Milton Friedman On The Unholy Coalitions Of The Minimum Wage

Tyler Durden's picture

This week we were told that, by the magic of a non-deficit-increasing wave of our President's hand, the minimum wage should be increased to $9 (a 24% rise from the current $7.25 federal minimum wage) and anchored to inflation going forward. The rabbit-holes of whether this is a good or bad thing run deep and in very different directions. However, in three short minutes, Milton Friedman provides some critically clarifying truthiness on the unholy coalitions between 'do-gooders', 'special interests', 'trade unions', and the vicious circle that this non-market-based decision will create. "Do-Gooders believe passing a law saying nobody shall get less than [a minimum wage] is helping poor people (who need the money). You're doing nothing of the kind. What you're doing is to ensure that people whose skills do not justify that wage will be unemployed." It is no accident that youth unemployment is almost double the overall unemployment rate. We never learn... and as Friedman concludes, "it is the exact people who the do-gooders are trying to help that are hurt the most - the poorest!"

 

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meghaljani's picture

Holocaust did not happen. 

malek's picture

You know, when you think your logic all the way through, then for example the concept of "The Big Lie" cannot be true, because it was written down by an asshole named Adolf Hitler.

How about you and WCD try to get back to the original statement "it is the exact people who the do-gooders are trying to help that are hurt the most - the poorest!" and try to refute it.

steve from virginia's picture

 

 

First of all, Friedman's monetarism was tried in the UK for several years until the UK economy fell apart/ deindustrialization and deflationary contraction. His economic platform was a fail. There was no real chance for monetarism to take hold in the US due to the fiscal power of the government and hegemony of expansionist finance. The private sector controls the US money supply (more control over money supply by the exchequer during Thatcher period but this was pre-Big Bang).

 

Ironic: I like deflation b/c I am a Luddite and monetarism requires more centralized control than neo-liberal economics/Washington Consensus allows.

 

Greenspan was a fake monetarist although he claimed to be one, he constantly offered more and more credit at least  possible costs whenever there was a bank in the world somewhere in the least amount of trouble. Result => moral hazard => bubbles.

 

As for minimum wage, there is no way for the workers themselves to bargain for it, they have no leverage. Any arguments that the 'market' can set wages for those with no leverage are mendacious and intellectually dishonest b/c the market is controlled by big business and finance. Low wages accompany de-skilling, the result is an incapable workforce ... the long term effect is a workforce that cannot afford the goods that it produces ... or a non-workforce that does not produce anything.

 

The only thing Friedman did right other than keep his swastika flags at home was to write 'The Monetary History of the US'with Anna Schwartz.

 

 

tmosley's picture

Unions are a feature of the free market.  That is a large source of leverage, even in a monopsony.  Of course, monopsonies are rare, so most of the time, workers leaving for higher pay is enough to drive up wages.  Turnover is a cost too, after all, and if you wages are too low, you won't attract workers in the first place.

Many liberals are under the impression that you can just offer a job at any wage and the position will automatically be filled by some mindless idiot who will be your slave.  This is because they have no experience in the real world.

Henry Hub's picture

***after all, and if you wages are too low, you won't attract workers in the first place.***

So why is it that many of the minimum wage jobs are filled by people with college degrees? Is it because these people are desperate or is that they have decided that cleaning toilets is a rewarding, challenging career choice?

 

Edmon Plume's picture

Because an effortless degree earns low skill wages.

A Nanny Moose's picture

As for minimum wage, there is no way for the workers themselves to bargain for it, they have no leverage

Horsepiss. Employers must compete for the most suitable employees. They have no leverage now because government has continually intervened in the marketplace, and keeps dicking around with the currency.

the market is controlled by big business and finance.

At a time when we have the biggest government, and more regulations than we've ever had. You are conflating what we have now, which is controlled by corporations, with the free market.

steve from virginia's picture

 

 

Thank you for making my point.

 

Meanwhile, the US has the world's (worlds') largest of all possible governments b/c the US also has 270 million automobiles which require fuel and place to run free like the wind (in traffic jams).

 

I'd gladly give up my government if you will give up your car.

A Nanny Moose's picture

Thank you for making my point.

I fail to see how pointing out the leverage that competition givers employees makes your point that employees have no leverage.

I'd gladly give up my government if you will give up your car.

False Dichotomy. Next.

Henry Hub's picture

For some reason you down arrow doesn't work. So consider this a double down arrow

A Nanny Moose's picture

Feel free to make an actual argument, when you are able. The down arrow didn't work, because it doesn't need to work.

yatikto's picture

good tree produces good fruit.  bad tree produces bad fruit.

toys for tits's picture

That's very insightful, Chauncey Gardener.

FreedomGuy's picture

Should we point out that Friedman and his wife Rose are jewish? Don't think Hitler would approve. I would like proof that Friedman's ideas are responsible for Argentina. The exact opposite is the truth as Argentina prepares anew for default.

Stockmonger's picture

Mussolini appointed Charles Ponzi to be Italy's Treasury minister.

A Nanny Moose's picture

Confusing correlation with causation.

FreedomGuy's picture

I will prefer Friedman to your moronic unsupported rants. Have you actually ever read any Friedman? Put down the hash and leftist websites and look at reality.

mrdenis's picture

"You didn't build that business".......so it's only right that someone else set the wages .....

CheapBastard's picture

What's a "Do-Gooder"?

 

 

"Urban Dictionary: do-gooder
www.urbandictionary.com/define.php?term=do-gooder

See bleeding heart liberal."

Mine Is Bigger's picture

After we've been through in the past several decades, why are you still taking this guy seriously?

alien-IQ's picture

Because some of these assholes here love anybody that hates poor people.

alien-IQ's picture

Can you imagine how glorious corporate profits would be if we can get people in America to work for free? That would surely fix the economy right?

Does anybody here really expect corporations to willingly pay the average workers a living wage? There needs to be a minimum wage and considering the rise of basic costs of living such as food and energy (not to mention Health care) in the last few years, $7.25 just does not cut it. And it's not the small business that pays minimum wage in America, it's the giants like Wallmart and McDonalds.

Motorhead's picture

Another reason these "giants" (who can afford to pay for this "regulation in the public interest") are all for the minimum wage...to stifle any potential competitors.

alien-IQ's picture

Which one of these "Giants" is in favor of raising minimum wage? Where is this evidence?

Motorhead's picture

Wal-Mart...a few years ago.

Edmon Plume's picture

Why not raise the min wage to $400/hour and we'll all be ultra rich!

Better yet, let's just print a few quadrillion and divide it among the citizenry - why even work at all for it?

Why not use price controls - that way, nobody will have to raise the minimum wage?

/sarc

DRT RD's picture

Newsflash, those jobs are not menat to support a family! They are entry level posistions.  Hell, most of the people that take those jobs are only worth $4.25/hr. My family and I own and operate 4 c-stores and a car wash.  Trust me I know.  It's just a tax increase on poor people, that doesn't account for the rest of the unintended consequences.   

 

And it's not the small business that pays minimum wage in America, it's the giants like Wallmart and McDonalds. 

 

We start out at minimum wage, we are also considered a giant according to ACA.

FreedomGuy's picture

Hey, space cadet. In a free market would you work for free? Do you know what the proper wage for everyone everywhere in every profession is? I didn't think so. How much stuff can people who make zero buy at Walmart or Gucci? Nothing. That model does not work. Do you know that businesses small and large often pay well including benefits? Some are better than others like some people are better than others. At the end of the day you have to make more than you pay out...unless you are a government. You live in a fantasy world. I hope you don't vote but you probably do.

Only governments can drive wages to zero. All the governments that do this are on the left, by definition.

You know it scares me how many people read stuff like yours and give up arrows. Leftist ideology is fed by ignorance and fantasy utopian ideas...that never quite arrive.

Liberty is hard. It requires reason, thinking past the surface and having a firm grip on reality. It is often unpleasant but the results are satisfying...like hard work and productivity.

FunkyOldGeezer's picture

Freidman along with any other relatively rich person who decries the minimum wage, ought to try living on it for a year. They'd soon call a different tune.

What the minimum wage does achieve is to set a rather low hourly wage that then becomes the defacto level for all manner of jobs, many of which were much higher paid prior to it. It gives corporates and smaller businesses a 'get out of jail free' card when setting wage levels. "but it pays minimum wage" or "it pays above minimum wage" (yeah right, a few pennioes above) have become many businesses' mantra.

Is $9.00/hour really a living wage in the USA in 2013, or anywhere near it?????

ATM's picture

Two much better questions are this  - is the work performed worth $9/hr? And do I want to do the work for $9/hr )(or something else/)

Who the fuck gave our government to power to say it is or isn't? 

Matt's picture

"Who the fuck gave our government to power to say it is or isn't? "

In theory, the vote of the majority.

FreedomGuy's picture

Good point. Let's ask why Friedman and the majority of people who probably read ZH do not work at minimum wage and have escaped it. You see the Left always sees people as stupid and incapable without their protective leadership. Yet, the truth is motivated individuals given opportunity in free markets always succeed over time. They have to produce something of value for their fellow man over time and they generally look for where their labor gets the best return or where they simply enjoy the craft and lifestyle, whether a mechanic, waiter or PhD metallurgist. You cannot centrally plan that but you can screw it up and torture it.

Turin Turambar's picture

FunkyOldEconomicIlliterate,

An offer of employment is a non-coerced, voluntary offer between two parties.  The employer voluntarily offers to pay a certain amount per hour because he'd rather have the labor than the money, and if the employee accepts the offer, the employee does so because he prefers the money to his other options; otherwise, logically, he would decline the offer.  If the prospective employee isn't happy with the compensation, then he is free to decline the job offer.  Nobody owes him anything. 

The only natural right that an individual has to a job is through SELF-EMPLOYMENT.  An individual has zero moral right to impose his demands for either compensation or work on another individual against his will.

FreedomGuy's picture

I love you, man! See my earlier post. YOU got the basis of the argument right and actually Friedman missed it, at least in this video. He was right but he missed the most important point. If libertarian-right wing politicians would argue in Congresses and parliaments based on your argument we would win over time. The Left wins because we argue on their turf about the economic consequences which are frankly more vague and distant compared to the here, now and visibile large raise some individuals will get. Then leftists look like they care more and are compassionate...even though they actually did not spend their own money to fund the raises. As usual, they forced others.

Bravo!

Turin Turambar's picture

While Friedman speaks of free markets, his utilitarian philosophy actually undermines his professed positions.  Revolutions are not waged by gradualists.  Murray Rothbard's For A New Liberty has a brilliant treatment of this exact topic within the first 1 or 2 chapters. 

http://mises.org/document/1010/For-a-New-Liberty-The-Libertarian-Manifesto

 

steve from virginia's picture

 

 

The problem w/ Friedman is he can't hold his arm out straight any more because he shakes so badly, nor can he goose step ... arthritis.

 

He's always been able to do a good 'Dr. Strangelove' bit ... in that wheelchair.

 

What is it w/ Xero Hedge, a Nazi party love fest?

 

My Dad risked his neck to kill these people, now you asshats line up to kiss their feet? No wonder the US is sinking fast.

 

 

Bazza McKenzie's picture

Well Steve, since he died more than 6 years ago, it's no wonder he can't hold his arm up.

Friedman was a Jew, so if your dad was risking his life to "kill these people" presumably your dad was a Nazi.

steve from virginia's picture

 

 

He didn't die quickly enough.

 

Israel is filled with Nazi jews.

FreedomGuy's picture

Should we tell guys like Steve the truth? Is it worth it? Should we tell him that "Nazi" stands for National Socialist?

The subtle unifying principle of all leftists is that they are suspcious of freedom. Free people don't always do what you want them to do.

Stockmonger's picture

Friedman is acting like Krugman here.  Price sensitivity for labor is relatively flat: there is work to be done regardless of how expensive labor is. McDonald's doesn't fire workers when the minimum wage rises.  It may raise prices and/or cut costs in other areas.  As long as the minimum wage rises across the board, all you are doing is increasing the poor laborer's share of the hamburger dollar and perhaps raising its price.  Paying below subsistence level doesn't help anyone.

ATM's picture

What you are really doing is simply sending those low paying jobs overseas and creating fewer entry level opportunities for workers here to gain real work skills. If not then you simply have US made goods priced out of the market and replaced by cheap imports.

Then ass wipe leftist complain that jobs have been shipped overseas by greedy companies while they shop at Walmart.

FreedomGuy's picture

To be leftist is to be myopic. McDonalds' will not fire workers as long as people will pay $10 for a burger. What leftist deny or don't get is that markets, not businesses set the ultimate price for products. if you double the wage and benefits for all McDonald's workers but the market will still only pay the same price for your burgers...you don't fire the workers. You close the whole business.

Leftists are only geniuses when they talk to each other. That is why when they take over people like you and me go to reeducation camps.

Stockmonger's picture

Obviously there is a limit to how high you can jack up the minimum wage before the whole business is unviable.  But tying it to inflation is not unreasonable.  And if all business is affected, burgers are no more expensive than alternatives, at least in labor costs.

Stockmonger's picture

How many goods are produced by minimum wage workers?  Few.  Mimimum wage is mostly service workers that can't be sent overseas.

cherry picker's picture

Obama is crazy if he thinks this minimu wage increase will work.  They don't teach reality in college and on top of that, most politicians are lawyers including Obama.

Friedman is right.  I used to run a small business with 35 employees.  For the lower earning ones, I would lay off rather than pay more as the productivity in respect to profit dollars is limited by such labor.

The current and past administrations have no clue.  How could they?  They never walked in my shoes.

Bangin7GramRocks's picture

You sir are a patriot. We should all just layoff everyone!

Kickaha's picture

Why not?  Do employers have some sort of moral duty to keep workers on a payroll, one from which you are blissfully exempt because you have avoided ever employing anyone?

No worker has a right to receive pay in excess of the value they produce while on the job, and it is utter folly for you to suggest that an employer must do so to assuage your feelings of guilt for the poverty that afflicts the world in general.

There have been many periods and places in human history where the honest labor of a man was not sufficient to feed and house himself and his family.  When that happens, people die from exposure and starvation.  It has happened many times before.  It can happen again, anywhere, at any time.  Denying that reality is a form of hubris which will only hasten the next great downfall. Civilizations continue to exist due to complex systems involving resources, energy, knowledge, and hard work.  Any government effort to fix the price of any system component will only hasten the rate of collapse.

But when times get tough, the impulse to legislate prosperity (or print our way there) takes over.   And there will always be at least one lobby (in this instance public employee and service industry unions whose jobs are hard to send overseas) willing to write the new laws, and their P.R. departments will be eager to sell the fallacy that this "will be good for all of us", when, in fact, it will mean more for them and less for everyone else.

 

FreedomGuy's picture

Kickaha, people like you give me hope. Liberty and true economics take reasoning and a grip on reality. The left neither reasons nor confronts realisty even when the painful lessons of it's own failures fill the history books. just one more try with the right geniuses and amount of power will work the next time is what they tell themselves.

Brixton Guns's picture

Do y'all hear that incridble sucking sound from the south of the border?  It just got a LOT louder.  All this really does is give even more incentive for illegals to invade and establish residency the right to vote and moar free cheese.

If anyone's seen the film Machete, this agenda does not bode well for Amerika.

Slick Barry knows this damn well, and as destructor-in-chief this is topmost among his agenda items, to crush whats left of Amerika and bring us all to our knees begging for the NWO.  A mass invasion of illegals who will support his communist policies is essential to achieve that goal.

ATM's picture

It creates a black market for below min wage work filled mostly by illegals who are happy to do the job. Cut that hole in the none-existent border fence because we are going to really have a big influx of new "undocumented Amerikans".