We Don’t Have a Wage Problem; We Have a Money Problem
On June 7, the Washington DC Council voted to raise the city’s minimum wage to $15 per hour. DC joins New York and California, along with a number of major US cities that have made the move to boost the minimum wage over the last year.
The DC Council’s vote was a major symbolic victory for supporters of the well-organized “Fight for $15” campaign. According to the Washington Post, the effort resonates with Americans:
Polls find strong support for a $15 wage floor as many Americans have become frustrated by the loss of well-paying manufacturing jobs and the growth of low-paying retail and service jobs.”
Last spring, ReasonTV asked residents of the “trendy, hipster enclave” of Silver Lake in Los Angeles, “What is the ‘right’ minimum wage?” Unsurprisingly, most assumed a higher minimum wage is a no-brainer – a win-win for society and workers.
Presidential candidate Bernie Sanders has made a federal $15 minimum wage part of his campaign platform. Hillary Clinton has indicated she would support a gradually phased in federal $15 minimum.
As the Post reports the movement is clearly gaining significant steam:
The District’s move is the latest in a series of unexpected and rapid-fire victories for the $15-minimum-wage movement. What began as an audacious push by fast-food workers just a few years ago is evolving into a new labor standard, with state lawmakers in California and New York agreeing to implement a $15 minimum wage by 2022, and legislatures in Connecticut, Massachusetts, and New Jersey weighing similar measures.”
The current economic climate makes the push for $15 understandable. DC Mayor Muriel E. Bowser described the situation faced by DC residents, and it reflects realities across the US:
When I see how much it costs to live in Washington, D.C. — and that cost is only going up — we know that it takes more money for every household to be able to afford to live. There are families working day in and day out, sometimes two or three jobs but barely making ends meet.”
But is a $15 minimum wage really the solution to what is a very real problem?
Some ominous signs indicate it may actually make things worse. A recent New York Post article highlighted how New York City car washes tend to be less automated than in other parts of the country because the city has a labor pool willing to do that kind of work with relatively low pay.
But these workers will likely find themselves without a job as the New York minimum wage takes effect:
How does taking away their jobs make them better off? The $15 minimum will push New York car-wash operators to automate like the rest of the country, denying workers the right to undercut the machines on cost. It’s already starting to happen. Amir Malki, a leading car-wash equipment installer in the region, says over a dozen car-wash operators in New York City have inquired about putting in equipment to eliminate workers.”
All we have to do to see how minimum wages can negatively impact the labor force is look to Puerto Rico. The federally impose minimum wage was a major factor in spiraling the territory into economic chaos.
Congress required Puerto Rico to bring its minimum wage in line with the US back in the 70s and 80s. While increasing the minimum always impacts employment, it was particularly disruptive in Puerto Rico, and obviously so, due to the fact that the wage scale there was significantly lower than on the mainland. Forcing wages up led to widespread unemployment, especially among low-skilled, lower paid workers.
Minimum wage advocates seek to solve a legitimate problem facing American workers: their dollars buy less and less every year. But simply mandating employers fork over more dollars is a little like putting a band-aide on an amputation. It doesn’t do anything to address the underlying problem.
Our money is broken, and we need to fix it.
The US government’s monetary policy devalues our currency, and that means less purchasing power for you and me. Simply put, when the government debases currency, a dollar no longer buys the same amount of stuff it once did. Quantitative easing debases the currency and the Federal Reserve has engaged in the practice for years.
This is one of the many reasons to invest in gold. Download SchiffGold’s Free White Paper: Why Buy Gold Now?
So, what does this have to do with wages? Well, consider this: in 1964, the minimum wage stood at $1.25. To put it another way, a minimum wage worker earned five silver quarters for every hour worked. Today, you can’t even buy a cup of coffee with those five quarters.
But the silver melt-value of those five quarters today stands at over $15.
There’s your $15 per hour minimum wage.
This vividly illustrates currency debasement. In terms of purchasing power, the value of the silver remains relatively stable, but the value of a dollar shrinks. The long-term rise in the price of silver reflects this reality. It’s the very reason people buy silver and buy gold.
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Now flip things around. Today, it takes 60 quarters to make up the $15 minimum wage advocates want. If you paid that in 1964 silver quarters, the value of the metal would be something in the neighborhood of $175!
This demonstrates why precious metals are good investments. Silver and gold retain their value as paper currencies continue to debase – thus raising prices over the long-term.
In an economy with stable money, prices tend to fall, not rise. That means more purchasing power to the poor, minimum wage workers, those on fixed incomes, and savers. But the government currently debases our currency. The politicians and central bankers claim their policies stabilize economies and protect the people from currency debasement. But in truth, these policies only enrich the politically well-connected at the expense of you and me.
Minimum wage hikes only mask the problem. We need to fix the money.
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Peter when I become Prime Minister of New Zealand, I will be putting your name forward as Governor of the Reserve Bank. I would be honored if you would accept the position. Unfortunately many in my country at present think the solution to our trade deficit is to devalue our currency further, ignoring the fact that while that will increase export earnings in the short-term, in the long-term it will simply cause inflation. A strong dollar is just that-a strong dollar. As you said, anyone can fail a test (create a weak currency), it takes hard work and sound economic policy to get an a+
So, the next question is:
How do we fix the money!?
By ending the Federal Reserve and backing paper with gold, so it isn’t just worthless paper.
There is no single point of failure that creates our currency and debt problems. Government debt is only part of the problem. Accumulative consumer debt is also in the trillions (~$3.5+T). Add to this the fractional banking system, and we breed debt like gerbils.
Then there are all of the financial system fail safes which were remove back in the 30’s, creating the too-big-to-fail behemoths we have today.
Going back to the gold standard is not a rational solution, at this point. Frankly, we need a deep domestic and global recession to reset the economy, followed by entitlement reform.
>> How do we fix the money!?
By stopping trying to fix the money.
Money will be “fixed” when it becomes impossible or nearly impossible for any centralized authority to inflate it or restrict people from using it. There is already a currency that has this property. Bitcoin.
By actually using money. Money is gold and silver, not green pieces of paper.
Fixing the money would require the US Congress to revoke the charter of US Federal Reserve (The election of 1832 provides precedence for such an action.) and places the US Central Bank under the protection of the US Constitution (Including responsible banking practices.).
Prior to dissolution the Fed would be required to take-back on its balance sheet all the debt it has created (out of thin air.), pay-off all counter parties with Federal Reserve notes, and provide clear asset title to all parties using those loans for the purchase of said assets.
Upon dissolution a new currency, backed by gold & silver, would be introduced to compete against all currencies including all existing Federal Reserve notes until such time that they are phased out.
The result of such an action would eliminate the overwhelming debt that severely restricts our society, bring back a free market economy and (hopefully) reduce the chances of Special Interests creating the problem again.
Hello I am from Mexico and I understand perfectly what are you going through because in my country this has happened many times during the last 45 years and I believe this is because some people at your countries didnt do good at managing your financial system like it happened in my country.The question is: These things happen by accident or someones prepared this artificial inflation to take advantage of the chaos.
To fix the problem we don’t need a gold standard we need a bi-pericious metal standard more than just gold like gold and silver or platinum, gold and silver
The gold/silver is not there to back the paper money. It hasn’t been there for along time. Its all just an illusion. God forbid China comes calling for us to make good on our debt. China owns more of America than America does. A crash of catastrophic proportions is unfortunately the only way out. Stripped to nothing and start over.
Kevin. There is enough gold, always has been.
That’s because the government sold it all or leased it out. It isn’t a problem for Russia or China.
There is ALWAYS enough gold. It’s a matter of price per ounce to account for all the fiat. At $2500 per ounce there is not enough, but at $10,000 there is plenty of gold above ground to account for all of today’s debt.
As far as currency goes, the supply of precious metals does not meet the demand of the ever increasing number of people. This is OK though, as a real and organic economy is one simply based on fair goods and services trade. The phenomenon of local currencies are simply a barter system that uses a note system – just as we do now! The difference is the power is in the hands that it should be.
Gold and silver can be returned to their rightful place as simply marvels of the mineral Kingdom, so beautiful and busy in their service to us, not locked in the dusty vaults of old and extremely creepy World Vampires. Ahhhh, Nature, it’s laws are as beautiful as it’s …..nature!
Bitcoin is cyber money what happens when their is no cyber for it to be traded upon? A bird in the hand is worth 2 in the Bush…
Near-infinite money buys near-infinite government. What is the organizational dynamic of bureaucrats with near-infinite money? The Iron Law of Bureaucracy says they will expand their power and control until some other power stops them. Back when government spending was limited by what the taxpayers were willing to pay for, the primary constraint upon government was that there simply was not enough money to fund every foolish bureaucratic desire. So, government tended to be forced to pay attention to its legal and Constitutional responsibilities first in proper priority. Now, with near-infinite money, there are far fewer spending constraints, and thus it is far easier for bureaucracies to run amok.
Secondly, bureaucracies can even entertain their darkest worries about what threats might challenge their powers. Thus we see the rise in private bureaucrat armies. What founding father would have thought that the government’s own property management agency, the Bureau of Land Management, would need a sniper team? How else do we explain the auditors for the Department of Education really need to carry sidearms?
Third, bureaucrats who never really have their power threatened by lack of money tend to get the idea that their power is unlimited, as compared to the power of the citizen to restrain their actions.
The very first limit on government’s ability to extend its power over us is to limit the amount of money it has to function. That limit must be how much taxpayers are willing to directly pay. When government can create money and debt, there is no limit on government, that is until it destroys the value of money itself as Schiff point out.
Every day more people are coming to the judgment that a carefully organized effort to repair the constitution via the States’ power to propose and ratify amendments has less risk to our liberty and prosperity than the present trajectory of the federal government and especially the federal bureaucracy.
The first order of business of an Article V Convention must be to limit government’s ability to spend and create near-infinite amounts of money.
Well spoken a brilliant synopsis.
This is the crux! and it must be forced upon.
A standard based on something that isnt there first step to resolve this is to end central banking get the rothchilds out of here we must get to the true root of the weed and exterminate its roots and then and only then will we make progress the one percent has to go we wage war on each other and die. We outnumber the rich. We are human beings and we need to band together and wage war on the 15 families yhat control the money
Using shadow stats and toms inflation calculator , as well as data from productivity growth, working hours input comparison, I did a real wages comparison in purchasing power of wages in 1970 vs 2009, when the stats for 2009 came out in 2010 or 2011. It was eye opening.
I do not wish to presume anyone wants to read the analysis. I did it for “fun” to run the numbers myself and see if it matched expectations and even I was shocked.
If anyone wants this info and source data, or if perhaps I should turn it into an article with some minor editing, then email me via ancient(NO SPACE)engineers AT googlemail DOT com. I am happy to share.
[…] same amount of goods and services. Ultimately, that means we suffer a lower standard of living. As we showed recently, a look at the minimum wage vividly illustrates the impact of currency debasement. In 1964, the […]
Excellent information! Well explained. Thank you very much for teaching the truth…
Congrats Peter.. you just proved that silver is a horrible investment since you showed it just barely keeps up with inflation, not beats it, and doesn’t pay any income unless you sell it.
On the other hand, in 1964, DJIA was ~830, now the DJIA is ~18000 (not to mention all the dividends you received over those 50+ years)
You are claiming that silver quarters have a melt value of $15.55
This is totally incorrect, and misleading. By claiming this value you are actually lying to us.
FYI, each silver quarter has exactly .180084oz of silver that at the current spot price is about $17.25. Doing the math shows only $3.12 of silver in each quarter and that is the melt value. NOT $15.55
$3.12 per quarter. Multiply that by 5 quarters…
Unfortunately,we have a majority of Americans who are short term greedy and long term ignorant.Combine this with unrestricted growth of govt power(Dems call it Progressive), there isn’t much hope.If Americans understood economics and didn’t think they had the right to steal from others through govt(were honest) or if govt had limits,we might be OK.
Many great ideas of how to “fix” our money problem however, most continue to overlook the cause of our present day mess. It really won’t matter what we do or how we do it UNTIL we rid ourselves of the spineless, incompetent idiots in Washington and severe the puppet strings by which they dance of the Wall St Banksters!
That’s the way it is, it all looks good on paper and who can blame the working poor to help themselves. GOOD INTENSIONS and BAD RESULTS and more strain on a weak dollar. What really gets me is how is it possible out of 400,000,000 U.S citizens you end up with either Clinton or Trump……..amazing !!!
The minimum wage in CA and NY will hit $15 per hour…when? In the year 2022?
A lot of good that will do people then. By that time, the push will be on for $25 per hour because $15 per hour won’t be enough, if the Fed keeps debasing the money.
This country is run by economic ignoramuses. It’s much easier to create fiat money and tell people that they’ll get some of it, rather than actually do something that will fix the problem, like getting the State out of money production.
As the Mogambo Guru says, we’re freaking doomed!
Puerto Rico did just fine with a higher minimum wage until congress repealed the tax breaks that big pharma got for moving there. Seattle is doing just fine with $15 per hour. So, it is a mixed bag. The money supply should be increased. That is the failure of the Fed.
END THE FED!!!
Interesting to read and without offense, but this debasement is not “fixable”. One only has to read and watch as the character (lack thereof) of youth are rapidly circling the drain. Yes, there are exceptions, but as quoted in many movies, “this will not end well”.
Great Point, wished I started saving in silver years ago.
But what about a maximum wage? why should a CEO get not 20 times the wage of his average employee … I’m not talking socialism, I’m saying the distorted money system has taken CEO compensation from 20 to 500 times the average worker. It’s the flip side of the same coin, and no one talks about it.
Suspect honest money will be the answer to both distortions.
How does the Brexit Vote effect how we should play the gold market. Should we sell Gold investments on chance that UK will exit?
Currently it does make sense to have the wages at $15 because of the worthless of the US dollar. If prices were less, costs were less then yes, wages should be lower, but reality is the opposite. Things cost too much currently thus for now we need the $15/hr until the fiat currency is fixed. As a business owner I don’t mind making less to pay my employees more because I still make a lot.