Sunday, February 16, 2014

How to become a famous, respected Republican economist in 5 EZ steps

1. Write a "think piece" (but be careful not to think TOO deeply) proposing to reduce the minimum wage to $3 an hour -- $2 would be even better. 2. Submit to a high-flown corporate-shill publication like National Review. 3. Deposit check, accept appointment as senior fellow at Heritage Institute, apply for seven-figure grant from Americans for Prosperity to research benefits of negative wages. 4. Lease villa at Antibes for season. 5. Never work again. This is not a spoof. RtO was on this trend even before its recent efflorescence, writing (See: "So just starve already," Jan. 31) that Ricardo's Iron Law of Wages (which never went away in corporate circles) is ready for a big comeback. Only a little over a week later, Robert Strayton proposed in the Wall Street Journal that the hideously extravagant $7 minimum should be cut to $5. The Journal called it: A MINIMUM WAGE THAT WILL WORK, and asserted it would create "millions of jobs." "a $5 minimum wage will 'trickle up,' " Strayton claimed. Trickle seems exactly the right word. His heart is big. He yearns to help "Single-parent families, often headed by an educated young woman with one or two infants who supports a live-in partner on an entry-level job income." Hmm. It would seem even simpler to raise the pay of an educated woman, but that is not how business works. It works like this. (The link tells the story of Tim Armstrong, a chief executive who lost his company $200 million or $300 million (nobody's counting, eh) on a doomed venture that everybody knew was doomed, but is being encouraged to do better next time via a $12 million (a year, not an hour) raise. He intends to achieve this goal of all publicly-traded corporations of driving revenue directly to the bottom line by slashing the benefits of the young, educated women who work for him because some of them have the ill-judgment of having "one or two infants.") The blood, er, ink, was not dry on Strayton's manicured hands when at Bloomberg News aspiring famous Republican economist Michael Strain raised (or is it lowered?) the stakes by proposing a $4 minimum wage. Strain is not overly concerned with young babymakers. His heart bleeds for the long-term unemployed: "Careful studies conducted in recent years indicate that being out of a job for such a long time is a serious obstacle to re-employment in and of itself." So, rather than, say, re-equip American business with managers who are not so stupid they will not hire qualified people because their own (the managers', that is, not the ex-workers) policies caused a lengthy recession, Strain would prefer offering the workers what I suppose we could call a non-living (others might say, starvation) wage. Strain, being a deep thinker, understands this might have unintended consequences. No, not that the workers will starve. Dumbesilleh. They don't hire you at the American Enterprise Institute to worry about starving workers.
Of course, we can’t just lower the minimum wage for the long-term unemployed to $4 an hour and leave it at that. Society must have as a goal that no one who works full time and heads a household lives in poverty. This policy would have to be paired with an expanded earned-income tax credit, or with more straightforward wage subsidies -- federal transfer programs that supplement a worker’s labor market earnings with tax dollars.
Wal-Mart couldn't have said it better: Let the taxpayers pay our workers, since we won't. Strayton also worries about the (possibly) undesirable consequences of paying Americans Third World wages. Not that that would be bad for the workers, but what about the poor employers?:
How would such a program operate? At the government level, with as little red-tape as possible, although government must protect current workers by guaranteeing they will not be subject to any wage lower than the one they now earn. At the employer level, hiring $5-per-hour personnel must be balanced against the risk inherent in the often-inexperienced people such a wage attracts. As an incentive, the IRS can allow a 50% tax deduction on all wages paid at the $5 level during a test period. Facing workforce mobility issues (prospective employees without cars, bikes or gas money), employers can offer transportation, water, food and necessary material services for which they may also claim tax deductions.
I hear West Virginia has some otherwise unsalable water that benevolent employers could foist off on their Ricardian hires as "drinking water" and get a tax break at the same time. Woo! Woo! Win, win. He writes, without evident irony, that "government must protect current workers." From whom, he is discreetly silent. Don't ask, don't tell.

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