American Intelligence Test #17 – A Minimum Sage for Americans

Now here’s the thing about the big debate in Congress and across the political landscape on the minimum wage, it may not be clear to those engaged in the debate whether they know much of anything about what they are debating. This doesn’t mean that they don’t understand the words themselves, they do know what each means separately and some know what the combined set refers to at the most simple and primitive level. However, given how highly you rate Congress in general, what would make you conversely consider that they are going to be likely to understand this issue? Do you even think that you understand this issue? Are you comfortable relying upon these minimally sage representatives to both be smarter than you and to do the right thing?

The Minimum Wage issue is an important societal test. It puts before you a question that has far reaching implications and consequences, and thus is one of those ‘laws of physics’ problems that you may think doesn’t impact you much unless you are a minimum wage earner. However the ‘laws of physics’ aspect of a minimum wage are very big because the ‘cause and effect’ impact is recursive in nature. So if you are going to put your trust in politicians, Republicans or Democrats, then you better be sure that they comprehend this issue properly and those unavoidable consequences that result from their particular action that set into motion the consequences that you, I and everyone else will live with and have to be accountable for like it or not.

So if you had to decide on whether to set a minimum wage amount now, what would your sage decision be? Would you increase it, keep it the same, lower it, or eliminate it? Your answer to this question should be decided now, and you can make a note for yourself about your basic rationale for your determination. Got your answer? OK, now you can choose to change it as you proceed with the test; but wouldn’t that be basically cheating yourself, treating you the same way that politicians treat you? The following test asks a couple questions and you should answer them in terms of what you think the right answer is, not what the right answer is based on what the decision you just made about the minimum wage was. This is a little tricky because you might feel that you ought to have answered differently but try to be honest with yourself, no politician is ever going to do that and it will be a refreshing experience.
Let’s begin impacting the American economy.

Question 1:   The lower the minimum wage the more competitive the US is with the rest of the world.   True  False

Question 2:  Increases in the minimum wage produces higher unemployment. True   False

Question 3:  Minimum wages are forcing a redistribution of wealth from middle to lower-income individuals?   True   False

Question 4:   Keeping minimum wage levels low promotes the general economy.   True   False

Question 5:   The percentage of people receiving the minimum wage is constantly growing and placing an increasing burden on the economy.   True    False

The Critical X-Question:  If keeping the minimum wage from increasing would help the economy and job growth then logically wouldn’t keeping all wages lower be even more effective in supporting economic growth and job creation?    Yes    No
Would reducing wages and bonuses to the top 1% be proportionally more beneficial?  Yes   No

It’s over. The answers below are referential, that is they try to give some additional info that may give a perspective of why I have judged them to be the proper answers. The real ‘cause and effect’ forces of minimum wages are much more complicated then I suspect even those who study this issue are capable of comprehending. That people disagree is not surprising but that we don’t recognize and admit that we don’t understand most of what is really at issue is not worthy of us.

Answers:

1. False.  These jobs are not a significant portion of the income population. The work involved is not highly related to international competition as it is more often related to local job situations that are not subject to international competition.

2. False. There is no empirical evidence that increasing the minimum wage has a negative effect upon employment. The slight increase in income at the lower income level may actually increase demand on businesses that both employ and depend upon consumer demand from the lower income population. This emphasizes the Henry Ford principle of workers are also consumers, an unusual and unexpected insight from a leader of capitalism.

3. False.  Actually the dynamic existing in the economy is that the middle class is shifting slightly toward the lower income range in the income population distribution. It’s not that the lower income group is acquiring more of societies’ income, rather that the middle class is losing it to the higher income levels.

4. False. Holding minimum income levels constant is actually reducing the true value of the minimum wage level. The minimum wage level is fundamentally flat over its history in real economic value. Thus the logical conclusion absent any additional factor would be that minimum wage changes have had no impact on the economy since it has been constant during periods of good and bad economics.

5. False. Actually, the percentage of the population impacted by the minimum wage is declining. So it’s not getting to be a larger problem; it’s actually becoming of lesser importance, affecting fewer people, and a minor economic issue. This explains why it is increasing in political significance, which is why politicians use it as a divisive issue since they are spending a lot of time talking about something that is of meaningless substantive value but perceived as highly important by a large portion of the voters who don’t know much about reality.

X-Question. Yes to both. If lower wages to one part of the income distribution is beneficial then it is logical that it would generalize to all segments of the income population. I would propose that Congress should dismiss its efforts to raise the minimum wage and replace it with a new economic concept about which they are ill-informed, ill-equipped to manage, and ill-suited to have any say over and present and pass a law that establishes a Maximum Wage for the nation. This would create an entirely new political issue over which the idiots in Congress could wage their inane debates. Or as members of Congress would understand: “Stupid is as stupid does.”