There’s an old saying: “The road to Hell is paved with good intentions.” I used to think that meant that I did not do something that I intended to do and maybe promised someone that I would do. Then more recently I decided that it probably happens when I do something that I may have promised, but the action results in unintended consequences. Politicians make a lot of promises to voters that they will do things to help them. But it’s hard to avoid unintended consequences.
When it comes to social issues, Liberals make lots of well-intended promises. There is often more than one way to fulfill these promises. But not understanding or thinking through the economic effects of how one addresses these social issues, often causes things that could be avoided. Conservatives, on the other hand are frequently accused of not doing being motivated to do things that help people. They want to do things that help the economy but are not specifically aimed at helping people who need help. We would probably be better off if the two sides would work together. Helping the economy may not always help the people who need help the most. On the other hand, trying to help people without considering the economic effects often leads to unintended consequences. And sometimes people just need to be motivated to help themselves.
Walter Williams who is a professor of economics at George Mason University and writes a syndicated column, had a recent column in the local paper. In it he goes through the possible economic effects of raising the minimum wage from $10 per hour to $15 per hour. He points out that a person making minimum wage of $10 per hour makes about $21,000 per year which is “no great shakes”. But it’s an honest job above the poverty line in most areas, and requires a minimum of skills. In today’s world many jobs can and are being replaced by automation, and he cites a few. There is a good possibility that if the minimum wage was raised to $15 per hour that it would give company’s more incentive to automate the work, and the number of jobs would be fewer. While some people would make more money, a lot would not have jobs at all. So if some people are helped, but a lot of others hurt, how compassionate is that? The supporter of a higher minimum wage may have the best of intentions, but it may not be the best way to improve the most lives. The best way to help people have more money would be to have them qualified for more than a minimum skilled job. And according to things I see in the news, a lot of companies are having trouble finding people with the skills they need.
In case you are wondering about his logic (He’s dealing in micro-economics which my good friend and economics professor told me – several years ago – not as important as Macro – economics, but I took his course in Micro anyway and have used it much more than macro in nearly 40 years of work in industry. But I haven’t been interviewed like he has by news media on actions by the Fed and congress.) An article in the Wall Street Journal the first of July talked about Seattle, Washington which a few rears ago raise its minimum wage from $9.47 to $13 per hour as a first step to $15 per hour. Since then, a Washington University study found that, on average, workers getting a raise in hourly dollars had their incomes fall by a net $125 per month because employers cut their work hours. Another Wall Street Journal in last May, had a story about a steel mill being built in Ashland, Kentucky. The average pay at the plant will start at $50,000 per year and average $70,000 per year – about twice the median house hold income in Ashland. It is located in Ashland because labor is available and Kentucky is a “right-to-work” state – so they could not have unions and union rules. A lot of people in these areas voted for Trump because he promised to get industry back in their area. But union’s usually support Liberal Democrats because they want higher wages and more rules. With this and new technology, it is expected to be competitive with international steel companies where most of the steel production has gone over the last several decades. I don’t think that Trump should get any credit for this plant, but the well-intentioned union should not either.
Apparently a lot of people making minimum wage are working in the food industry. In San Francisco a lot of restaurants went out of business when the minimum wage went up. (As reported in the news) So this is not “greed” on the part of the business owner, it’s survival. An article in the local paper last week said that although Americans like American products if asked, they will by foreign imports if they are cheaper. They will buy lower priced products regardless of where they are made. So if company is using a lot of minimum wage workers whose price went up, they would have to look for ways to cut costs to stay competitive. It’s not necessarily “greed”, it’s “survival”, and low prices – and more jobs, help all of us.
A better way to help minimum wage workers would be to give them skills for a better paying job or make them more productive in the job they are in. Industry – according to the news media – is having problems with finding skilled workers. The answer is not necessarily more people attending college. I heard a guy speak recently who is with a company that trains air plane mechanics. The training takes some time, but the time and cost are much less than college costs and the Airlines have a shortage of mechanics. The starting pay is $20 per hour (about $42,000 per year, which is probably comparable to a lot of college grads) and with some experience that can increase to $100,000 a year or higher . If one’s intentions are to help people with low pay jobs, that sounds like a much better alternative to me. But to get there would involve some discussions of both well-meaning conservatives who know something about economics and liberals interested in helping people do better. It’s not so much a matter of wanting to help people, but which is the better alternative. And we probably won’t get there, today or tomorrow, unless liberals and conservatives start talking to each other.