Wednesday, June 8, 2016

“Hip” and “Safe": Minimum Wage Increase Code Words for Economic Gentrification

“No business which depends for existence on paying less than living wages to its workers has any right to continue in this country.” 
--President Franklin Delano Roosevelt, 1933, 
Statement on National Industrial Recovery Act

Urban progressive activists preach that American corporations make a great deal of profit and can afford to pay there employees any salary that they desire.  At a crescendo, the social justice provocateurs thunderously raise their tones to exclaim that the American "worker" is entitled to the wealth of nations not by merit but by just cause of living.  Their sermons proclaim that corporations morally owe it to the American "worker" to pay them a "living wage".  The laws of economics are frail in the individual grasps of mortal men when compared to the social hold of the collective in negotiating the spoils of business.  It is the job of government and labor unions to assure the livelihood and the living of those oppressed by the evil American business owner, sitting in his dark room, counting the gold coins amassed upon his desk, locking out the innocent single mothers and "returning" citizens, leaving them to their unsettled activities in the blistering ghettos of the inner city.  The Urban progressives settle their beleaguered masses, quelling their vibrant chants with a simple hush.  The noble finish is upon their lips.  We must solve poverty.  It is for this reason that we have been ordained of men.  Many will say that we were wrong when we said raising the minimum wage to $7 would end poverty and provide a livable wage.  Many would say that we were slightly amiss when we said raising the minimum wage to $10 would end poverty and provide a livable wage.  However, today, we stand before you and say that raising the minimum wage to $20 would end poverty and provide a livable wage.  We, the American politician and the labor unions, stand before you and say that we must slay the goose that we may all have golden eggs.  The choir of voracious and beleaguered entry-level workers say, "Amen".

Yesterday, in America's federal district, the City's Council passed legislation to raise the hourly minimum wage to $15 by 2020.  Insulated from excessive economic instability as the Center of the Nation's Treasury, the City's Mayor Muriel Bowser (DS) [Democrat-Socialist] has vowed to sign it upon reaching her desk.  The announcement was regaled in all of the normal fanfare of a modern federal district press conference.  Encircled by the significant guardians of demand economics--city council members, labor union leaders and members and a few noble business owners, the Mayor refuted claims that businesses, out of sound practice, would leave the District for the business friendly shores of the Commonwealth of Virginia.  According to the Washington Post:

A think tank backed by the hospitality industry released a survey last month warning that 1 in 5 businesses would consider leaving the District for Virginia.
Bowser said she was attuned to those concerns but said that as long as the city remained “hip” and “safe,” “people are going to want to live and work in the District of Columbia.”

The key terms behind the salary increase are "hip" and "safe".  Hip, in the sense of being cool and culturally acceptable, is having few reservations that exceed normal prevailing community standards.  Safe, in the sense of not being an East of the River community, is not subject to illicit drug commodities, unresolved murders, high levels of missing persons and inordinate violent crime.  You see, raising the minimum wage fits the Democrat-Socialist's agenda: Eliminating the poor from where they live and work, fleecing businesses that remain with higher taxes and more intensive government regulations and assuring that "the poor" or "low wage worker" will be with you always, even until the November election.  A commitment to raising the costs of production is a political economy means of managing and controlling the population's demographics within a city's borders.  Sincere Urbanites, you are guilty of economic gentrification.

“All but the hopelessly reactionary will agree that to conserve our primary resources of man power, government must have some control over maximum hours, minimum wages, the evil of child labor and the exploitation of unorganized labor.” 
--President Franklin Delano Roosevelt, 1937, 
Message to Congress upon introduction of the Fair Labor Standards Act

Economics is a social science that studies how individuals, governments, firms and nations make choices on allocating scarce resources to satisfy their unlimited wants.  While many will focus on the entities--individuals, governments, firms and nations, the greatest focus should be on the action--make choices.  In a free market, individuals have the will to reward others by merit based on their abilities, improvements and performances.  The individual, using scarce resources and limited profits, invests in their employees based upon what is affordable.  In the competitive marketplace of the world economy, the individual business owner realizes that scant resources are expensive and that such costs must be paid by someone.  That someone is either the business itself or the consumer or buyer.  If the buyer says no to increased costs then, the business suffers.  When it suffers, costs are cut and prices are reduced.  Fewer profits, fewer funds for wages.  In free markets, the individual business owner understands his risk is buoyed by costs to his operations including labor.  The employee understands that he must negotiate for himself the best deal possible to secure his portion of the operations' profits, which are limited by overall operations costs, for his livelihood.  This is his great risk.  Neither the business owner or the employee are guaranteed success or profits.  They each risk their livelihood based on what the market is willing to pay.

In a demand economy, choices are made for individuals and firms by governments and nations.   Seduced by labor unions and activists of the moral need for legislative intervention, politicians nobly address the marketplace by forcing businesses to pay individuals not by merit but by the power of the collective and the force of the governed.  Not considering labor as a "true" cost of business operations but a moral prerequisite to do business within city limits, government officials respond to the minimum wage as a tool to ensure electoral results, secure tax revenue and limit the competitiveness of small businesses against larger corporate entities.  The Democrat-Socialists soft sell their endeavors by asserting that a "booming economy" can support such an increase.  Council member Vincent Orange, a sponsor of the bill, and other supporters say Washington's robust economy and growing population mean it can support a higher minimum wage.

"Raising the minimum wage will help address the issues of residents being pushed out of the District due to rising costs of living and income inequality..."

Asking them to explain how a robust economy has no effect on the East of the River neighborhoods that possess large enclaves of potential unemployed "workers" merits only a humbling silence among the enlightened political economist elites.

So why only $15 per hour?  I mean if $15 per hour makes us all equal, why not $25?  Council member David Grosso added an amendment requiring the government to study a minimum income system to help the poorest residents.  "Raising the minimum wage is a good thing, but is $15 enough? Or should the number be $35, or $50 an hour?"  As an agent, I do not know why so many subscribe to the government to negotiate wages.  By merit, I believe an agent of mine would negotiate top dollar because he's motivated to get top dollar for his services.  I would dare him to come back to me and say I got you the minimum dollar offer.  However, millions of Democrat-Socialist workers subscribe such contractual due process daily.

A household with two adults and two children in Washington, D.C., for example, would need to budget more than $106,000 a year to make ends meet, researchers found.  That makes it the most expensive area in the country for a family that size.  How much does it cost to live in DC, you may ask.  Let's take a look at some economic scenarios:

  1. Basic lunchtime menu (including a drink) in the business district costs $14 while a Combo meal in fast food restaurant (Big Mac Meal or similar) costs $7.  
  2. Monthly rent for 900 Sqft furnished accommodation in an EXPENSIVE area is $2,586 while the Monthly rent 900 Sqft furnished accommodation in a NORMAL area is $2,022.  
  3. Monthly ticket for public transport is $175 while a Taxi trip on a business day, 5 miles, is $19.
  4. Dinner for two at an Italian restaurant in the expat area including appetizers, main course, wine and dessert is $87 while Basic dinner out for two in neighborhood club is $49.

The Democrat-Socialist Bowser got the DC "worker" $15 per hour.  Based on the just living standard, they need $50.96 per hour to make ends meet.  Thanks for the tip Muriel!  Stick to negotiating deals for wealthy capitalists like Ted Leonsis.  Wealthy Ted got nearly 100% of his arena paid for by the DC Government!  In the words of Charles Barkley, the Democrat-Socialists did a "terrible, just terrible" job negotiating a minimum wage for the poor.  If the poor have learned anything, it is that they will doing a better job negotiating on their own in the free market .

Who are the winners of this government intervention?  Certainly, not child care workers.  In a 2007 survey, the U.S. Census Bureau reports that child daycare services have the highest payroll costs of 50.77 percent.  The Society for Human Resources Management reported in 2008 that healthcare services had the highest salary payroll cost of 52 percent.  For-profit and educational services were second, with 50 percent.  Yes, Mr. and Mrs. Liberal Progressive, your wallet will take a hit in childcare costs, healthcare insurance costs and services and corporate services and costs.  Educational services?  Baby, that's taxes.  It's an indirect tax increase.

Who is the winner?  It's the government.  Yeaaaaaaaaah for more tax revenue from fewer workers and small businesses.  Yes, fewer workers.  Businesses generally restrain their payroll costs from 15% to 30% of gross profits.  Most from the Wharton School of Business to the School of Hard Knocks will tell you that if payroll goes beyond 26% generally you won't be in business very long.  Most believe that businesses--small, medium or large-- make extreme profits.  The general public believes 36%.   The truth is that is way too much.  Not to make but to think that they make.  Most corporations have small profit margins.  Healthcare services net profit is 4.7%.  Food retail is 4.4%.  Consumer Apparel is 6.7%  Yeah, the economics of facts always beats the economics of feelings.  Except when people subscribe to government intervention.

There are many reasons to oppose the minimum wage increase.  The fiery rhetoric of the Left on the minimum wage subject has driven men to put their lives and others at risk by taking a gun through metal detectors at the US Capital.  However, the greatest is the justification for economic gentrification.  An economy does not boom because of government intervention but in spite of it.  It overcomes the hurdles placed before it--some natural and some unnatural.  Yet, not one scientist among the political economic elite can point to a time when the raising or implementation of a minimum boosted an economy.  The truth is increasing labor costs will increase the price of products and the consumers, the employees and the taxpayers will all take this unnatural bite.  It is the poor that will soon see the impact.  That 30% guardrail for payroll expenditure will make a choice for some businesses.  Is it cheaper to hold onto 2 employees or better to pay 1 highly qualified one?  Is it better to rid myself of cashiers and go simply with kiosks?  Do I end my community investment plan because I have to pay my entry-level employees more?  The truth is that increasing the minimum wage will not bring employees' salaries back to what they were paid before Obamcare.  The Democrat-Socialists through the Affordable Care Act stole 416 hours of pay from full time entry level employees when the minimum number of payroll hours fell from 40 to 32.  For the employee earning $10 per hour, that resulted in a loss of $3,160.  No matter amount of accounting gimmicks will replace that loss sum.  An increase in the minimum wage does not make it easier for families to afford the city in which they live.  However, as businesses move to Northern Virginia, low wage workers will have to follow.  Thus, making it easier for the "hipsters" seeking a "safer" city to move into the places in which low wage workers once lived.  With higher incomes and more disposable incomes, they will attract the businesses that will help sustain a 100% securely financed arena.  Eventually, the low wage "workers" will shuttle in from Alexandria and Arlington Counties to work in the City that they once lived.  Worse yet, they realize, as they stare from their public transportation at the newly finished homes, both renovated and new, that they voted for the Democrat-Socialists that made the economic gentrification possible in the first place.  Affordable Housing is always a great goal.  It always concerns me for whom the political economists deem the intended targets of their noble goal.  Economic gentrification through the raising of the minimum makes it very visible in my mind.

The minimum wage argument since the time of Karl Marx has been built upon the foundation of this observation: "political economy knows the worker only as a working animal – as a beast reduced to the strictest bodily needs."  Somehow, in order that all mankind will be respected as persons and not beasts, "capitalists" are morally required to secure the lives and lifestyles of their "workers" by paying a prescribed wage.  Nobly, the "wage" assures that the individual will maintain his viability in the community, allow him to keep his home and afford the increased costs of living within his City.  Indeed in the political economy, guaranteeing a man with few skills a higher wage will certainly make it easier for him to afford the costs of the products he reproduces.  However, that kind of common sense only works if you secure the demand side of economics without consider its impact on the supply side.  Before  you stand in ovation for the political economic efforts of the Democrat-Socialists, know that you have been bamboozled into accepting a "noble" premise: Government can not by wage terrorism make a city more affordable or people better able to afford the city that want to afford.

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