Looking past the first and second moves

What is the goal of the postings we will have under this category? The goal is to expose people to the need to consider the ramifications of what actions they wish to take and the ramifications of what positions they espouse.

When I was young and lived in the lower middle class area of Newark NJ we used to spend a great deal of time playing of all things chess. In chess to be any good at all you must look many moves ahead. Not one move not two moves but many moves. Now life is more complex than chess, we all know that, and we have a much higher degree of variables plus unexpected things can have major effects. Still we must look ahead to the third and fourth level and beyond.

A life changing project was assigned to me in my senior year in college. I had to write a research paper on the impact of the minimum wage laws. At the time I was completely for anything that might improve the life of poor people (since I was one of them). So I was initially a strong supporter of the minimum wage laws.

So you raise the minimum wage. What are the ramifications?

1. Since marginal companies are just making it, a rise in the minimum wage forces them to go out of business or to move. Means, now people do not have jobs.

2. Companies now compress their wage scale throughout the organization. Which means the increase results, in, over time, lower wages for these same people and others as they get promoted from the minimum wage job? Not a good thing.

3. Companies now move either to states where the minimum wage is lower or move off shore. Both are very bad for the local worker.

So does elevation of minimum wage benefit poor unskilled workers? The answer I believe is, certainly not in most cases.

Where would a rise in minimum wage make sense? To address item 3, in those areas where the jobs cannot move off shore or out of state and where there is not any out of area competition.  So if you want to increase the wages of the unskilled workers the perfect place in in the fast food industry. There are very few negatives here since all of the competitors will face the same problem. Of course the cost will be passed to the consumer who might spend their money someplace else if the increase in their cost of their hamburger and fries go up too much. We definitely do not want to do it in areas where the local companies face foreign competition or might wish to move out of state or off shore.

To increase government revenues let us increase tax rates. Tell me the ramifications of doing this at the state level and then on the national level.

Hint: Historically the best way to increase revenue to the government is to increase the business activity which raising taxes do just the opposite.

How do we get out of our financial crisis without either raising tax rates or by printing more money? 

Eliminating government waste helps, reducing government spending helps but that is not the whole answer. The only real way is to provide the climate for a substantial increase in domestic business activity.

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