Milton Friedman On The Unholy Coalitions Of The Minimum Wage
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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It's very simple. The minimum wage doesn't create jobs. It only makes it illegal to pay labor under a certain rate. That can only result in fewer people being employed. Net net, the minimum wage causes more unemployment.
ergo more communist (nee demokrat) slaves (nee voters)
Raising the min wage has the following impact
Those who have a job, might make a little more (probably not), but as a result if they do... they will pay higher taxes.
Those who don't have a job, will probably find it harder to find a job because they just became more expensive to employ (23% more expensive).
Those who have jobs, run the risk of loosing their job because of the forced raise in their wage, so they will be under more stress to perform.
The govt just wants everyone to earn as much "income" as definable by the fraudulent income tax laws, so that it can be garnished in taxes, (they want to push people into higher tax brackets with inflation.
Inflation in wages causes direct and real inflation in prices, makes it harder for the poor to buy crap.
Everything they do is fueling dependency on govt.
If they wanted to actually help the US economy.
1) Huge Import Taxes, Tax everything that comes in from overseas by 50%.(protectionism).
2) Abolish income taxes for anyone earning under 2 Million Dollars a year. (Promote Savings)
3) Stop taxing cap gains, that (promote investing).
4) Stop printing money to pay for promises that should of never been made.
If people are poor they will move to where they can succeed, you don't fucking pay them to sit there and stay in poverty. Survivalism works because people are motivated by their stomachs.
5) Stop bailing out corrupt and fraudulent banks.
6) Liquidate all debt from 1980 to 2013, just force all the banks to write it off and give them a tax break in return for the next 5 years (stop foreclosing on collateral so the economy can grow, because banks suck at managing REAL CAPITAL (REAL ASSETS) they are only good at buffing numbers.
7) The last step should be to abolish or lower the min wage to like 5$ an hour (because the economy will be soo good that 5$ will afford a family of 5 a full meal), right now Pizza is almost 20$ and people are protesting on bridges blocking traffic because the tolls are 40$ just to cross 20 miles of "toll road".
Okay Peter Schiff/Henry Hazlitt.
I read Economics in One Lesson, too.
The math is this simple. When the minimum wage actually paid drops below the cost of living the people will riot, even if just a little. When the cost of living is more than twice the minimum wage actually paid there will be mass murder in the streets.
Clear?
Now go on & argue your case but do so knowing those facts above hold.
In the extreme, this is a call for slavery/unpaid labor.
I doubt the result is so linear...i.e. the increased price of labor (price fixing at a given minimum wage rate) is probably just passed on to consumers. Result is more likely inflation than unemployment.
Youth unemployment is classic correlation/causation. There are many reasons for it.
I'm checking out Denmark because I'm thinking of living there. Can I rent an apt for 1000 bucks?
http://www.numbeo.com/cost-of-living/city_result.jsp?country=Denmark&city=Copenhagen&displayCurrency=USD
according to this website you can rent a one bedroom apartment outside the center of Copenhagen for $827 on average per month
In the extreme, this is a call for slavery/unpaid labor.
_____________________________
Slavery? But there is no need for slaves.
An unpleasant side consequence of an abundant world, which might explain why 'americans' have been working so dedicatedly to ending the abundance era.
You do not hire people because they are cheap.
That 'american' Friedman rehashed the old 'american' mantra of infinite growth. 'Americans' know how to do that.
Can any of you snarky commenters that hang out on this site explain to me how Denmark survives when the average minimum wage is $17/hour? Last time I looked Burmeister-Wain, Aalborg, and A.P. Moeller are still located there. They have not moved to China. So, smart asses, how do they survive doing this? By the way, they have determined that a person needs $17/hr to live and not in poverty.
See my post above--the cost is passed on to consumers and everything rises. Gas is $10/gal in Denmark, too (not that a wage manipulation is the only cause of this).
Denmark is just another Socialist state on the way down. (http://www.nytimes.com/2010/08/17/business/global/17denmark.html?pagewan...). Like all Socialist states it will bloom for a short while and then collapse. Sweden, Norway, and Denmark are all losing their entrepreneurs to countries that don't tax and regulate them to death.
socialism is fully sustainable with good accounting and consent.
There is no minimum wage in Denmark.
Try another one.
Minimum wages in Denmark "None, nationally; instead, negotiated between unions and employer associations; the average minimum wage for all private and public sector collective bargaining agreements was 103.15 kroner per hour, according to statistics released on March 1, 2009[5]""
! Danish Krone = 0.18 USD that would give you 103.15x0.18=18.57 USD in 2009.
That's not a minimum wage. That's a negotiated salary. There's a huge difference.
There's also no burger flipping union in Denmark and that's what minimum wage jobs typically are.
So whatever that trade unions, universities and major employers set wages. It's not the same thing.
Try a source that's not Wikipedia.
Cry me a fucking river with your bullshit claims of lost jobs and inflation. Minimum wage - yeah as in - "I'd pay you less but it's against the law".
LOL - more money competing for the same goods is the very definition of inflation.
Inflation is the reason why they are trying to raise the minimum wage, not necessarily the other way around.
"They" are the cause of the inflation that makes the dollar worth less, which requires them to grandstand about how they are fighting to pay you more, because you'll need more dollars to exist at the same level as before they caused the inflation.
I'd pay you more for a higher-skill job, and so would every other business. But if someone with your qualifications will work for less, I'll hire them.
I'd move my company overseas and employee people who will work for less, so as to save you the shame of having a low-paying job.
See how that works?
US has the lowest minumum wage in the developed english speaking world ... yet countries like Canada anbd Australia have higher minimums and lower unemployment rates ... go figure ... maybe the folks making minimum can actually afford to buy stuff ... creating more jobs. go figure.
Friedman has always been a MORON.
The perpetual intersest growing , debt based money system cannot stay in business without a new crop of low paid slaves to keep the ponzi scheme alive. Guess what Bernanke, Dimon, Fuld, Pauslon, Buffett, Obama, Bush, Cheney , Condoleza Rice, and the rest of the international team players, there is no way the US can grow its way enough to keep up with the massive debt you have run up with your schemes. The system will reset and everyone will get hurt. After the collapse maybe who ever is left standing can start all over again, this time with the government printing it's own money without the ursury of the central money fiat system. Maybe then monetary theory will be taught in school if there are any schools left.
Ask anybody on the street "How is money created?" and the said fact is we have a country of uneducated people who if thier eyes were opened would revolt.
If you have a company that relies on paying minimum wage to the majority of its employees, you don't have a LEGITIMATE business, IMO.
That raise in minimum wage will raise the cost of a burger/pizza to what? Certainly not more than a one-off, few pecent. Well, wages etc might be 40% or 50% of costs... yeah right, like a dominoes pizza has labour costs of that much. In the UK dominoes pizza selling for £12.99 has ALL IN costs of about £1.75, max.
All those who espouse free market live in utopia.Their is no such thing as a free market and there has never been and there can never be.Free market ought not to be dependent onTBTF bailouts, tarps and QE's.As far as revolving door clash of interests,free wheeling money is free speech and policy,laws and regulation are determined by lobbyists is not free market.Where power wealth and media collude to create hype that drugs us to believe that all is well and more of the same will help is not a free market.When highly leveraged rampantly speculate with exotic financial products whose notional value is thrice the globes assets is not a free market.
A free market to be really free ought to exist on its own with the survival and thrival of the fit following same set of ethical laws beneficial to the society at large.Where violators and manipulators punished according to the severity of their misdeed.Such a market under no guise would made to be dependent on a fiscal stimulus and the central planners intervention to help it to sustain. While how passionately we debate raising the minimum wage in this supposedly free market of ours.The choice is stark for those dependent on the minimum wage either try working to make a living or destitute themselves and be a moocher to the free marketeers.How ironical is it that right now the so called free market disciples and the minimum wagers are both dependent so much upon the borrowed and created money.
Price controls always work, just ask the Soviets.
Isn't there a law for "too f%&king poor to live" minimum wage.
We should just follow market dogma, supply of workers is infinit, therefore
I can pay them a dollar an hour, or they can fuck off, if they prefer.
Already, without reading much, I can kick his theory into the weeds.
"guaranteeing that those who do not deserve the raise, will be unemployed".
Well, duh. The employee has to be good , or he's in deep shit anyway. What
sort of argumental is that?
And, none of his ass-kissing fans ever produced any data on that. So, we're
supposed to believe what Chicago's Favourite Fascist said on a talk show?
I thought we were reading ZH to get wise.
It starts in elementary school with people like you, doesn't it? You think you can fool around and skate by because the system lets you. You expect the world owes you something: employers, governments at all levels, family, friends. You never think that if you can't produce, not just enough for yourself, management, share holders, but the ever growing Government, your efforts are not worth your pay. Guess what? That is called math and it rules the universe.
To this day, I carefully balance the time dedicated to development of my skills against the time I reserve for family and friends. The company I work for pays me what I'm worth to them, but if they did not, I'd find another company that did. Yes, I recommend you get wise or be satisfied being poor, bacause the economic distortions that allow you to think the way you do are about to re-balance.
I love Americans that think they are worth more than they really are.
Hey dude, if you're so valuable go move to the Arctic, because apparently you have some god-given "skill" that is the same any where on the planet.
You need a little dose of WAKE THE FUCK UP.
You're just LUCKY. Stop looking down on other people that are less lucky and wise up.
Corporations get "limited liability" to break tons of rules, laws & destroy real capital in the form of food, water, air quality & land use, eminent domain & special deals with government.
You're damn right they owe me something.
Level the playing field again so they aren't above the law & we'll call it even, shall we?
You missed the irony: WHO doesn't deserve a meritless raise in this case? The government - who has no idea who your employees are - has decided that all employees merit a pay increase. BUT employers know that an increase from $8 to $10 per hour, for example, can be paid for by letting every 5th employee go and making the rest of them EARN that extra by working harder. Not to mention the savings on workman's comp, FUTA, FICA, SUTA and all the other monies employers have to pay for each employee. It's a net win for the employer.
Would you be upset if the same government who has the power does the inverse - lowers the minimum wage, so that suddenly all employees across the board get a couple of bucks less per hour, deserving or not?
Again, the main BAD assumption with raising the min wage.
What if a company is making huge profits because of the currently low min wage and glut of labor in the workforce?
Why do you assume that if you raise the limit, the company can't simply absorb the costs?
Or just equally important, why do you assume a company would hire more people if the min wage were lowered? Why wouldn't they just make more PROFITS?
The impact of Raising/lowering the min wage is not that simple.
Milton Friedman: One of the last adults to leave the room. Economically, we are left with the equivalent of "Lord of the Flies". R.I.P, you good, articulate, and patient man.
http://www.nytimes.com/2006/11/23/business/23scene.html?_r=0
"His proposal, which he called the negative income tax, was to replace the multiplicity of existing welfare programs with a single cash transfer — say, $6,000 — to every citizen. A family of four with no market income would thus receive an annual payment from the I.R.S. of $24,000. For each dollar the family then earned, this payment would be reduced by some fraction — perhaps 50 percent. A family of four earning $12,000 a year, for example, would receive a net supplement of $18,000 (the initial $24,000 less the $6,000 tax on its earnings)."
.
Not only does this mean reducing employees or number of hours at low wage businesses that hire poor untrained workers, but the poor tend to shop at these types of businesses and a higher minimum wage wil cause those businesses to raise their prices!
Uh yeah, how's that working out for Walmart.
The reason you can't throw out some blanket statement about "they will lay off workers" is because you have no fucking clue how large marginst are because the company is fucking it's employees over.
Walmart makes $100s of billions because they pay a poverty wage with no benefits.
Would they cut workers?? Or would they compromise to maintain some profits??
Also, look at the recent sales at Walmart, apparently paying slave wages comes back to bite you in the ASS!
Indeed I'm probably on my 4th or 5th year of Walmart-boycott.
Friedman killed the last vestiges of the gold standard once and for all with Nixon in 1971. He left us with the system we currently suffer under, a system of irredeemable fiat paper. Brilliant as he may have been, for that error, I'm afraid his legacy is ruined. In the words of Walter E. Spahr; "Irredeemable currency is a cesspool in which disease and human conflict are spawned. It is a wrecker of people, of families, and of nations. It is a road to the despotism of dictatorship"
Or how about Keynes, "...it engages all the hidden forces of economic law on the side of destruction which not one man in a million is able to diagnose"
Here is a great paper about Milton's legacy, and what he left us with.
http://www.professorfekete.com/articles/AEFWhereFriedmanWentWrong.pdf
How much do minimum wage employees pay their baby sitters ? Minimum wage law drives entry level work off shore ! Milton Friedman was a brilliant and articulate economist .... we need a million more just like him !
He said "negro." That's a code word for "black" wihich is a code word for persons "of color" which is a code word or a code word for "voter." We must disregard anything ol' Milt says because he used code words of code words to accurately describe the decision process of a small busineess owner. If you don't think so, live in Europe for a few years where their socialism has been the the most effective cementation of the class system since Napoleon.
dog whistle we much?
This is bullshit.
So who is the employer going to hire at 2.50? A rocket scientist?
He still has to hire somone to clean the shitter. Instead of 2 bucks that person gets 2.50.
Friedman and his school of thought was totally wrong - he is a fucking idiot sycophant to the elites and says whatever furthers their goals.
either you left your sarc switch on or you are most definately not a rocket scientist...
Jew trolls can go blow yourselves.
first a mandated minimum wage and then a mandated hiring law... problem solved (sarc)
Milton smacked down the keynsian way
jb
Some interesting comments in this thread.
But really, shouldn't you all be doing something more useful this weekend, like buying a mattress?
It's your patriotic duty.
that was the bush line, go out and shop and beat those terrorists.
The four winds... That is what you might call 'american' people.
'American' people blow in so many directions.
It is funny. So we have the looting class,ummm, well, no, they prefer to parade themselves as the productive class, aka the middle class, that keeps blowing about production, productivity etc
On the other end, they can cheer for an 'american' economist connecting minimal wages to unemployment etc
Since when a producer hires people because they are cheap?
No matter how cheap one is, if the environment is no supportive to production, you do not hire. You wont add extra, unneeded consumption just because it is cheap.
Oh, wait, we are speaking about 'americans' whose mantra has been that the more you are consuming, the more you will get to consume in the future.
So, yeah, make it cheap as cheap, and 'americans' will consume. Even when there is nothing to consume. As long as it is cheap.
'Americans', led by the middle class, are also well known to choose people who are represent them.
Just as the bike race Lance Armstrong was that miracle of hard work, probity, honesty, tolerance, resilience etc that 'american' economist as a champion for 'americans' is of the same wood.
JKC, when you think that the Romans put on their thinkers the obligation to suicide if their way of thinking was shown to be a disaster, you understand how much of an advance for humanity 'americanism' has been.
AnAnonymous travests reality here:
What's the point of this text? Withdrawal from reality?
Was it not part of Mao See Dung's plan to create one's own reality?
Chinese citizenism government lives in reality, they know their assets, cards hand and play them quite well. But to discuss that, one might deal in reality. Not in AnAnonymystical fantasy.
Alas, alas, alas, quadruple alas, now the point of this text is become clearly: AnAnonymous promoting his Chinese citizenism fastfood franchise Just Killed Cat.
When you think that the Chinese citizenism citizens put on their wokkers the obligation to female infanticide if their way of cooking was shown to be a popular menu item, you understand how much of a regression for humanity Chinese citizenism has been.
No words about the requirement for a word like USism?
Or how the behaviour of US Americans from day one was a source of shame?
Too bad, that expression of 'american' sentiments was very funny...
AnAnonymous, the blossom of Chinese citizenism growing from the crap strewn roadside, said:
Hey, if that's your new catch phrase for US citizenism, ummm I mean americanism, go ahead and use it now as your label for all world problems. Perhaps substitute it for US citizenism in your rejected thesis and resubmit to the thesis committee. Perhaps the term brings 88 double lucky prosperings gratuitously.
No surprise here. When you are running a racket of distorting the fabled past and farming the myth, best to stay on the distortion racket path with fabrications of diligence.
Perhaps it is good then for inclusion in your act at the Chinese citizenism squat-down roadside comedy club.
'American' wants wage making splendid 'iDignity' over glamorous trade benefiting 'economy' for algorithmic high frequencing turding