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Thursday, December 5, 2013

Cause and effect

I'll take a little break from Obamacare today, to do a mind exercise with you. Maybe you've already thought this through before. Kudos if you have.

Here's the problem (Drudge headlines):

OK. So people receiving minimum wage aren't happy, because they don't have much to live on. That's understandable. They want higher wages. Nothing wrong with that. However, if their wages are raised, what will happen? Will they actually be any better off? Has raising minimum waged helped in the past?
First, if minimum wage is raised in any sort of significant way, the companies who pay them will be in a financial bind themselves: either cut some jobs to pay fewer people or raise prices on their products and services to make up for it. There is no precedent for a company to raise wages but not make up for it elsewhere. Doesn't happen. 

This is the same as with anyone's personal budget: if you have a relatively fixed income (as many companies do or try to do - sometimes they take losses, sometimes they have big gains but it's never forever) then if you spend more money in one area then you have to make cuts in expenses elsewhere or find a way to earn more money.

Second, if prices are raised, that hurts everyone. Inflation. Our dollars buy less, including the dollars of the recently raised wages. Meaning they're no better off. On the other hand, if a company cuts jobs instead of raising prices then obviously that hurts employment rates of those who are presumably underemployed to begin with.

Now, I understand that the people working these jobs are in a no-win situation. They literally can't win in an economy like this one. Education is the key to a better income but they need money to get it or the credit to get a loan. It used to be that the kind of people in minimum wage jobs were predominantly high school students, not people paying rent and grocery bills, etc. How do we fix this? I have no idea. A robust and growing economy (meaning more net profits and not losses) would go a long way, though, because then there would be so many jobs as companies expand that trained workers would be scarce and employers would provide training to those normally considered underqualified, thus circumventing the problem for the minimum wage earner.

How do we achieve a robust and growing economy? To a large degree, the government can lighten the load on businesses (employers) with lower tax rates, less of a regulatory burden which require time and money with which to comply, and fewer laws about things that employers *have* to do for full-time employees. Is getting rid of Obamacare sounding good to anyone else right now?

PS. Government wants more and more taxpayer money rather than making cuts in their budgets. They are not living by the simple rule of not spending what you don't have. Instead we have annual $1 Trillion deficits which is obscene. Cut spending! Cut bloated federal budgets which still grow annually even though Americans who pay the taxes aren't making more annually!  Cut programs! If we can't pay for it, we shouldn't have it!

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