Economics 102

by Kerry Thomas

February 15, 2005

It's time once again for a course in basic economics in a capitalistic society.

Despite the best efforts of the Democrats/Liberals/Progressives to turn America into a socialist country, our basic economy is based upon capitalism. Capitalism is simply a social system based on the principle of individual rights. Capitalism allows us the freedom to conduct business with one another as we choose, or choose not, with a minimum of government interference.

In the words of Ayn Rand "The moral justification of capitalism does not lie in the altruist claim that it represents the best way to achieve "the common good." It is true that capitalism does, if that catch-phrase has any meaning. But this is merely a secondary consequence. The moral justification for capitalism lies in the fact that it is the only system consonant with man's rational nature, that it protects man's survival qua man, and that it's ruling principle is justice."

Enter the idea of a minimum wage.

For more than a year, the Democrats have been pushing the idea of increasing the minimum wage in Wisconsin. Their supporters are again plastering the editorial pages of Wisconsin newspapers with letters about how great it would be for "working families" to finally get a raise. This year their strategy has changed, from talk of a "living wage" to talk of social justice. These are all undefined phrases, chosen so as to pull at your heartstrings, and disengage your brain from a logical examination of the topic. But no matter what phrase they use, their talking points focus on making people feel good, rather than actually doing any good for the very people for whom they claim they are standing up.

The latest claim is that approximately $432 million would be added to Wisconsin's economy if the minimum wage were raised from $5.15/hour to $6.50/hour. It's pure baloney. But no matter. Let's play their game, using their numbers.

The figure of $432 million comes from an estimate of 160,000 workers, working a 40-hour work week for a year, and increasing their hourly pay from $5.15 to $6.60 per hour. 160,000 workers X 2000 hours X $1.35 increase = $432 million. Nice straightforward simple math. So what would happen if we increased that minimum wage to $10/hour? That would be an increase of $4.85/hour instead of only $1.35. Plugging $4.85 into our previous equation we end up with an increase of $1,536,000,000 to Wisconsin's economy. Wow! More than $1.5 Billion. But why stop there? Let's see what happens if we go to $20/hour. Result is $4,752,000,000 increase in Wisconsin's economy. Now that would be an economic kick in the pants.

The problem soon becomes evident. These numbers are not static. The number of employees working for that minimum wage will not remain a constant. Nor does this simple formula account for changes in tax status, inflation, and other basic human factors.

What the purveyors of this misinformation fail to tell you (probably because they do not understand economics themselves) is that that $432 million has to come from somewhere. It cannot simply materialize just because the government passes a new law decreeing it to be so. That money would come from the businesses who employ the minimum wage workers, and that cost of doing business would be passed along to you, the consumer, resulting in higher prices for everyone, including the very minimum wage workers it ostensibly was supposed to help. There would even be some minimum wage jobs that would disappear, as the cost of mechanization of some jobs would become attractive as the cost of labor rises.

There is not one single case in Wisconsin of an individual being forced to work for minimum wage. The people who work these jobs apply for them, knowing full well what the wage will be. If these workers are smart, they realize what most of us know, that to increase one's pay, you need to become more productive, improve your job skills, and make yourself a more valuable employee. A business compensates it's employees because they are productive to the business. It is true that the government-mandated minimum wage has remained constant since 1997. But in that time, have you improved your basic job skills? Don't you think the people who were working for minimum wage in 1997 might have improved their job skills as well?

Jobs are not a social welfare program. This term "social justice" is nothing less than socialism. It has no place in a capitalist society. By it's very definition, social justice is not justice, but punishment of successful people. The American Dream used to be that you could work hard and make a success of yourself. Today, an entire class of people have made a profession out of attacking successful people, and trying to punish them simply for being successful. It's just so much easier to sue someone who is successful than to work hard and make a success of yourself.

It just doesn't make sense to say paying someone $5.15/hour is unjust and socially irresponsible, but $6.50/hour makes everything all right. Why not make it $10/hour? How about $20? Let's just say everyone will earn $50k/year? These arbitrary numbers reek of communism, and should be repugnant to anyone who values freedom. An arbitrary government-imposed wage of any level is contrary to the principles upon which America was founded, that of individual rights and freedoms.

As for morally right, one of the greatest teachers of morality once said that if you give a man a fish you feed him for a day, but if you teach a man to fish you feed him for a lifetime.

So go ahead and call Rep. Dan Meyer at 1-888-534-0034 and thank him for doing what is morally right, socially just and economically sensible. Call Sen. Breske at 1-800-334-8773 and tell him you cannot understand why he refuses to support entrepreneurs.