So is average intelligence about economics.
My biggest pet peeve in politics used to be anthropogenic global warming (AKA Climate Change, AKA, Global Warmonger), but after 15 years of unchanged temperatures the hot air is leaving the balloon. Now I just feel sorry for people who are concerned about it.
Americans actually believe the weather is getting worse in the United States when it’s not. People love to be fed news they agree with and not news that makes them think. When it comes to not thinking there are no two better example than the issues of income inequality and the minimum wage.
The minimum wage is now now my biggest pet peeve in politics. It’s a nonsense policy. I won’t rehash it here, but I’ve written about it extensively. Needless to say, the minimum wage is the perfect example of a faith-based economic program. There is no evidence that it’s a good policy. It simply exists for political reasons.
In the past, I have linked to the New York Times op-ed from 1987 titled “The Right Minimum Wage: $0.00.” There’s been no evidence since 1987 to suggest that the op-ed is wrong other than the politicization of the field of economics. However, I want to point out a section of the op-ed that is relevant to the debate today.
The working poor obviously deserve a better shake. But it should not surpass our ingenuity or generosity to help some of them without hurting others. Here are two means toward that end: Wage supplements. Government might subsidize low wages with cash or payments for medical insurance, pensions or Social Security taxes. Alternatively, Washington could enlarge the existing earned income tax credit, a ”negative” income tax paying up to $800 a year to working poor families. This would permit better targeting, since minimum-wage workers in affluent families would not be eligible.
What a great idea! That’s exactly what the federal government has been doing since 1987 and it hasn’t helped. The United States has had some form of the minimum wage since 1938. So it took around 50 years for progressives to accept that the minimum wage wasn’t working. Their new idea was to subsidize low-skilled workers through various government transfers. After 25 years what do progressives have to say now?
If congressional Republicans are serious about their claim that cutting government spending is their highest priority, why are they so indifferent to this flagrant abuse of federally funded benefits? The reason can only be that if they were to raise serious objections to what is effectively a corporate welfare program for the fast food industry, they might be forced to do something that would be an even bigger violation of conservative principles – raise the minimum wage.
Sadly, no lesson has been learned. History indeed does repeat itself. You can literally see the dog chasing it’s own tail here…
- Raise the minimum wage
- Realize the minimum wage doesn’t work
- Subside low skilled workers
- Realize subsidizing doesn’t work
- Repeat step 1
Sadhbh Walshe’s entire article drips with condescension and she has no idea how mistaken she is about simple economics. Blaming companies for the policies of lawmakers is ridiculous. Low skilled workers receive subsidies because they’re available. Is it much of a surprise that some low skilled workers have no incentive to climb the ladder when they’re receiving benefits from the government? Government services and wage controls are not real solutions for reducing poverty. This isn’t even a debate any longer.
The other annoying economic topic is income inequality. Progressive love to talk about income inequality, but they hardly have a monopoly on the topic. I see it everywhere. It’s truly astounding how many people just believe it without question. It’s good example of the short memory of mankind. By any conceivable measure Americans are wealthier than a generation ago, but we’re constantly told how the middle class is shrinking and only the rich are getting richer. It’s just not true.
The income inequality myth comes from the interpretation of household income statistics. Household income isn’t a very reliable way to look at income distribution in the United States. This is from Thomas Sowell’s Economic Facts and Fallacies.
Income comparisons using household statistics are far less reliable indicators of standards of living than are individual income data because households vary in size while an individual always means one person. Studies of what people actually consume–that is, their standard of living–show substantial increases over the years, even among the poor, which is more in keeping with a 51 percent increase in real per capita income than with a 6 percent increase in real household income. But household income statistics present golden opportunities for fallacies to flourish, and those opportunities have been seized by many in the media, in politics, and in academia.
Mr. Sowell goes into more detail about household income in the book, but it’s important to realize that comparing a household in 1950 to a household in 2013 is a fool’s errand. What is it about the human race that wants to believe things are getting worse? The real danger when it comes to this kind of economic ignorance is that politicians create idiotic policy to placate the masses.
When it comes to issues like the minimum wage and income inequality our biggest problem is our perception. When the state passes laws to fix imaginary problems you can bet the real problems will emerge. The challenge to keep people informed about these kind of misconceptions is growing. If our media, political, and academic centers are working to perpetrate myths, what hope is there for the average American to understand?
