versus benefit” decision making) that virtually guarantee that increasing the minimum wage will serve to eliminate a certain number of jobs. It should be noted that different studies project different numbers of jobs lost, but none of the studies show that increasing the minimum wage will serve to increase the number of jobs.
This is how decision making happens in the (real) business world – – Faced with a new higher mandated cost, businesses will analyze the economics and the alternatives, and if appropriate, may choose to shift these extra costs into equipment in lieu of minimum wage job(s). The demand for workers will decrease due to higher mandated wage costs, but the supply of available potential employees will remain the same (or probably increase). New higher mandated costs will either be passed on to the market place (which increases inflation) or (if the business is not able to pass on these higher costs in the marketplace) the higher wage costs will negatively impact the business’ profitability, and therefore the business’ ability to continue to stay in business (and provide jobs).
Minimum wage jobs are merely the first rung on a person’s economic ladder. These types of jobs were never intended to be the kind of job that a person should strive for, in order to support a family of four. These jobs are typically filled by high school kids, or by people who are trying to get into the workforce for the first time to establish their skills credentials, or by senior citizens who want to continue to work for personal reasons and who would prefer to get some level of pay rather than perform volunteer work, etc., etc. A minimum wage job has minimal skill requirements – – the primary ones being the ability and the consistency to show up for work each day, take direction from management, be pleasant to work with, and to competently fulfill that job’s duties and responsibilities. Unfortunately, developing and maintaining these minimal skills can be a challenge for some individuals, and this is where the public education system and/or social services agencies (and Not for Profit Organizations) need the public’s support, so that these organizations can become more effective in fulfilling their role(s) to help eliminate poverty. This support can include joining your local PTA, running for the local school board, or providing monetary support to these organizations, etc. In order to achieve a higher level of pay, higher paying jobs require higher levels of skills (i.e., higher level math and language skills and/or specialized skills). Our Foundation believes that it is the individual’s personal responsibility to acquire those skills, so that they can find the type of job (or career) that they would like to have, to fulfill their own personal dreams and aspirations. It should be noted that sometimes those dreams and aspirations evolve into a desire to own your own business that would employ your fellow citizens.
The “political sound bite” regarding the minimum wage needs to be re-focused away from the purely “emotional argument” (poverty sucks, so “we the public” are obligated to try and do something) and the conversation needs to be re-directed towards the role of personal responsibility, along with society working on finding effective solutions to the issue of poverty in America.
In closing, our Editorial Board would like to mention that we also hold the following truth to be self-evident – – in a free-market, capitalistic economy “income inequality” is merely a fact of life. History has shown that even Communism was unsuccessful in eliminating income inequality (or poverty). Next month we will talk about the president’s proposal for the government to solve this “problem”.
US Debt Clock – – February 1st – $54,544 per citizen / March 1st – $54,729
We can get this fixed…..
3/10/14 Addendum – Please be sure to read the Comment from a California Member