Anti-Minimum Wage Convert

 A Sheep in Wolf's Clothing

When we were knee high to a grasshopper we worked out that minimum wage laws are socially and economically destructive.  We know why they are the favoured populist tripe of government.  They appeal to our envious egalitarian instincts.  We are sufficiently stupid to clothe such perversity in high fashion, appealing to nostrums such as "justice" or "fairness" to cloak our covetousness.

The unintended effect is always perverse.  Minimum wage laws create a barrier for the least skilled and the least educated, making them unemployable.  Minimum wage laws increase unemployment. Thanks to  constantly inflating minimum wage rates in New Zealand in the last three years, under both Labour and National, youth unemployment rates have skyrocketed.  A quarter of the next generation is already on the scrap-heap.  Only naive economic ignorance would have failed to see this coming.

Brian Edwards, a doyen of the Left, appears to have seen the light--well, at least this particular lamp.  He has written a piece on his blog, slamming minimum wages.  Maybe even the chattering classes and some in the Commentariate are starting to get the point.  Either that, or Edwards is attempting to be satirical.  We think the latter.  (He got at least one of his audience going though--see the comment at the end).

I devise a failsafe recipe for full employment – lower the Minimum Wage! (with thanks to John Key)

Posted by BE on May 30th, 2011 

I see that left-wing liberal bleeding-heart, Tapu Misa, doesn’t believe the PM when he says that raising the minimum wage from $12.50 an hour to $15 an hour will put thousands more Kiwis  out of work. 

After quoting a whole lot of economists  (whom none of us have heard of) to support her argument, Ms Misa conveniently ends her column in this morning’s Herald  by admitting that, ‘There isn’t the space here for an exhaustive discussion of the research’. Very convenient!

This doesn’t stop her claiming that, ‘recent evidence is forcing a rethink about what was once accepted economic wisdom.’ Well, I’ve been having a bit of a rethink about this myself and it’s blindingly obvious to me, as it must be to any other reasonable person, that what the PM is saying just has to be right.

It’s just common sense that if an employer has a choice of employing someone on $12.50 an hour and someone else to do the same job for $15 an hour, he’s going to employ the first bloke. And if he can’t afford $12.50 an hour, he’s not going to employ either of them. That’s simple economics. We could call it ‘John’s Law’: The higher the hourly rate, the higher the number of unemployed.
The corollary of John’s Law – let’s call it ‘Bill’s Law’ – must then logically be: The lower the hourly rate, the lower the number of unemployed.  

Now, unlike Ms Misa, I can quote several million ‘experts’ to support Bill’s Law. They’re all in highly productive work, none of them are on the bread line, they rarely complain about their lives or working conditions, their economy is knocking the rest of the world for six and almost every New Zealander benefits financially from their labour. They’re the Chinese of course and we could learn a lot from them.

Here are some of the things we could learn:

• If the minimum wage were set at $2 an hour instead of $12.50 an hour, a manufacturer could  take on six (and a quarter) workers instead of just one.
• In one fell swoop unemployment would be erased.   
• With his now significantly  increased output the manufacturer  could greatly decrease the cost of his product, thus hugely increasing both his domestic and, more importantly, his export sales.
• At the same time, the $2 minimum wage would put pressure on all wages, increasing the manufacturer’s  margins and therefore his taxable income.
• By way of example, the clothing and shoe-making industries, both driven out of New Zealand because of high wages and an inability to compete in the international market, would be revived.  
• Instead of buying clothes and shoes from China, we would be selling our clothes and shoes to the rest of the world, including China.  
• And so it would be with everything, from plastic toys to Kiwi-built personal flying machines. 

In summary, if the minimum wage were reduced rather than increased, we would become a mini China. Our $17 billion deficit would be gone by lunchtime.  The Government’s coffers would be full.
While it is certainly true that wages and salaries will fall dramatically under Bill’s Law, several compensatory factors must be borne in mind:

• Everyone in New Zealand who wants a job will have a job;
•  Huge government surpluses will make it possible for governments to offer substantial across-the-board, flat-rate tax cuts every three years as a sort of Christmas bonus;.
•  Blue jeans, most clothing and flat screen 3-D TVs will be cheap as chips;
•  Charities, including public hospitals and schools,  can expect to receive much larger donations from the new super-rich;
• The job-market for gardeners, chauffeurs, nannies, maids, butlers, cooks, kitchen hands, cleaners, chimney sweeps and other ‘downstairs’ staff will  hugely increase;
• New Zealand’s 100% pure, clean/green environment, cheap labour and inexpensive retail goods will make it a tourist paradise and a Mecca for foreign investment;
• The trickle-down theory will become the trickle down law.

Ms Misa will of course reject Bill’s (and John’s)  Law. She will say that it will  create even greater divisions between the haves and have-nots in society. Of Labour’s policy of increasing rather than reducing the minimum wage, she writes:

‘There’s no doubt about the good it will do: it will put more money in the hands of the struggling low-paid, and lighten the load on Working for Families.’

To that, in the immortal words of Milton Friedman, I reply, ‘Yeah right!’

Comment:

Ben May 30th, 2011 at 20:14

Brian, some ACT supporter has hacked into your website and is blogging right wing filth under your name. And I had always thought that you were a ‘left wing liberal bleeding heart’.
I find it very hard to argue against your logic. (I have read this again and wonder this is a wind up. Is there a dollop of irony at work here?)
However Mr Key and his government have done everything they can to help their mates and once again those who work hard on a subsistence wage get nothing. It is repeating the policies of the 1980′s and Douglas and socially we are stil paying the price for those policies as we will pay the price for Key’s policies. As soon as anyone suggests helping those who need help there is the old regrain that they should be glad they have a job even if they are being paid peanuts.
We have seen today the Whitcoulls staff being shafted as though it were there fault that the previous management was incompetent.
i have read this a third time and think you are actually serious (although your comparisons with the Chinese stil make me wonder whether I am being had). You should hang your head in shame.

Hat Tip: Whaleoil