Monday, February 6, 2012

The Romney index!

So…Mitt made a statement last week that managed to get me thinking…imagine that!!

The media has made a meal out of it…and everybody is saying stuff like…”I know he made a mistake, and I don’t want to take it out of context…but….”


How like the media.

Anyway…I am not even going to try to requite Mitt’s words…except to say that he doesn’t care too much about the poor because they have a safety net…and if the safety net needs fixing, he will fix it.

How very progressive of you Mitt!!

Let’s find more ways to give handouts to the poor….more ways to keep them addicted to government freebies, more ways to keep them trapped in their own misery!

But Mitt has a plan…being the good progressive that he is, he is planning to index the minimum wage so that it goes up automatically with inflation.

Say what?

Yep…Mitt is planning to have automatic increases to the minimum wage.

And he is running on a conservative ticket?

I tell you, folks…the world has turned completely upside down.

So let’s look at minimum wage and indexing thereof.

Let’s pretend that I am a business owner, ok?

Not too hard a stretch for me as I have been there several times in my life.

Anyway, as a business owner, I have invested my capital in a venture that I own, that I have created, that I have risked MY capital on…and now it is time to find somebody to work the business with me.

This should be really easy…but when I look at the regulations, I need to consider a few things first.

For instance, if I employ too many people I will be prevented from employing the best people because I will have to employ a certain number of “minorities”. (See my post about this here…. )

OH…and I can’t NOT employ somebody because I don’t like their sexual orientation, or their religious beliefs, or skin color, or any form of disability….

And then, when I do find somebody that meets all these criteria, and I think they can do the job…I am not allowed to pay them what I think the job is worth!

Hang on a minute…it is MY company…I am taking ALL the risk, and the government tells me who I must employ and how much I must pay them?

What happened to property rights? What could possibly be the argument that people accept government intervention into property rights? What could possibly have convinced us that this is a good thing? That government has the right to do this…or even that the government knows best?

Well….let’s have a look at some of the arguments I have heard about the minimum wage….

1.       We hear our President and many on the left  (and unfortunately, far too many conservatives) say…”Everybody deserves a well-paying job.”

Really? Apart from the stupidity of such a statement which I will look at in a minute, let me ask this….who has the moral authority to determine what a well-paying job actually is?

After all…for me, I am sure it is a much higher number than it would be for a high school dropout with a record longer than your arm!

What should it be? What should the minimum be? Is $3 too low….is $50 too high? Who has the moral authority to determine what that so-called living wage should be?

Now, let’s look at the stupidity of that statement.

Do you really think that a high school dropout, who takes 5 hours to sweep a floor should be paid the same rate as a high school dropout who takes 1 hour to sweep that same floor?

I didn’t think so….the stupidity of a claim like that is self-apparent!

2.       Then there is the old chestnut that without a minimum wage we would have slave labor conditions.


Let’s run with this assumption for a minute. Assume that I have a fast food burger joint where I want to hire high school dropouts to flip burgers. The area I live in has a FINITE number of high school dropouts that are seeking work. There are a large number sitting on their asses watching soaps and smoking dope, but they are not in the job market.

So, I need to compete in the free market to find these high school dropouts to work for me. I figure it is worth about $3 an hour to have my burgers flipped, after all, I have to allow for wastage due to the fact that at least 40% of the burgers will burn before they get flipped.

So I advertise  for burger flippers at $3 an hour.  But I don’t get any responses. SO I check what is happening and find that two doors down is a pizza shop offering $5 an hour to the same group of high school dropouts that I wanted. He was getting all the applicants he could handle.

Being the good businessman that I am, I decide that I need to compete better, so I offer $6.50 an hour. Not only do I start getting some good applicants, but I actually get some of the people he had hired looking for work with me.

I grinned from ear to ear when I found that out….but that grin was short lived, when he advertised at $8 an hour.  I immediately offered $10 and found that at that hourly rate, a whole new market of employees opened up. Some of the doped up dropouts gave up their soap operas and asked for a job…but more importantly, some better quality applicants turned up….people that would do the job with less wastage…

I figured that if I employed a couple of $10 people I could reduce my wastage from 40% down to 8%...and could still make a profit selling my burgers without having to increase the price.

This is how free markets work.

Now imagine the same scenario with a minimum wage of $10.

I advertise at $10 and get a mixture of good applicants and crappy applicants. Fewer good ones though because they believe they are worth more than the crappy ones (rightfully so). If I wanted to employ the good ones, I would have to pay $3 an hour more…and I can’t make that business case close without increasing my prices by around 30%.

Likewise,  if I employ the dropouts at $10 hour my wastage remains at 40% so I will have to increase my prices to remain profitable.

It does not take long for me to realize that the market will not buy my burgers at 30% higher prices…so I do the only thing I can…I close up shop and stop losing money. The 40 or so jobs I created were gone. The dopers go back to their sofas, the good employees start the search for yet another job that will disappear almost immediately and the cycle of hopelessness and despair takes root.

Slave labor conditions? Really? Do you want tio hold on to that lie as a support for minimum labor laws?

Go right ahead….it is not slave labor you have to worry about, it is jobs.

3.       How about this one.  “An employee has a right to share in the results of his labor.”

I am not quite sure what these idiots are trying to say here.

Here is the fact. The employee is PAID for his labor. He has NO further rights to anything.
The fruits of his labor are his wage.

Do you think he has rights to a share of the profits? 

Maybe he has rights to the ownership of the business too?

Here are the facts. The employee chooses to work for a given labor rate and when he gets paid for his labor, he has received all he is entitled to.

4.       How about this one….”Henry Ford declared that he would pay his workers enough that they could afford to buy his vehicles.”
From all accounts this appears to be a true quote…..but so what? What does this have to do with being forced to pay a minimum wage? In some cases that may be a wise business decision….it is always good business to protect and create your markets….but what if Henry Ford was building luxury yachts instead of inexpensive motor cars? Would he have paid his employees enough that they could afford to buy his products?


The liberal progressives have got to have something much better than these lame arguments before I will ever accept the value of the minimum wage.

To understand the devastating economic impact of the minimum wage, and its job killing properties, you have to first understand and accept the principle of a free market economy.

In a free market economy an individual is free to sell his labor under any terms and conditions he will accept. Somebody may not accept less than $20 an hour while somebody else with identical skill base and qualifications will do the same job for $15 an hour.

As a business owner, if all things are equal I would chose the $15 hour applicant….because that means I could sell my products for less (while still making a profit) and expand my market to [people who might otherwise be unable to afford my products.

I guess some greedy business men will simply charge the same price and pocket the $5 profit….this may not be good business but here’s the thing. HE HAS THE RIGHT TO DO THAT.

By making an extra profit he is taking NOTHING away from the guy who will work for $15 hour. That guy is getting paid what he would sell his labor for.

What happens next becomes very interesting. You see, the pool of people willing to work for less than $15 hour is very small. After all, they have a skill base that they think is worth $20 hour. So, the employer will soon have to raise his pay rates if he wants to employ more people…..but the people are clever. They know they can hasten this process if they can offer more to the employer…so they do some more training, get some more experience….gather a broader skill base….and soon they become an appealing prospect….the employer sees that they offer more and even if he has to pay $25 an hour for them, they are a better prospect now than the $15 guy.

The free market…if allowed to operate freely will result in some significant advantages:-

1.       Higher employment with more jobs created
2.       Higher wages with competition driving not just market sales forces but also employment forces
3.       Lower prices – the higher educated employees allow prices to reduce through reduced wastage and greater efficiencies
4.       A stronger economy since the balance between value creation, cost of living, and wages is always on an upward trend

On the flip side, a minimum wage economy does this:-

1.       Destroys job growth by forcing unrealistic wages
2.       Encourages lower wages since free market competition does not exist
3.       Forces higher prices since wage rates have no connection to efficiency or wastage
4.       A weaker economy since there is no relationship between value creation, cost of living and wage growth

And we have Mitt Romney, claiming to be a capitalist, claiming conservative roots, supporting and encouraging the growth of minimum wages?
It is clear that this man, who has used the existing system to garner great wealth, has no idea of what conservatism really is.

He is willing to sacrifice your property rights, and my property rights, on the altar of expediency…somehow believing that by throwing trinkets to the poor he will win their votes.

I hate to say this, but should Romney win the Republican nomination, the battle for the President will become no more than a pissing match to see who can give away more of your tax dollars to buy the next vote.

With 4 potential nominees…there is only one that has shown his lack of conservative credibility…and it is with statements like the ones Romney has made last week that Romney is defining himself as Obama light. His lack of conservative backbone will hand Obama a second term.

As for me, I would rather go down fighting than capitulating to the same end result. Newt with all his baggage would at least fight hard. Santorum, even without igniting the voters imagination, has shown his true conservative roots. Ron Paul, everybodies favorite loony uncle, understands conservatism in ways that Romney could never grasp.

Anybody but Romney? You betcha!

Any of the other three will at least present a true conservative face, a true alternative to the Liar-in-Chief.

Minimum wage? Political correctness? Diversity? Fairness? Equal share?

All broken records that destroy economies and morality.

I implore you not to fall for it again.

Stupid is as stupid says….


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