Beating A Dead Horse: Fallacy of Minimum Wage and Rise of Welfare

The topic of minimum wage seems to really boil my blood. I write about it constantly. I don’t know if I can link all the posts its in without making a paragraph of it. In this post, I want to reiterate some of my usual arguments about minimum wage. However, I want to connect two things that are eerily related. Many people who think that McDonald’s and other workers of low skill level jobs need a living wage are the same people who say welfare is necessary because of the low wages. The liberal mission of a living wage is a misguided pipe-dream. The conservative theory that cutting all welfare at once is a solution that also will not work. Ever since the mid 1960s, the United States has been nothing short of obsessed with welfare and minimum wage. We depend it, like a cigarette addict who depends on cigarettes for nicotine. You can try to quit cold turkey or you can say fuck it and smoke more cigarettes because why quit when you’ve already damaged your lungs. I want to present something similar to what the e-cigarette has done for smokers. A new innovative way for the United States to free itself from this trap of living wages and welfare.

Recently, I came across these articles claiming that Minnesota had fix their state economy while Kansas had wrecked it. Minnesota elected a new democratic governor who raised taxes and increased minimum wage and saw a positive effect on the economy. Meanwhile in Kansas, they elected a tea party candidate. The governor of Kansas proceeded to cut four government departments and Medicaid. He cut the department of education and others. He lowered taxes for the rich. Kansas nearly went bankrupt.  It’s interesting that the total population of Kansas and Minnesota is about 7 or 8 million people. Kings County or otherwise known as Brooklyn has 2.6 million people, about same number of people as Kansas. New York City has a total of 8.6 million people as much both of those states combined. Just for some scale. I think when you look at tax plans and government philosophies, you can’t just look at results like “Oh the democratic way is definitely better because of Minnesota and the conservative technique sucks because look at Kansas!”

I believe that you have to take into account how many people are in the state and the unique-ness of that state. Kansas and Minnesota have completely different populations. They have different income per capita. They are in different geographic locations. Now I think that there are flaws with both GOP and Liberal ways of taxation and spending. As a libertarian, I can appreciate what the Kansas governor was trying to do. But he was too hasty, and didn’t have clear alternative that actually worked. I think the flaws with liberal system really tell you all about why minimum wage doesn’t work. The first flaw is that minimum wage can’t possibly help the worker as they claim it will. You have to realize that a minimum or base wage means it’s the least any worker can make. When you raise the base wage that means you raise the production costs of every company in the country, state or county. It affects all businesses. Businesses don’t just pay out wages. They have to pay taxes, regulatory fees, stock, transportation, supplies, retirement. Its bad enough that workers wages already take up to 50 or 60 percent of the profits in most businesses.

The worst effect of rasing minimum wage is felt by small business or franchised businesses. I have worked in franchised businesses for about 6 years now. A franchised is a separately owned business that pays to have the corporations name on it. The corporation sets the rules and standards and the franchisee is responsible for turning a profit. When you raise minimum wage you really hurt any small business or franchisee. I can personally tell you that at some McDonald’s they don’t even make a million dollars in a year. The one I worked at, only made about 500,000 in profit. Minimum wage is a small business killer, it’s not fair. Big corporations don’t care if you raise the minimum wage because they can take it. They are multinational corporations that make millions worldwide. You may say ok but low wages means we need more welfare right?  What we need is to keep the government out of the price setting business. Minimum wage increases the costs of everything. A lower wage would go further because production cost are lower. That is why other countries take our businesses, you can pay their workers less.

I’ll admit that we need some type of welfare. We cannot just cut medicare and Medicaid. We can’t just collapse social security. We need to help anyone who can’t work because of a mental or physical condition. We need to help people save for retirement. We need to support to the unemployed. The question is how to do all that without raising our debt even more. Currently, the welfare system in the United States cost about 700 billion dollars each year. This 700 billion on the taxpayer’s dime, aka you and me. It’s a complex and complicated system with multiple government agencies. The bureaucracy is ridiculous. I have written about basic income before and I strongly recommending read it. In that post about Basic Income, I propose a simple solution to the problem of welfare. Although it may not be as simple as I explain it. My central argument is that if 700 billion is spent on welfare each year then we install a basic income of about 2000 dollars to each resident over 18. The cost is about 500 billion for a basic income. We then replace our current welfare system with this basic income. Obviously there are kinks and certain regulations that would necessary especially when it comes to the unemployed and taxation. In my estimation, I believe that we could save 200 billion a year.

Here is my original post:

Basic Income: $2000

Population over 18: 244 million

Monthly cost of Basic Income: $488,000,000,000 billion

Monthly cost of welfare: 700 Billion

Savings by Government:$212,000,000,000 Billion dollars.

My point is that minimum wage doesn’t pull anybody out of poverty and neither does welfare. However, it is necessary to have both because we are a first world country. I believe that our government just doesn’t run anything that efficiently. I think that a ton of money is wasted on government programs that could be done by the private sector. I also believe that basic income is the solution between tea party economics and a full-fledged socialist economy. In beginning I used the analogy of a smoker trying to quit. I believe if keep minimum wage reasonably low, and we install basic income to replace our current welfare system, the United States could start to fix the other problems that plague our nation. I think that both parties and libertarians can get behind this idea. For liberals, it maintains the idea that people should be helped by the government and it would be taxpayer money paying for basic income.  For conservatives and libertarians, it keeps the government reach out of people’s lives. It eliminates a large of chunk of government-run services. It also could help bring our national debt down or pay for other projects.

I hope that this was an informative and though provoking piece. Feel free to research anything I have said. I won’t say that I was right about everything and I left out exact details. However, I think my argument is a viable one that should be considered by everyone.

Thank you for reading!


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s