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President Obama gives the thumbs up prior to delivering remarks on the minimum wage in East Room of the White House in Washington, D.C. (Shawn Thew / EPA / February 12, 2014)
On February 23, 2014, Larry Harris writes in the Los Angeles Times:
The government should give vouchers to unemployed workers seeking low-income jobs. Those vouchers would provide wage subsidies to employers who hire the unemployed.
Livable wages and less income disparity are noble objectives that resonate with many people. President Obama has proposed that Congress raise the minimum wage as a way to meet those objectives. But there’s a better way to improve wages, assist low-income workers and flatten the income distribution.
The unemployment rate in the U.S. is 6.6%. For the young, the old and many minority groups, it’s much higher. With so many unemployed workers, the sensible economic policy would be to subsidize labor rather than raise the minimum wage. That’s because raising the minimum wage is the equivalent of taxing employers for the work done by their employees and giving the proceeds to the workers. And that works against employment, not in favor of it.
Larry Harris is advocating yet another government redistributive approach that is the WRONG solution. Harris does get the part that a minimum wage is essentially a tax on employers who hire minimum wage workers.
While I am not opposed to the concept of a “minimum wage,” economic productivity is a bigger part of the story. Those arguing its support basically argue that labor is producing more value today, but working people aren’t seeing any of the gains. Who has walked away with the proceeds from all that productivity? But contrary to general belief, when looked at through the lens of two factors of production––human and non-human––labor is not becoming more productive; the non-human means of production is driving the productivity gains.
Whether or not raising the minimum wage is harmful and will cause less employment should be discussed within the larger scope of economic inequality. The proposed measures are at best a sedative to ease the pain of deteriorating livelihoods, but not the solution that is necessary to significantly address income disparities between the wealthy ownership class and the propertyless, non- and under-capitalized American majority.
Technological change makes tools, machines, structures, and processes ever more productive while leaving human productiveness largely unchanged (our human abilities are limited by physical strength and brain power––and relatively constant). The technology industry is always changing, evolving and innovating. The result is that primary distribution through the free market economy, whose distributive principle is “to each according to his production,” delivers progressively more market-sourced income to capital owners and progressively less to workers who make their contribution through labor.
People invented tools to reduce toil, enable otherwise impossible production, create new highly automated industries, and significantly change the way in which products and services are produced from labor intensive to capital intensive––the core function of technological invention. Most changes in the productive capacity of the world since the beginning of the Industrial Revolution can be attributed to technological improvements in our physical capital assets, and a relatively diminishing proportion to human labor. Physical productive capital does not “enhance” labor productivity (labor’s ability to produce economic goods). In fact, the opposite is true. It makes many forms of labor unnecessary. Because of this undeniable fact, binary economist Louis Kelso asserted that, “free-market forces no longer establish the ‘value’ of labor. Instead, the price of labor is artificially elevated by government through minimum wage legislation, overtime laws, and collective bargaining legislation or by government employment and government subsidization of private employment solely to increase consumer income.”
The role of physical productive capital is to do ever more of the work, which produces income. Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum in order to maximize profits for the owners. Private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role.
Furthermore, according to Kelso, productive capital is increasingly the source of the world’s economic growth and, therefore, should become the source of added property ownership incomes for all. Kelso postulated that if both labor and capital are independent factors of production, and if capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all. Yet, sadly, the American people and its leaders still pretend to believe that labor is becoming more productive.
In reality, raising the minimum wage is the equivalent of taxing employers for the work done by their employees and giving the proceeds to the workers. And that works against employment, not in favor of it, and penalizes the ownership class for their “tools” of productivity. Advocates for a minimum wage should instead be advocating for ensuring that EVERY citizen benefits from income derived by the ownership of productive capital assets, and eliminate the need for government measures that redistribute income in one form or another––through coerced trickle-down. In other words, accomplished through redistribution achieved by the rigging of labor prices, by taxation to support redistribution and job “creation,” or subsidization by inflation and by all kinds of welfare, open and concealed.
For REAL solutions to economic inequality, support the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797, Monetary Justice at http://capitalhomestead.org/page/monetary-justice, and the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm.
See “Ownership––The Minimum Wage Replacement” at http://www.nationofchange.org/ownership-minimum-wage-replacement-1392301004, http://www.huffingtonpost.com/gary-reber/ownershipthe-minimum-wage_b_4770199.html and http://www.opednews.com/articles/Ownership–The-Minimum-Wa-by-Gary-Reber-Assets_Credit_Economic_Economy-140217-873.html.
