Hiatus Break: Minimum Wage doing Maximum Damage

I’m baaaaaack.

I came upon some very interesting news on minimum wage. If you have ever read a post or scroll through this blog you can see that I love to talk about minimum wage. The reason why I discuss it so much is because its the best example of flawed economics and government policy. I know there is a lot juicy political controversies that I could write about but I actually wanted to talk about something important.

A few years ago in Seattle, Washington they decided it was a good idea to raise the minimum wage to 15 dollars an hour. Now personal sidebar note: I will be visiting Seattle this summer and I may even want to move there. I hear its a great city and place to live despite the government’s stupid economic policies. Anyway so its been a few years since Seattle raise its minimum wage to 15. What happened?

In an unsurprising twist of events to anyone knowledgeable in economics this study came out to find that the minimum wage ACTUALLY HURT LOW INCOME WORKERS!!!! WHAT A SHOCK! Here is the link to the study: https://www.washingtonpost.com/news/wonk/wp/2017/06/26/new-study-casts-doubt-on-whether-a-15-minimum-wage-really-helps-workers/?utm_term=.4ea73b51a9f7

Workers lost an average of 125 dollars a month! If you don’t think its big deal then you probably don’t understand how economics works. The explanation of this is pretty simple. In laymen terms: The government artificially increased the wages of the lowest income workers to 15 dollars. Therefore this decreased the value of money. For example if you had 100 workers, and you split them into 5 payment scales.

Scale of salary per 20 workers:

20 Workers make 10 dollars

20 Workers make 20 dollars

20 Workers make 30 dollars

20 Workers make 40 dollars

20 Workers make 50 dollars

Let’s imagine that the government raises minimum wage from 10 dollars to 30 dollars. This would decrease the value of all the workers buying power.  Now 60 workers would make 30 dollars. Because everyone makes at 30 dollars the buying power would decrease for everyone since employers would pass off the costs of raise to its consumers. Any time you raise the costs of doing business you raise the prices and that effectively eliminates any benefit of minimum wage.

You have to understand that buying power is more important than how much money you actually make. This is the point I’m trying to get across. People think that minimum wage lifts you out of poverty. But the reality is that because it sets the floor higher, it just decreases the value people who aren’t low wage workers. It also doesn’t help those low wage earners because the price of goods increase and so do taxes.

I believe the workers should make what they deserve. But I think that businesses and potentially employees are better fit to decide what their compensation is. For example, look at Starbucks. A few months ago they gave their employees a raise in wages by 5 percent. No government urging or anything. That is great. But then a few months later they raise their prices to off-set the cost of higher wages. That’s how it works with minimum wage too.

Honestly I could sit here and give a million examples of minimum wage failures. But to end this post I want talk about the Federal Reserve Bank. I recently read part of a book about the Fed (nickname for the Federal Reserve Bank; look it up).  The Fed controls and maintains the currency of the US. Its not well known how the Fed works or what exactly they do. However, because of their negligence in lowering the cost of money aka interest rates on borrowing money, they essentially caused the house crisis. They also devalued money over the past 20 or so years. The Fed is a purely evil organization, not created to be evil. But with great power comes great responsibility and corruption. The problem is that the Fed is not under the control of the government itself. However, it does work for the government (by printing money).

I really want go in a deep expose of the Federal Reserve Bank. I need to do some more research. I believe that if I can help educate people on this topic maybe we can end the fed and fix the damn money. Inflation and de-valuation of money is causing a ton of our problems today especially for normal everyday people. I’m sick of it.

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