Fun on Friday: Muh Feelz Trumps Economics
I get really frustrated by people arguing vociferously about things they don’t know anything about. And on no subject is this more prevalent than the debate over the minimum wage. Bring up the “fight for $15” and you will suddenly get high school dropouts who can’t do basic multiplication yelling at you emphatically about the benefits of government-imposed wage floors. Because, you know, they feel like it should work.
I live in Florida and voters here just approved a measure to hike the minimum wage to $15 an hour. It got over 60 percent of the vote. Now, this isn’t exactly a blue state. In fact, Trump carried Florida. So, there’s a pretty conservative streak here. But we just overwhelmingly did the progressive $15 per hour thing. How does that work?
Well, I’m pretty sure most people just looked at the ballot measure and said, “Yeah, it would be good for people to make a little more money. I’ll vote for that! It feels good!”
And I can’t really blame them. Because the average person has no clue about the economic ramifications of price floors. It’s not like they teach econ in school. And even if they did, most people just aren’t interested. To the average Joe, economics is boooooring.
Nevertheless, I think Murray Rothbard was onto something.
It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.”
And that’s where we are today.
I made the mistake of wading into a Facebook thread on the minimum wage vote here in Florida.
There were a few people making the point that when you raise the price of something, you lower demand. That means all things being equal, there will be fewer people hired at a higher wage. They were being shouted down and pretty maligned for being mean-spirited and only caring about the rich.
But is basic supply and demand. It’s the most fundamental economic principle. It’s easily proven with a little thought experiment. Set the minimum wage at $1,000 an hour. I mean, if we can just willy-nilly raise wages, why not $1,000?
“That’s different.” Or so I’m told by many internet economists.
But it’s not.
Nobody would pay somebody $1,000 per hour to perform a low-skill task. It’s obviously unaffordable. A $15 per hour minimum is just as unaffordable.
But the smaller scale of a hike to $15 makes the effects much less obvious – sometimes completely invisible. There are so many other factors going on in the economy that the negative impact of government wage policy can remain completely unseen. But the same fundamental economic reasons that a $1,000 per hour minimum wage would never work make a $15 minimum just as economically unviable.
When you raise the price of labor, you raise the price of the thing that labor produces. Sure, businesses can eat some of that cost. But some of that gets passed on to the consumer as well. Think of it this way: imagine if the government set the minimum price for each aluminum can at $5. (This, of course, is to “help” the aluminum companies.) In that scenario, Coca-Cola would have to charge over $5 for a can of Coke. Would you shell out more than five bucks for a can of Coke?
Naw. Me neither.
In all likelihood, Coca-Cola would just switch to glass or plastic containers. The $5 minimum can price that was supposed to help the aluminum companies would actually hurt them over the long-term.
I’m sure the next step would be a government mandate requiring the use of aluminum cans, or banning plastic and glass. But you know what? I’m still not buying a $6 can of Coke. So, Coke would just pile up on the shelf. In the meantime, politicians would hit the campaign trail bragging about how they helped the aluminum companies.
This is precisely what happens when government imposes arbitrary minimum wage laws. Workers at the bottom of the skill pool can’t find work. Minimum wage laws literally make it illegal for you to take a job below the mandated wage.
But our internet economists somehow believe that these basic economic principles somehow cease to operate when “labor” is involved. This is because of the reasons.
Actually, it’s because of muh feelz.
Feelings trump economic reality every single time. In fact, it’s pointless for me to even write this missive – other than the fact that it makes me feel better. More than 60 percent of the voters in my state FEEL like a minimum wage is a good idea. They either don’t know just how wrong they are, or they just don’t care.
Fun on Friday is a weekly SchiffGold feature. We dig up some of the off-the-wall and off-beat stories relating to precious metals and share them with you – with tongue firmly planted in cheek. Click here to read other posts in this series.
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