A Conservative Case For Raising The Minimum Wage

A Few Variable Facts

150 million Americans benefit from welfare dollars. It is estimated that about 40 to 50 percent of the US population receives some sort of public assistance every year. I am going to call this 150,000,000 people because I like round numbers.

One trillion dollars of taxpayer money goes to welfare programs annually. The total of local, state, and federal welfare dollars slightly exceeds one trillion dollars, which I am going to round to $1,000,000,000,000 because, once again, I like round numbers.

Using simple math, this comes to an average of $6,666 per welfare recipient per year, or $26,600 per year for a family of four. That is one full-time $10.00/hour job plus benefits for that family.

Government overhead consumes 70% of that $1,000,000,000,000. Several experts, such as Robert L. Woodson, estimate that government overhead consumes about 70% of that trillion dollars, leaving about 30% for welfare recipients. Compare that to your average private charity where only 20-30% goes to overhead and 70-80% of the money reaches charity recipients. That means, while the American tax payer pay $26,600 per welfare family, that same family of four only sees about $8,000 in benefits.

Welfare dollars are not wages, and produce zero goods and services. While some welfare dollars go to fund the severely disabled, a lot of welfare dollars represent a subsidy for working class folks who simply cannot make ends meet.

Paying wages for production is better for  corporate profits than paying welfare taxes. For all you conservative, corporate types, shelling out $26,600 in taxes for every poor family of four, knowing at best you will get an $8,000 return, is one of mankind’s most moronic business models. The left-wing, progressive, big government types love you for it. You have just cut off your nose to spite your face. If you could get that family off welfare, you could benefit from their productivity for a lower cost than the taxes you pay to subsidize your own crap wages and 30-hour work weeks. Sure, maybe the prices at Taco Bell, McDonald’s and Old Navy might go up a bit as we reach a new equilibrium, but I cannot think of one good reason the taxpayer should subsidize the low wages of your companies… and you and your executives ARE the tax payers.

Wages Are More Efficient Than Redistribution Via Taxes

In the United States of America virtually every man, woman, and child has a roof over their head, food in their belly, and access to a doctor in an emergency. Out of approximately 2.5 million annual deaths in the U.S., the CDC attributes less than 3,000  to malnutrition, and while about 1 in 500 Americans are considered homeless, exposure and starvation are not listed anywhere among the leading causes of death in that population group.  Considering the nature of Man, America is doing a decent job of taking care of their own. What is troubling is that 40 to 50 percent of Americans receive some sort of government assistance. That means the top 25 percent of income earners, those Americans who earn above $66,000 per year and pay nearly 90 percent of the annual gross tax revenue received by the government, are subsidizing the bottom 50 percent of the population. The top 25 percent are having their wealth redistributed to the poor to give them the basic dignities in life, to the tune of slightly more than $1 trillion per year. That equals an average of about $6600 per person per year for the bottom 50 percent of Americans, or $26,000 of benefits for a family of four, or full-time job at about $10/hour plus benefits for the head of that household.

$26,000 in welfare taxes is what the wealthy pay, but once that money goes through the government welfare apparatus, that family of four only sees about $8,000 of benefits, or the equivalent of a half-time, minimum wage job. The government keeps about 70% of the welfare tax dollars to fund… well… themselves. That means that 70 cents of every $1.00 American businesses pay in welfare taxes, programs many of their low wage employees routinely use to make ends meet, vanishes into the black hole of government waste. The definition of a bad charity is when the bureaucracy is the primary recipient of the charitable dollar. Essentially, America’s business model is to spend $1.00 in charity taxes just to save 50 cents in wages.

Speaking in terms of averages does not paint a fair picture of who actually benefits from the final 30 cents of each welfare dollar. The reality is a relatively small percentage of the bottom 50 percent are consuming the lion’s share of these welfare dollars. I have a paranoid-schizophrenic patient who is incapable of working, yet consumes well over $100,000 of public assistance annually to maintain his little apartment and pay all of his medical bills. Taxpayers pay well over $300,000 annually to keep this poor fellow alive. Alone, he consumes fifty times the average welfare payout, yet will never contribute anything to the American economy. Still, the point remains, the welfare dollar is a significant, yet horribly inefficient, source of income that subsidizes the underpaid and underemployed, yet perfectly capable workers of the United States, and therefore subsidizes their employers.

People Get Stupider And More Foolish Every Day

Like any trait across any species, human traits often track along a bell-shaped curved. For instance, a few people are severely retarded, a few people are incredible geniuses, and the rest of us have intellects that fall somewhere between the two extremes. While it is not politically correct to say it publicly, there are a lot of stupid people in this world. People whose IQ is so low that, no matter how hard they try, they will never be able to learn the skills required to net them a good paying job. There are also a lot of people who, while not clinically insane, have significant psychological defects that make it very difficult for them to perform any sort of valuable work simply because they cannot behave rationally with any sort of consistency. These two groups, people who are stupid and people who are incorrigibly irrational, in my experience in healthcare, make up a good portion of the bottom 50 percent.

Over the past century technology has replaced the majority of decent paying jobs that stupid and irrational people used to perform. Machines have become more reliable, make few mistakes, and never complain. Oh, and machines are mere tools… meaning the only compensation they require is basic maintenance and nothing extra. Powerful computers continue to raise the functional IQ of machines. The machine’s programming, bugs and all, is now more productive and more reliable than a significant percentage of the human population. This state of affairs has essentially made a sizable chunk of mankind virtually useless, and the size of that chunk grows everyday. It is entirely probable that virtually all of the jobs we do today will eventually be replaced by machines. As machines get smarter and more reliable, people look stupider and more irrational.

The Better Mousetrap Will Eventually Build Itself

Man’s natural inclination to compete against one another has given rise to an incredible world, despite all its evils. We fight wars, yes, but we build, create and innovate in order to upstage each other to a much greater degree. A dead enemy is good, but defeating an adversary and making him live with it is great, is it not?  That is the real joy of competition. Just look at the battles that occur daily between Apple and Samsung. Those battles are the battles that build the world, pitting one extraordinarily arrogant architect against another. This intractable desire to win, to be the best, is the golden fleece that pushes industrialists to always do more with less in order to upstage their rivals. They will lie, cheat, bribe, and sometimes kill to win. It is the lowest common denominator that makes them great, and they endlessly seek it in the name of winning, and always collateral damage is someone else’s problem. That is progress, and in America, and for much of the world, it has raised the standard of living for the stupid and irrational beyond their comprehension. Think on how automobiles, cell phones, and internet access are ubiquitous in industrialized nations. Think about how food in North America and Europe is so plentiful and cheap that the impoverished are also obese. The reason the American poor seem to always have enough disposable cash to spend on all sorts of luxuries like tattoos, cigarettes, drugs, junk food, beer, smart phones, and fashionable clothes is these things are really, really cheap in the grand scheme of things. Poverty, as my parents knew it, has been radically redefined to the betterment of our society. Competitive innovation has raised everyone’s standard of living. Except now, all the innovations the human race has created over the last several centuries are starting to make our labor unnecessary. Even as Fortune 500 corporate profits are at record levels, American wages are falling, real unemployment is rising, and welfare payouts are increasing. While Corporate America still needs lots of consumers, they no longer need lots of workers. This reality means we are rapidly reaching the point where the economics of mass production and mass consumption are starting to fail.

This begs the question, at what point does the industrial race to be the first mega-corporation to produce virtually everything at virtually no cost make all of mankind essentially useless? At what point will our labor be of no value because a machine can always do it better, faster and cheaper?  That leaves us, as a race, needing to address a very deep, philosophical question in relatively short order. How are we to survive now and in retirement as a species, keeping that roof over our head, keeping the food in our belly, and taking care of our health, when most of the jobs we use to do have been upstaged by an extremely innovative machine that perform human tasks with near perfection for the price of electricity? How will we “get ahead” in the future? The bell-shaped curve for human intelligence is now being weighted by the intelligence of machines, much to our detriment. Soon nearly all of us will fall into the “too stupid to merit a good wage” category. If we allow most of us to become industrial collateral damage, we will only have ourselves to blame. Right now, the top 25 percent of Americans have to subsidize the wages of the bottom 50 percent of Americans in order that they can live a secure life. Is that the right thing to do? Will this economic model continue to be feasible as the bottom 50 percent grows while the top 25 percent shrinks? Or should we raise the standard minimum wage, cut out the government middleman, and lay claim that the hard labor of even the stupid and irrational is worth a poor, but secure life without subsidy? Honestly, that seems the cheaper, more efficient model for the future, and it acknowledges every person’s hard work is at least worth a roof, food and a doctor’s care. What use is all of our incredible technologies and massive productivity, if a handful of powerful corporations hoard everything except what taxes the government levies to redistribute? In all honesty, what on earth are all these companies going to do with the trillions of dollars they have amassed? Eat it? Roll in it? Build empty vacation homes and luxury yachts that languish unused? Money is like blood, it needs to circulate to prevent social gangrene. With today’s technology and today’s productivity there is more than enough for the bottom 50% to have basic security even after the greedy attain wealth and material goods beyond the dreams of avarice.

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2 thoughts on “A Conservative Case For Raising The Minimum Wage

  1. Henshaw says:

    I missed the part where you explained away the Law of Demand when it comes to raising wages. The is no “conservative case” for the minimum wage because the policy doesn’t raise wages.

    • The law of demand – as the price of something increases, demand for it decreases. I understand the economic theory. I am just factoring the cost of welfare programs into the price. About 3.9 million people live in my home state of Oregon. Over 800,000 of them, about 20%, receive food stamps. The unemployed in Oregon received almost $1.5 billion in benefits in 2012 because that was better than low pay, part time work. The taxpayer is on the hook for all of these costs plus the costs of the bureaucracy built to deliver the benefits, without any productivity for their investment. My theory is that low wages and underemployment raises the overall costs of production, therefore decreasing potential demands for goods and services. I believe, in theory anyway, that capitalists could, if they chose, more efficiently and equitably distribute resources among the bottom 50% than government, and in the end everyone would profit. It is at least worth considering.

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