Albany pranked New York in cruel April Fools’ Day joke

New Yorkers awoke on the first day of April with news that, among those budgetary items Governor Andrew Cuomo tentatively finalised with the legislature, was an increase in the hourly minimum wage (staggered across industries and jurisdictions over the next six years), from $9 to $15 — the cruellest of April Fools’ Day jokes, with consequences lasting more than a day and afflicting more than the targeted beneficiaries.

Governor Cuomo, speaking of the plan at a January rally, took aim at critics by a populist appeal. ‘We are going to do it for the State of New York, we are going to lead the way for this nation, we are going to restore honor and dignity and respect to the workers, we are going to say to this country, “You can do very well on the top level and you can also rise up the bottom level.”’

As Cuomo doubtless knows but heeds not, the arguments against the minimum wage are legion: that it hurts the working poor, that it penalises workers with low skills, and that it bars young job-seekers (particularly the marginalised) from gaining valuable experience and work-habits — criticisms that are all well-rehearsed, but no less true.

Yet in laying out the case for the minimum wage, Governor Cuomo raised issues that are further proof that state intervention into markets only compounds problems the political process purported to fix. He is not alone, for it must be a prerequisite of political office to misjudge the organic nature of market operations.

The market is a clearinghouse, with individuals offering each other what they have — be it goods and services — for what they need. Barter was the modus operandi at the beginning; with various media being introduced in time to facilitate transactions. But in its essence, exchange means exchange. You can only buy if you have something to sell and cannot sell if you price yourself out of the market.

But through its economic interventions, the State has priced the poor out of market, and in many cases (such as the minimum wage), have left them nothing to exchange (e.g., their labour). The only thing left they have to barter is their vote, and in this exchange, between the individual and the political process, the parties are unevenly matched.

‘The minimum wage doesn’t even work numerically in this State,’ bewailed the Governor. ‘This is below a subsistence level. You can’t make it on a minimum wage job. You need two, three, four minimum wage jobs to actually make it, and that’s not what the minimum wage was all about.’

However, if the market were allowed free scope, buyers and sellers would have to reach agreement, or else neither would be able to exchange. What impediments stand in their way?

At January’s announcement, Cuomo pointed the finger at businesses that ‘make money on the minimum wage’, noting that ‘McDonalds pays a minimum wage, but at the minimum wage in this State, you are still below the poverty level. So this State then, with tax dollars, gives you a welfare payment, food stamp payment, housing assistance. When you look at it at the end of the day, McDonalds pays the minimum wage [$18,000] and the people of the State of New York pay on average $6,800 more.’

With the availability of State aid and the get-out-of-purdah free pass of a legislated minimum wage, who can blame McDonalds or any other industry from maximising its profits, given the perverse government incentives?

‘I am getting out of the hamburger business,’ the Governor promised; but who put State officials into the free market exchange in the first place?

Moreover, as a result of this minimum wage legislation, the New York Post reported, ‘Wages will be hiked to the new minimum for 2.3 million workers in New York, a move Cuomo says will infuse $15.7 billion into the state economy’ — with nary a second thought about the origins of this bounty nor Albany’s ‘take’ thereof. Such an echt bureaucratic attitude from the State capital.

‘If you had taken the minimum wage in 1970,’ Cuomo observed nonchalantly at the rally, ‘and you had indexed it to inflation, you know what it would be today? Fifteen dollars an hour. That’s the fair wage for a minimum wage in the State of New York.’

But as American fiat greenbacks are nothing more than a medium of exchange, without any connexion to real worth — such as the gold standard — government-induced money inflation does not add to America’s net worth but only benefits those crony capitalists with government ties and hurts those of low incomes hit by inexorable price increases.

As negotiations had neared completion, Cuomo told waiting reporters, ‘I believe that this is the best plan the State has produced in decades.’ Nonsense. This April 1^st budget is only the latest example of government having a good laugh at citizens’ expense.

On the Web: Thoughts on charity in the workplace

Please see my first post for the Intercollegiate Review website, ‘What Role Does Charity Have in the Workplace?’

Charity may begin at home but it ends at the workplace, suggests a report from the New York Times. The world cheered when Dan Price, cofounder of Gravity Payments, decided to initiate a minimum salary of $70,000 per year across the board for his workforce, this after hearing a friend complain about making ends meet on $40,000 a year and realizing that many of his 120 employees earned less.

Those who were already receiving this minimum salary, however, didn’t like it. They had had to work long hours to attain that pay level. Experience and the hard work that gave rise to it merited their compensation, but now new hires and others with lower seniority were reaping the benefits without the effort. Minimum-wage mandates have always raised the hackles of classical economists, but rarely have they drawn the publicly vented ire of employees themselves. Until now.

Read more…

Economic Laws Trump Political Prestidigitation

‘It is the highest impertinence and presumption ... in kings and ministers, to pretend to watch over the œconomy of private people,’ observed Adam Smith. ‘If their own extravagance does not ruin the state, that of their subjects never will (Wealth of Nations, II.iii.36).’

This theme is explored in two essays posted this month. The first, ‘No Crystal Ball Needed to Forecast Fundamentals of Sound Economics’, takes a look at what constitutes ‘wealth producers’ and ‘wealth destroyers’, and why government — when it goes beyond providing the basic framework of law and order, and acting as a service provider of last resort — is so often a member of the latter group and not the former.

The second essay, ‘Raising the minimum wage while debasing the currency: an illogical economic policy?’ (published courtesy of the Institute of Economic Affairs), argues that instituting minimum wage laws while engaging in quantitative easing of the money supply is a hopeless venture; each activity considered alone is less than innocuous, but pursing both at the same time is an exercise in futility as any doubtful benefits are cancelled out and nullified.

Smith recognised that ‘All systems either of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord (IV.ix.51).’ To-day, encouraged by social democrats and their Progressive ideology, governments are addicted to these systems, whether through the aforementioned minimum wage laws and currency debasement or other forms of welfare economics. But, in the end, economic laws trump political prestidigitation.
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#DMI_Reads Update — Two volumes are in the reading queue this month: The Case for Capitalism (E.P. Dutton, 1920) by Hartley Withers and Lectures on the French Revolution (Liberty Fund, 2000) by Lord Acton.

Do you know of a little-known and under-appreciated volume on the French Revolution that you’d like to recommend? Write and tell me about it. And do people still read Thomas Carlyle on the subject? I’ve looked at the first few pages of his massive tome and been daunted, but am game to have another look if anyone is willing to make an argument in its favour.