Jobs Americans Won’t Do?

By Simon Grey, on December 1st, 2011
It looks like that canard is just plain wrong:

Unemployment rates have fallen in Alabama amid new legal pressure on companies to comply with a popular immigration reform law.

September was the first full month that the reform was in force, and the unemployment rate fell from 9.8 percent in September to 9.3 percent in October, according to a Nov. 18 report from the state government.

The rates fell from 9.9 percent to 9 percent in Etowah County, from 8.8 percent to 8.1 percent in Marshall county, and from 11.6 percent to 10.6 percent in DeKalb county. [Hat tip: Karl Denninger.]

As I’ve written before, illegal labor and minimum wage don’t go together because illegal labor prices legal labor out of the market. This is very simple economics. If you increase supply of something without increasing demand, prices will drop. And, if there is some sort of price floor in that market (think minimum wage), then that which has a price floor will be priced out at the margin. Therefore, when you decrease supply of something while demand remains stagnant, price will rise and marginal purchases will occur again. Incidentally, that’s precisely what happened in Alabama, and that’s what should happen in every state.

If there are any governors who might be squeamish about the idea of booting illegals back to the third-world, dirt-ridden country from which they came, let me offer you three benefits, beyond the simple reduction in unemployment rates, for your consideration.

First, government expenditures will decrease because you will no longer have to pay for free-riding illegals. Education costs, medical care costs, law enforcement costs, etc. will all decline because you won’t have to pay for social programs for illegals, or police them.

Second, tax revenues will increase. If people earn money, they will have taxable income. They will also inevitably spend some of it, which means increases in sales tax revenue. There might even be indirect increases in property tax revenue, since increased employment should increase demand for property at the margins.

Finally, this will head off potential political unrest. In spite of multi-culturists’ best attempts at convincing people that people from different cultures are all the same, the simple fact of the matter is that people from different cultures are different from one another. Another simple truth: People hate people who are different from them (just ask the Jews what the Germans thought of them in the 30’s), and they love to scapegoat people from other countries and cultures. Sometimes this can be violent.

If, however, you kick illegals out your state, they won’t be around to be scapegoated, which means that you have likely prevented bloodshed. Also, with increased employment as a result, you have a population that will not be as inclined to view violence against other ethnic groups as necessary.

Frankly, if this is not enough to compel you to implement a policy similar to Alabama’s, then you are simply unfit to be a governor, and will deserve the wrath of the voters during the next election or uprising, whichever comes first. Don’t say I didn’t warn you.



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Do we need minimum wage legislations?

By G.L.C., on March 11th, 2009

Minimum wage laws are against the law of supply and demand. Wages are based on the supply of and demand for labor. If the supply is low, wages will be higher and if the supply is high, the wages will be lower. If the demand is high, the wages will be high and if the demand is low, the wages will be lower. The market price of an individual labor’s wage is determined by the supply of and demand for particular skills of that labor. Employers pay the lowest price for the specific skills and labor attempts to find the employer paying the highest.

If the consumer does not value a product in the market, the prices of all factors involved in the production of that product including labor will fall and vice-versa. Real wages will also rise if the workers become more productive.

If the government through legislation raises the wages, the demand for labor will fall and some labor will not have any employment. It is more likely that the less experienced and young workers will be the ones at the receiving end. Minimum wage legislation prices the least employable out of the market and makes them unemployable. If an employer feels that a worker is not likely to produce at least the value of the wage paid to him.

Increase in minimum wages pushes up the cost of individual businesses. Most businesses will pass on the increased in the wages to the end consumer.

Minimum wage legislation will inevitably create unemployment. The ones who are most affected are those at the bottom of the economic pyramid. Labor valued by employers at less than the mandated minimum are likely to be unemployed. It increases unemployment amongst the young and unskilled.

The most obvious beneficiary of minimum wages legislation are unions and their members. The median weekly wage for union members is higher than for nonunion workers. How successful an union is depends on its ability to maintain high wages and job security for its members or else it will loose its members. To obtain higher wages, it becomes necessary to exclude some labor from the market. Only a small percentage of the population will be benefited by increase in the minimum wages. This benefit comes at the expense of the least experienced, least productive, and poorest workers.

Supporters of minimum wage legislations claim that without minimum wages employers would drive down the wages to extremely low levels which would make it very difficult for the workers. This is just not true. Many businesses pay higher wages than mandated by law.

Increasing the minimum wages will not result in an increase in the real wages. Although minimum wages have been fixed over the last few years, the average pay in the United States had been increasing steadily. This is not due the efforts of the policy makers in Washington DC. Any attempts to increase the minimum wages would have a negative impact on the economy. It will affect the capacity of the economy to generate prosperity for the less skilled.

Instead of trying to influence minimum wages through legislation, the government could do very well to ensure a booming economy in which lots of businesses are opening and expanding thereby increasing the demand for labor which in turn increases the wages.



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How the Minimum Wage Benefits Corporations at the Expense of Workers

By J.D. Seagraves, on October 1st, 2008

If there is a silver lining to the dark clouds on Wall Street, it’s that people are finally waking up to the realization that something is fundamentally wrong with the U.S. economy. Unfortunately, most citizens accept long-refuted economic myths and, thus, incorrectly prescribe more government to cure a problem caused by too much government. Students of the Austrian school of economics know that government intervention into the economy—regulation—almost always has the opposite of its intended effect. A good case study for this is the minimum wage.

The federal minimum wage was $5.15 per hour from September 1, 1997 to July 24, 2007. Thanks to the money-supply expansion of the Federal Reserve, the purchasing power of that $5.15 dwindled to $3.99 over the ten-year period, meaning that minimum-wage workers received a 23% pay-cut in real terms, even as their nominal wages remained the same.

The Minimum Wage in Action Encourages Inaction

Obviously, a person earning $5.15 an hour for the standard 40 hours per week—$206 before taxes—could not afford to support a family. This was one of the arguments for raising the minimum wage to $6.55 (it will go up to $7.25 by 2014). But are all wage earners supposed to be able to raise families on their income?

Consider the single person, fresh out of high school, who has no interest in college. In fact, he has no interest in leaving his parental abode, where Mom does the laundry and Dad pays the cable bill. He wants as much money as he can get for his labor, of course, but he has no need to support a family. And since he’s a bit of a slacker and not all that bright, he doesn’t have the skills to merit $6.55 (plus payroll taxes, workers’ compensation, unemployment insurance, etc.) in hourly pay. In order to find employment, he’ll have to stumble upon someone willing to pay him more than he’s worth.

Maybe our slacker could add $5 per hour of marginal utility as the third worker at a donut shop—marginal utility tends to decrease as the number of employees increases. The slacker would be happy to work ten or 12 hours a week at this rate, which would allow him to buy a new video game every Tuesday. But the donut-shopkeeper cannot afford to pay him $6.55, which would result in a loss of $1.55 an hour for every hour the slacker worked, so as a result, the slacker continues to mooch off Mom and Dad, never getting a chance to build up the work experience that could lead to better jobs in the future—and a new outlook on life.

Free Market vs. Government: How Wages Are Set

Employees are generally paid based on the amount of profit their work contributes to their employer’s bottom line. After all, in a competitive job market, employers are incentivized to pay as much as they can afford to in order to attract the best workers. Government regulation, however, leads to diminished competition between employers and more competition between employees. Regulation, including the minimum wage, is what pushes wages down.

For example, imagine the government set the minimum wage at $25 per hour. Some people in the $20-$24 range would get a pay boost, but people earning much less than $25 would undoubtedly be let go. After all, if they were really adding more than $25 of hourly utility to their employer, they’d be making more than $8, $10, or even $15 an hour.

In this scenario, unemployment would be very high, and thus jobs would be extraordinarily scarce. Thus, instead of employers competing for employees, job-seekers would be fighting one another for jobs. This would push wages down, not up, and healthcare and other fringe benefits would unquestionably be cut.

The $25 scenario might be seen as a little extreme, but the principle holds: when you mandate a minimum wage, workers whose labor contributes significantly less than that wage to the company’s well-being will be fired, and the scarcity of the remaining jobs will lead to greater competition among employees, not employers. And far from hurting only “slackers,” minimum-wage laws hurt the most vulnerable members of society.

How the Minimum Wage Promotes Crime

Consider this: when people are priced out of the job market, what do they do? They can turn to a life of government dependency on welfare, or perhaps, in an effort to preserve their dignity, they can turn to crime. Yes, crime can be honorable in the interventionist state. After all, anyone who works for less than the minimum wage is by definition a criminal, as is their employer. But too many people, who would otherwise be productive workers in the “overground” economy, do turn to lives of actual violent crime when they have nowhere else to turn.

Poor people in the inner city are most susceptible to these deleterious effects of the minimum wage. Employers want work experience, which is impossible to get if you never have a first job. And you can’t get a first job when your marginal utility is less than the minimum wage. In the old days, people could agree to work for initially low wages to get their feet in the door, but this is illegal now. And even worse yet, inner-city entrepreneurs, who could better their impoverished communities by providing jobs, are stifled by the minimum wage and other regulatory red tape.

Who is the Minimum Wage Good For?

One common critique of raising the minimum wage—that it causes inflation—is 100% false. Only expansion of the money supply can cause inflation, and raising wages does not produce more money—only the Federal Reserve can do that. However, this inaccurate criticism is actually worthy of consideration because, if the minimum wage did cause inflation, it would actually be less destructive than it is. For if it simply caused prices to rise throughout the economy, then employers would be more easily able to afford the higher wages. The truth is, it doesn’t, and they can’t.

So the minimum wage is clearly bad for workers and entrepreneurs and good for the government, which expands its sphere of influence as more citizens turn to welfare and criminality. But left-liberals should also note that, by tightening the labor market, the minimum wage benefits large corporations, too. After all, why do you think Wal-Mart supported the most recent minimum-wage hike?



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