Friday, June 30, 2006

Morality and the Minimum Wage

JML writes:
Your post is written as though the two programs cannot effectively work in tandem. It is quite possible to increase both the minimum wage and the EITC.

. . . I find it immensley immoral for a worker to be paid a wage so low that he cannot afford basic necessities when working full-time.
What about volunteers and interns? According to your personal moral views, they too should be paid a wage that allows them to afford the basic necessities of life.

JML also writes
Reading into the views held by recipients (or potential recipients) of the EITC, one is left with the distinct impression that recipients consider the EITC a handout. A higher wage brings a more content, more productive worker and member of society. The EITC is a brilliant concept but cannot quickly reverse the view deeply held by so many Americans that an hour worked should mean an hour paid.
I've spoken to quite a few people who receive EITC benefits, and not one of them considers it a handout. Rather, EITC benefits are perceived to be a tax break that people earn by working, thus allowing them to become more self-sufficient and avoid the stigma associated with food stamps and other entitlement programs.

In speaking to people who currently receive EITC benefits, I was astonished to find that many of them are making much more than the minimum wage and but for the EITC would still be living in poverty and would need to apply for food stamps and other entitlement programs. In striking contrast, more than two thirds of those earning minimum wage are not living in poverty. Moreover, raising the minimum wage also raises wages for union workers whose contracts with employers are tied to the prevailing minimum wage. Thus, what I find immoral is the fact that the minimum wage is a huge off-the-books tax that transfers income and wealth from employers to low wage and union employees who are not living in poverty rather than helping the working poor, which is (presumably) what the minimum wage is supposed to do.

Thursday, June 29, 2006

What Is A Reactionary?

In a previous blog post entitled Reactionary Ideologues and the Minimum Wage Debate, I used the term reactionary in a way that would confuse most people who are familiar with this term. To wit, most people would use the term reactionary to refer to an ultraconservative, but I used it in reference to people who subscribe to left-leaning liberal orthodoxy.

The left-leaning liberals that I encountered on the blogosphere are reactionaries of a different sort. A more commonly used term would be "knee-jerk liberals." Specifically, when I pointed out that my opposition to the minimum wage was not based upon the position that it would have a negative impact on low wage workers, I was told that "proves that your, and the Republican argument that the minimum wage increase would hurt the economy is total and complete garbage." Needless to say, this is a straw man argument. My original point was and is that the people who need help the most are the working poor, and that the Earned Income Tax Credit is the best way to target this group. Some people have a hard time understanding this.

While engaging the members of what can only be described as a very hostile forum, I pointed to the fact that over two thirds of the people working for minimum wage do not live in poverty. Although often ignored, this fact is very well documented, and anyone who does their own independent research will find this to be the case. Nonetheless, I was asked how someone living on the minimum wage could not be living in poverty. The answer, which I had already stated several times at that point, is somewhat obvious: Most people who work for minimum wage are the child or spouse of someone who earns a decent wage.

It's at about this time that my login to Democrats.com stopped working, and my forced silence was interpreted as victory, so if any of you people would like to continue the dialogue, I am prepared to do so by responding here on my own blog. I had formulated a response to "Jim" who asserted that the EITC has been attacked by Republicans who posted at Democrats.com and that he had defended it, but I lost that response when my login to Democrats.com was unceremoniously shut down, and at this point I'm still a little miffed that I was silenced by the powers that be.

Those Republicans who oppose an expansion of the EITC are "let them eat cake" ideologues who would almost certainly stand opposed to raising the minimum wage. For the record, and speaking as a libertarian, helping the working poor with the EITC can be justified because it reduces entitlement spending, provides a boost to a very inefficient sector of local economies, and increases labor work force participation.

Reactionary Ideologues and the Minimum Wage Debate

Democratic leaders in congress have made significant hay over the last week by stating their intention to block cost of living pay increases for congress unless and until congress raises the federal minimum wage. Since I had already engaged some advocates of raising the federal minimum wage over at David Sirota's Working for Change website by asking them about their position on the Earned Income Tax Credit, it seemed to be a natural progrssion to engage other bloggers with the same question. To that end, I visited the Google Blog Search Beta, entered the term "minimum wage," visited a number of the blogs where the issue was under discussion and asked:
What is your response to the position that expanding the earned income tax credit would be a more effective vehicle for helping the working poor than increasing the minimum wage?

The advantages of the Earned Income Tax Credit (EITC) seems to be a very well kept secret. Of those few bloggers who know what the EITC is and how it works, many still believe that a minimum wage law is necessary, . . . that somehow these two programs work in tandem to fight poverty. Well, I've looked high and low, and I have not found any evidence to support that position. Rather, in terms of fighting poverty, the EITC is highly effective because it puts more actual money into the hands of the working poor whereas the minimum wage is simply a huge off-the-books tax that redistributes wealth from employers to minimum wage employees. The EITC also reduces entitlement spending, provides a boost to the local economy from the bottom up, and increases labor force participation.

My venture into the blogosphere was a sincere attempt to figure out why people think that the minimum wage is a GoodThing(TM) when compared with the more effective alternative of the EITC, but I quickly found myself under attack from reactionary ideologues. Even so, I was able to find some common ground with the more intelligent posters at the Working for Change website, and most of the other blogs where I posted. Nonetheless, the rational discourse was cut short over at Democrats.com when I suddenly found my account disabled after making several posts. I suppose locking me out of the discussion is one way of making it look like they put me in my place.

Monday, June 26, 2006

The Problem with Minimum Wage Laws

I finally got a response from David Sirota's apologists over at the Working for Change website regarding (1) my suggestion that campaign contributions be taxed and (2) my claim that the Earned Income Tax Credit (EITC) is a more effective vehicle for helping the working poor than the minimum wage. Strangely enough, no opposition has yet surfaced to my proposal to tax campaign contributions. However, my assertion regarding the effectiveness of the EITC is being challenged by the age old question, "Where's the money going to come from?"

To be clear: The effectiveness of the EITC is not in doubt, and most people seem to agree that giving the working poor a break on their income taxes is a GoodThing(TM). However, the dialogue reaches an impasse when an advocate of the minimum wage asserts that a raise in the minimum wage would put more money in the hands of the working poor than the EITC ever could. Of course, this begs the same question that was asked of me, "Where's the money going to come from?"

In an article published on the Slate website on July 9, 2004, Steven Landsburg convincingly argued that there's less and less empirical evidence to suggest that raising the minimum wage will hurt minimum wage workers. Indeed, as a general rule, an increase in the minimum wage will be very effective at transferring wealth from employers to employees. However, the problems with this transfer of wealth are the facts that (1) over two-thirds of minimum wage workers are not living in poverty and (2) the financial burden of helping the working poor is placed on a very small group of people -- i.e., their employers.

"If you want to transfer income to the working poor, there are fairer and more honest ways to do it. The Earned Income Tax Credit, for example, accomplishes pretty much the same goals as the minimum wage but without concentrating the burden on a tiny minority. For that matter, the EITC also does a better job of helping the people you'd really want to help, as opposed to, say, middle-class teenagers working summer jobs. It's pretty hard to argue that a minimum-wage increase beats an EITC increase by any criterion. ┬ÂThe minimum wage is nothing but a huge off-the-books tax paid by a small group of people, with all the proceeds paid out . . . to another small group of people."


If you want to learn more about labor law check out the web for legal advice or if you feel like you have a case against a former employer the internet can help you find the best employment lawyer for your situation.

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Sunday, June 25, 2006

Trying to Make Everyone Richer by Raising the Minimum Wage

This blog post is the result of some followup that I did on a previous blog post wherein I proposed taxing campaign contributions. That idea was inspired by David Sirota when he appeared on The Colbert Report championing the idea of public financing of political campaigns. During my followup to my original blog post, I left comments on various sections of David Sirota's Working for Change website, and I soon found myself acting as an uninvited apologist for libertarian John Stossel in re his comments regarding the problems with using a raise in the minimum wage to help the working poor.

While I intend to continue making comments on Sirota's blog, I also intend to recapitulate my thoughts here rather than letting them get buried there. To wit:

One of the most basic tenets of modern economic theory is the law of supply and demand. Pursuant to the law of supply and demand, any economist will tell you that the "correct" price for a good or service is the one that is determined by buyers and sellers in a free market rather than one that is set by government mandate, ceteris paribus -- i.e., other things being equal. From this basic precept, however, most economists will then argue and/or agree that government should play some role in regulating the marketplace.

While David Sirota is not an economist, he is no doubt familiar with the basic tenets of modern economic theory by virtue of his undergraduate studies in political science. [Note: A cursory review of Sirota's bona fides does not indicate whether he ever graduated from college, only that he attended Northwestern University and double-majored in journalism and political science.] In any event, Sirota never seems to address the inherent conflict between minimum wage laws and the economic law of supply and demand. Instead, he points to empirical studies which indicate that states and localities that have raised the minimum wage have not suffered any adverse economic impact on the working poor.

Sirota has apparently set his sights on discrediting Emmy Award wining libertarian journalist John Stossel, characterizing Stossel as a "pathological liar." And in a televised appearance on NBC's Kudlow and Company that seems to be their first personal encounter, Stossel narrated his position that minimum wage laws hurt the working poor, and responded to Sirota's factual claims to the contrary by asking, "Well, if those are the facts, why stop at $7. We should pay everybody 20 bucks, 40 bucks an hour."

I looked up the interview on the Internet, and I think Sirota did nowhere near as well as he thinks he did. However, he had one very good talking point: According to Sirota, when the minimum wage was raised in the state of Oregon, the number of welfare recipients declined. That's all well and good, but if your objective is to help the working poor, and you find that people on welfare are inclined to opt out of minimum wage jobs, why not simply increase the Earned Income Tax Credit? I suggested this option in one of my comments on Sirota's Working for Change site, and no one has yet responded. Similarly, no one on Sirota's website has yet responded to my suggestion that we tax campaign contributions rather than create a system of publicly financed political campaigns.

Friday, June 16, 2006

Why Not Tax Political Contributions?

Inspiration comes from the most unlikely places sometimes. For instance, I was watching The Colbert Report on Comedy Central the other night, and David Sirota was on advocating public financing of political campaigns. This was not the first time that I'd heard this idea. It's been around for quite a while. The underlying rationale is that public financing of political campaigns will make sure that special interests cannot buy a candidate, and it sounds just as ineffective now as it did when it was first suggested to me in law school during a class that I took in the Law of Elections and Political Campaigns.

And then it hit me: Why not *TAX* political contributions? It's possible that someone has thought of this before, but I have an extensive background in law and politics, and I've never heard it suggested by anyone else, so this is apparently an original idea. In fact, the only discussions that I've seen regarding tax treatment of political contributions are people advising that political contributions are not tax deductible. As such, the idea of taxing political contributions will probably be rejected by most people out of hand.

I could go into a lengthy analysis of the pros and cons of this idea and/or narrate guidelines for its practical application, but I have no interest in doing so because it's a pretty straightforward idea. Suffice it to say that a tax on political contributions would be a totally voluntary tax, and it would immediately mitigate the impact of special interests on elections and political campaigns. As for the revenue generated by such a tax, . . . . that presents mind boggling possibilities. So how about it, Mr. Sirota? Why not tax the bastards?