The Conversation

Income inequality, minimum wages, and inflation

The latest distraction from ObamaCare failure is a renewed emphasis on "income inequality," which is one of those endless, highly subjective crusades the Left views as a bottomless well of power.  It's like global warming in many ways: its definition is fluid, there's no way to "disprove" it because it will always exist, and it's a problem that can never be "solved."  There will always be a relatively small group of people who make considerably more money than the average.

Another useful thing about the "income inequality" equation of power is that the variables can be manipulated at will by the power-hungry leftist.  After all, such inequality has gotten worse - much, much worse - under the policies of the modern era's most left-wing President, Barack Obama.  And yet, he gives speeches and complains about it, as though he were a mere spectator to an economy controlled by his government to an unprecedented degree!  And his audience laps it up, without a single curious soul bothering to point out that Obama's been the one who made "income equality" worse over the past five years!  

One of the essential tricks for making this little shell game work is the way liberals will rearrange the inputs, to claim "income inequality" is caused or exacerbated by whatever they don't like, or wish to gain more control over.  Put a hard-left ideologue in charge for the next fifty years, and you can rest assured that the liberals of 2063 would be saying they need more control over the economy to keep those greedy misers from getting even richer.  The rules of this game will always be rewritten to make it appear that excessive economic liberty is the cause of income inequality.

But maybe the rest of us should think more about another income gap: the one between people who don't work, and those who secure jobs in the entry level market.  That's where the minimum wage comes in.  Because the minimum wage is, over time, a form of slow and stealthy inflation.

Raising the minimum wage causes two cascade effects.  Other wages increase as well - the people who earn more than entry-level burger flippers are not happy when the burger-flippers suddenly get paid as much as they do.  And the price of just about everything goes up as the cost of labor increases.  This effect is more pronounced when the wage floor makes a big jump that outpaces core inflation, such as would be contemplated by the absurd "living wage" demands for $15 per hour.  The easiest way to understand this is to ask what would happen to the price of hamburgers if the minimum wage was more-or-less doubled. 

Of course, more expensive labor means fewer jobs are offered, especially when the wage increase is so dramatic (and combined with other mandates that increase the cost of labor) that automation becomes increasingly attractive.  You might have noticed that human cashiers are no longer necessary at some checkout lanes.  Crank up the minimum wage enough, and you'll see a lot more self-serve lines.  A huge investment in kitchen automation becomes reasonable for restaurant owners who are suddenly expected to pay far more for hourly labor.

This leaves more people pushed out of the workforce entirely, which keeps them off the track that merely begins with minimum wage entry-level jobs.  And everything these unemployed people need is made more expensive to boot.  That means they need more public assistance to survive.  If the minimum wage is cranked up, especially to "living wage" levels, you can bet you'll soon be hearing anguished cries that food-stamp allowances, unemployment checks, and other forms of public assistance are no longer enough to survive on.  Today's SNAP allowance won't go far in the world of the ten-dollar Happy Meal.

It's a vicious cycle that has the net effect on society of decreasing opportunity and removing control from the hands of individuals.  Anything that reduces the power of the dollar diminishes our liberty and limits our choices.  Which is all music to the ears of the Left, but it's a baffling mystery why anyone else capable of thinking clearly would want any part of it.



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