The rest of the story

I was listening to the Peter Schiff show last week.  Mr Schiff was out for some reason and he had Stefan Molyneux filling in.   I was just going to link to the podcast of the show, and tell you to go listen, but I can’t find it anywhere (without registration anyway) so I will transcribe one part that I thought was particularly though provoking.
With the State of the Empire  Union having just taken place, Stef was talking about one of the presidential promises that was getting a lot of attention: raining the minimum wage for federal contract workers.  Of course he immediately dismissed this particular move of having any real impact since so few government contractors actually make minimum wage, but he went on to make an important point about the minimum wage that I hadn’t heard before: the minimum wage is a smoke screen.  It is perhaps the most glaring example of the pretty lady on the stage that distracts you from what the magician is doing.
The minimum wage actually is such a large smoke screen it is actually covers over two completely different aspects of government shenanigans.  First it covers over the fact that after twelve years of government mandated and administered schooling that you don’t know enough to be paid well enough for your time to earn a basic living.  The government both requires children to go to school for twelve years and also controls the curriculum they received.  If the later was actually helping students learn valuable skills, new graduates would be in such high demand that there would be no need for a minimum wage.  Obviously that is not the case, but rather than fix it at the source (produce a product that the market will actually want) they simply use their power to fix prices.  Sounds a lot like farm subsidies….
Second, a perhaps more subtly, minimum wage also acts as a smoke screen for inflation.  Stef did the math (and I’m sure I will mess up the dates / amounts), but generally it went something like this: in the 60’s the minimum wage was $1.25.  In 2013 dollars that’s about $9.50 – actually $1.25 more than the current minimum wage.  So even though the wage has increase 4x, the purchasing power is down 20%.  Minimum wage is becoming more of a minimum.  Taking this further, in the 60s (at least until 1965) that $1.25 per hour could have been paid in 90% silver quarters, which in 2013 money would be an equivalent of about $25 per hour.  The government has been forced to increase the minimum wage to cover up the nasty effects of inflation on the “average worker” they claim to care so much about, who would in fact be much better off if they just left the money supply alone.
All of this seems to indicate that Hazlitt (PDF Link) was right when he wrote:

The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that
policy not merely for one group but for all groups.

I wish that we had  a few more economists and a few fewer politicians…






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