The Morning Rant: Minimalist Edition

The relationship between an increase in the minimum wage and a decrease in entry-level jobs has been studied and studied and studied, and guess what? It exists. It's real, and the economic literature is clear. It's even pretty obvious to most sentient beings!

Increase the cost of one of the inputs of any business, and that business will seek alternatives to that increased cost. We do it on a micro scale every day, so it is a concept that is both intuitive and backed up by data.

But the elitists in the media, led this morning by one of the more aggressively stupid national talking heads, apparently didn't pay attention in Econ 1, and probably never went shopping for anything, so they have no basis for their thoughts other than the talking points supplied by their handlers in the Democrat Party.

This is actually a fascinating glimpse into the chaotic, echo-filled brain of a media figurehead. He vomits up a word salad, expecting the illiterates who follow him to accept it without question. Although, I guess in one way he is correct; there are only a few negative effects of an an increase in the minimum wage. Inflation and a decrease in entry-level employment are the two first-order effects. It's the second-order effects that get really nasty.

And who gives a shit that it is popular politically (whatever that means)? Among whom is it popular? Democrat legislators? Sure. They think they are buying votes. Illegals? Absolutely! there will be more opportunities for off-the-books employment of illegals in many industries that consume cheap labor. Industries that can increase the speed of automation? Yup.

There was an economist named Schumpeter who wrote about an economic concept called "Creative Destruction." Well, a $15 minimum wage will absolutely have that effect. It will disrupt entire industries and destroy their labor models. What will happen next is open to debate, but the smart money is on automation, a decrease in service industries and a huge increase in self-serve and drive-through and all the other ways that businesses that currently rely on unskilled labor can decrease that need.

That means fewer entry-level summer jobs for high school kids. That means fewer college students can bus tables to pay for textbooks. That means that your landscapers are going to use more illegals or jack up their prices...or both! That means food costs will increase because the food industries are huge consumers of low-skill labor.

The facts are clear. Labor is not insulated from pricing pressure, and the arrant stupidity and ignorance of the chattering classes and the political classes cannot change that fact.

But eventually it will reset, when inflation rises and the buying power of the minimum wage reaches equilibrium. But nothing can replace the economic activity that will be lost because of this incredible ignorance of the real world.

Hat Tip: Anonosaurus Wrecks, Tyrannosaur Wrangler

posted by CBD at 11:00 AM

| Access Comments