Saturday, July 29, 2006


Legislatively vetoing the Law of Supply & Demand

It is perhaps my favorite quote from a national columnist this year:

“It should normally be difficult to pick the worst state legislature in America, but Maryland's is way out in front.” John Fund - Cross Country

Now nothing recently has happened that would threaten Maryland’s status of having the worst STATE legislature but others are pitching to show that such incompetence is endemic at the local and national levels also.

Case in point: the Chicago city council. You may have read awhile ago that the city had refused a permit for Wal-Mart to build a store in the South Side because, well, it’s Wal-Mart and, you know, Wal-Mart is bad. Properly chastened, Wal-Mart agreed to change its evil ways and become a more responsible corporate citizen and force union representation on its workers and keep Christmas in its heart all year round.

Ha! Just kidding – instead Wal-Mart merely moved their plans a few feet and built the store just outside the South Side. Sure this meant that the city was missing out on a significant tax revenue source but the important point here was that the city government did what was best for its citizens…even if the citizens were too stupid to realize it.

“News that all but 500 of the 25,000 who applied for the store's 350 jobs were Chicagoans helped fuel the debate between those who say retailers like Wal-Mart should pay a "living wage" and those who argue their communities are desperate for both jobs and the taxes that such shoppers bring to a community.”

This is why you just gotta love liberals – facts never get in the way of politics. With the Wal-Mart store mis-calculation fresh in their mind, the Chicago city council attacks again: Chicago approves 'big-box' wage law

“The measure requires mega-retailers with more than $1 billion in annual sales and stores of at least 90,000 square feet to increase workers' pay to at least $10 an hour in wages and another $3 in fringe benefits by July 1, 2010. Today, the minimum wage in Illinois is $6.50 an hour and the federal minimum is $5.15.”

Never mind that Wal-Mart already pays more than the Illinois minimum wage, the Chicago city council has somehow determined that ‘Big-Box’ workers are more deserving of more money for their work than, say, someone who works for a $500 million company in stores of 80,000 square feet. I can’t explain the logic of it but then again, I’m doubly burdened with an economics degree and non-reliance on union support.

But senseless pandering can also be a non-partisan maneuver. Case in point: the U.S. House of Representatives. In a combined move, the Minimum Wage Hike Passed By House also includes provisions to permanently cut estate taxes:

“The House last night voted to boost the minimum wage for the first time in nearly a decade while also permanently slashing the estate tax, a coupling that GOP leaders calculated might garner enough Senate support to become law.”

I hope this all crashes and burns in the Senate because, my support for estate tax relief notwithstanding, I consider minimum wage laws fundamentally stupid.

“Many conservatives disagreed with the provision to raise the hourly minimum wage from $5.15 to $7.25 over three years.
"Every principled conservative knows this is horrible stuff,"
Rep. Tom Feeney (R-Fla.) said.”

It becomes even more outlandish when you put it in context with our immigration problem. How raising the price of labor serves to diminish the demand for cheap labor is beyond me but apparently some of our lawmakers labor under the impression that a minimum wage is a maximum wage. Accordingly, the thinking goes, raise the minimum wage and more Americans will do that kind of work. Yeah – increases in wages should increase the supply of labor. Unfortunately, whether the work is worth the increased wage and whether there will be employers out there who will pay it was beyond the scope of the legislation.

See, economic illiteracy – it’s not just a Maryland thing.

I would find Milton Friedman's idea of a negative income tax to be less offensive than a minimumm wage. If we believe that the evil is the suffering of the worker, then punishing the source of the worker's likely independence and autonomy - saleable job skills and a solid resume - seems perverse. Better that the worker get hired at market rates and that we all be taxed to assist.

That was not your argument and you may disagree, but I agree with your post. This sort of price-floor game is cheap and easy, i.e. extremely politically popular. Last time I checked Britain had no minimum wage and they seemed none the worse fot it.
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