Will Teenage Minimum Wage Hurt The Poor?

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Talk to any restaurant owner and you’ll immediately get two comments: “Covid was H-E-double toothpicks” and “We might not survive Albany’s minimum wage mandate.”

Of course, both points cover many different types of businesses, but it’s the latter sentiment that impacts businesses that rely on entry level workers to butter their bread, especially restaurants (yes, the metaphor was slyly chosen).

Interestingly enough, up until 100 years ago, the Supreme Court deemed minimum wage laws illegal. In 1923 the Supreme Court declared it “simply and exclusively a price-fixing law.” Once FDR threatened to pack the Court, the justices began changing their tune. In 1937, the Court birthed the “living wage” concept when it decided “a single employee was helpless in dealing with an employer… he was dependent ordinarily on his daily wage for the maintenance of himself and family.”

Few would argue that the cost of living in New York City and its surrounding environs far exceeds that of Western New York. Albany practically acknowledged this when it raised the minimum wage to a “living wage” a few years back. The raise became effective quickly down state. In our neck of the woods, it rolled out slowly over several years.

But it rolled out nonetheless.

Now, this has been explained on these Commentary pages before (see “Lemonade, Minimum Wage and Daddy’s Tough Decision,” Mendon-Honeoye Fall-Lima Sentinel, May 4, 1989), but almost any honest economist will tell you raising the minimum wage never works.

You’re smart enough to know this without the need of asking an economist. The proof it doesn’t work is evident to all. What more evidence do you need to understand raising the minimum wage is a failed policy than the simple fact that they keep raising it. If it really worked, they wouldn’t need to raise it again.

There’s worse news here.

It’s not that folks, and elected officials in particular, who are willing and enthusiastic members of the minimum wage cult don’t know economics (can anyone ever really know economics?). No, it’s much worse than that. It’s that they either don’t know or plainly choose to deny math.

And from this mathematical illiteracy spawns much of the economic myths the headlines of the national media swim in every day.

Never mind the minimum wage myth (for those who want to learn more about it, I’ve posted the link to the 1989 Sentinel article in the online version of this Commentary). I’ll add one thing, though, since it’s reflective of some of the current discussion (and I’m being charitable when I call it that).

Before I go any further, allow me a blunt caveat. What I’m about to say applies only to a mandated minimum wage. Wages can quickly exceed any mandated minimum wage when employers find there aren’t enough workers to fill the available job slots. That is a very different situation (and one that may exist in portions of our community) than the one that arises from a mandatory minimum wage.

Recently, the president of the Western New York Chapter of the New York State Restaurant Association was interviewed on a local TV station. He complained that, while could understand paying adults $15 an hour, he could not see why it was necessary to pay unskilled teenagers the same minimum wage. Regardless of what Albany says, his view faithfully represents those in his line of work.

Needless to say, there was a vicious partisan response to the claim of this businessman. Among the more telling was that “teenagers need to make a living wage, too” (this person then went on to explain why because of college, etc…).

The point is important, because it opens up the question as to what is a “living wage.” Is it the same for the parent as it is for the child? If this is the case, does that mean the parent’s “living wage” is less if the child also works? And what if both parents work? Does that mean their individual “living wages” are less than that of a household where only one parent works?

All interesting questions. They’re easy to answer if you depend only on math, but a lot harder to determine if you try to answer as a philosopher would (and, don’t forget, the definition of a bad economist is one who doesn’t realize he’s an applied mathematician and instead falsely believes he’s a philosopher).

If you want an economic exercise that eliminates the philosophy, you need simply turn to income inequality. This is related to the minimum wage issue in a very real sense (but totally unrelated to the concept of wealth inequality, which we will ignore here because it lacks any semblance of definitive causality).

Income inequality exists because people who provide greater value get paid more. For example, you willingly pay your doctor more than your auto mechanic. And you pay your auto mechanic more than you pay the neighbor’s kid who mows your lawn. Actually, because you have a kind heart, you may actually pay your neighbor’s kid more. But you won’t pay a generic lawn service company more.

In its most basic form, income inequality is desirable because you want to get good service. That’s all there is to it. To think otherwise would admit to a lack of fundamental understanding of the free markets that have made you the person you are today. And that’s a sad place to be. So don’t admit it unless you know for sure the other person doesn’t know any better either.

Now, here comes the brutal bluntness of math.

The other reality of income inequality is this: as the standard of living grows, so too will income inequality. In other words, the greater the income inequality within a given population, the greater the economic success of that population.

Here’s an example. Start with these three people: Dick, Jane, and Sally. Dick doesn’t have a job, so his income is $0. Jane has an average job, so her salary is $50K a year. Sally is an entrepreneur and she earns $100K annually. We all agree these are fair and equitable salaries given the value each worker provides.

Let’s say the economy expands by 100% (because the math is easier) and that everyone’s income doubles as a result. That’s fair, right? Everyone increases at the same percentage rate. You can’t be more equal than that.

Here are the new numbers. Sally now makes $200K/year, Jane makes $100K/year, and poor Dick, well, he’s still poor. His income remains $0.

But, wait. Sally, the highest earner, received two-thirds of the new earnings. Jane only got a third and, poor Dick stayed poor (or did he get poorer?) got nothing.

This is how income inequality successfully measures a growing economy, which in turn causes an increase in the standard of living.

Is this income inequality unfair? No. The relative standard of living of Sally and Jane increased dramatically. The only one left out was Dick. But you can’t say he got poorer. Sure, he went from earning $50K less than Jane to earning $100K less than Jane, but in both cases, he still earns the same as he did before.

There is one thing that can make Dick poorer: inflation. If the cost of living goes up, Dick drops further below the poverty line. There may be various “safety nets” to help him get along, but, based on the pure unforgiving mathematics of it, he is poorer in a sense.

Here’s the real bad news: Raising the minimum wage has the combined effect of inflating both salaries and the cost of living.

In the first case, increasing the minimum wage has a tendency to raise wages across the board (because supervisors want to earn more than the people they supervise, otherwise, why would they take on the added work of supervising). While this impacts wages in the same way economic growth does, it does so without necessarily having economic growth).

In the second case, raising wages raises the cost of doing business. When the cost of doing business rises, businesses will raise the costs of the goods and services they sell. This raises the cost of living for everyone consuming those goods and services.

You might say, “Why wouldn’t the business simply cut employees to keep costs low?” That’s a good question but the answer is the same. Fewer employees will lead to fewer widgets being made. And the Law of Supply and Demand tells you when the supply of widgets goes down, the price of buying one goes up.

In either case, the result is still the same: Dick gets poorer because the poverty line moves higher.

And when you don’t have economic growth with inflation, your end up with “stagflation,” something we last experienced during the Carter presidency in the 1970s. That means you don’t experience an increase in the standard of living commensurate with an increase in the cost of living.

Nobody wants that because it makes poor people poorer.

So, the next time you hear someone say we need to raise the minimum wage to a “living wage,” turn to them and ask, “Why do you hate the poor?”

Hooray For The New Space Race!

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Photo by David Cowan from FreeImagesAn amazing thing happened in the course of a week and a half this month. Did you notice it?

On July 11th, Richard Branson and his Virgin Galactic spacecraft, fulfilled a pledge he made decades ago to fly into space. He brought along five others in his rocket plane.

Nine days later, and on the anniversary of Neil Armstrong’s first steps on the moon, Jeff Bezos took a crew of four to the edge of space in his Blue Origin rocket. Aboard with the Continue Reading “Hooray For The New Space Race!”

Here’s Why You Always Ask The Obvious Question

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Photo by Troy Sherk from FreeImagesHow many times does this happen to you?

Someone asks you for help in dealing with another person. It could be a negotiation, it could be to convince them, it might even be to ask them for a favor. You judiciously listen to their plight, absorbing where each party stands and what exactly the person seeking your help wants.

In your mind, you construct a verbal argument carefully built to nudge the other party towards the position sought by your friend. You start by suggesting your associate ask the Continue Reading “Here’s Why You Always Ask The Obvious Question”

‘There Must Be A Pony In Here Somewhere!’

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If you’re old enough to remember simpler times, you’ll recall this title as the punch-line to one of President Reagan’s favorite jokes. The gag revealed not only Reagan’s engaging sense of humor, but also a lot about his political philosophy and his outlook on life.

The essence of the story goes something like this. It’s Christmas morning and two young brothers hurriedly amble towards the Christmas tree to discover their gifts. On one side lay piles of wonderful toys for one of the boys. He looked at it and sorrowfully said, “They’ll all be broken in a day or two.” The other boy’s gift, on the other side of the tree, was nothing but a pile of manure. He quickly grabbed a shovel and began to dig, joyfully telling his dour sibling, “There’s must be a pony in here somewhere!”

It’s the age-old tale of the wonders of optimism contrasted with the annoyance of Continue Reading “‘There Must Be A Pony In Here Somewhere!’”

The Great American Maxim: Stand Alone And Win

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The Conqueror“The game was created to demonstrate the futility of individual effort. Let the game do its work… If a champion defeats the meaning for which the game was designed, then he must lose.”

So says Mr. Bartholomew in 1975’s classic film Rollerball. It’s an American tale. An epic retelling of the classic mantra that fills the heart of every red-blooded citizen from the very founding of our country.

Don’t believe me? Just look at some of the most popular books, films, or any other place where a character must confront personal and public obstacles in heroic fashion. The most compelling of those stories are built around a single individual.

No, it doesn’t take a village to succeed, it takes self-discipline, self-reliance, and, ultimately, Continue Reading “The Great American Maxim: Stand Alone And Win”

Let’s Start Laughing Again!

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Everybody loves to laugh. So why don’t we anymore?

This isn’t funny. It’s true.

If you want to know the reason why, go to almost any social media platform. For that matter, read any headline. Whether from the right or from the left, you’re vilified once you stray too close to the shoulder of an ever-narrowing path.

Time was you could walk smoothly in a sea of honest humor. You’d laugh. You’d cringe. You’d get that awkward feeling. But it was all good. You accepted this variety of hits and misses because you liked to laugh. And there were enough hits to keep you laughing which made the trade-off worthwhile.

It seems today people would rather get angry than laugh. They’d prefer to take the easy Continue Reading “Let’s Start Laughing Again!”

How Has Your Workday Changed?

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It’s been a year. For twelve months we’ve been (or at least many of us have been) working from home. Even those fortunate enough (or unfortunate enough, depending on your perspective) to have returned to the office have discovered there’s no going back to what once was.

If you can take a moment (do you even have a moment anymore) to sit back and consider the evolution of work, it may strike you we’ve come full circle.

Skipping caveman times, let’s accelerate right up to what is known as the “Agricultural Economy.” You remember learning about that in school, don’t you? It existed pretty much Continue Reading “How Has Your Workday Changed?”

Forget About The Known Unknowns, It’s The Unknown Unknowns That Get You Every Time

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There’s an old adage that stipulates “generals are always fighting the last war.” This says more about the stultifying effects of age and experience than it does about military acumen.

As we live our lives, we accumulate knowledge. We use this knowledge to provide convenient short-cuts when we make decisions. That’s a good thing.

But those short-cuts assume a certain kind of status quo that cannot exist. That’s a bad thing.

Since we’re on the subject of old adages, there’s one from ancient Greece which warns “you can never step foot in the same river twice.”

At first that makes no sense. Why, just about any GPS will lead you to the same river time and time again. You can even dip your toe in each and every occasion.

Ah, but is it really the same river? Has not the water you touched that very first instance traveled far down the river and probably emptied itself into some larger body of water?

You see, a river is like time. It is constantly moving. The only way to make it stand still is to Continue Reading “Forget About The Known Unknowns, It’s The Unknown Unknowns That Get You Every Time”

Blackballed Again: Are You Prepared?

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Be honest. If the title had been “Are you prepared to be cancelled?” would you be reading this first sentence? Or how about “Are you prepared to be de-platformed?”? Would that have lured you in? Or does it sound too geeky?

The fact is, those modern-day synonyms merely reflect an awful tradition that dates back centuries, if not to the beginning of man’s time on Earth.

Indeed, there’s a really bad 1986 movie called The Clan of the Cave Bear. It stars Daryl Hannah, whose main character is ostracized from her Neanderthal family. As far as I can tell, they blackballed her because, unlike all the brunettes in the clan, she had blonde hair. (Of course, being caveman times and the lack of adequate shower facilities, perhaps it would be more accurate to describe her as a “dirty blonde.”)

In terms of good cinema, there’s always Looney Tunes’ 1953 cartoon “Bell Hoppy,” featuring Sylvester the Cat voicing the phrase “Blackballed again” when the Loyal Order of Alley Catz Mouse and Chowder Club declines his membership.

Most of us have had the unfortunate experience of being left out. It usually happens when Continue Reading “Blackballed Again: Are You Prepared?”

Criminal Hubris: It Gets Them Every TIME

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Search for the term “criminal hubris” and chances are you won’t find anything (except, hopefully, this woeful column). We know what a criminal is. We know what hubris is. But there is no definition of “criminal hubris.”

Yet there is, and it’s staring at us right in the face. Metaphorically, it’s all around us. Cinematographically, it resides on the screens we watch. Its roots, however, lie within the body of literature – both philosophical and dramatic – we ought to be most familiar with.

Whether as a metaphor for real-life, a character in a story, or an actual crime, “criminal hubris” is easy to spot (if you’ve got a trained eye), hard to avoid (if you’re arrogant), and, best of all, wonderful to watch (because it hoists offenders with their own petard quite regularly).

Before I reveal the “7 Steps of Criminal Hubris” let’s explore the origins of “hubris” and Continue Reading “Criminal Hubris: It Gets Them Every TIME