Monday, August 01, 2005

Wealth is not pie 

Prof. Peter Lorenzi, a longtime regular reader of the Scholars, sends me this article on the push for a referendum to raise the minimum wage in Michigan. We don't have initiative and referendum in Minnesota -- that's one of the things Governor Pawlenty didn't get for his pledge abdication -- but we did get a $1 raise in the minimum wage from today. I just called my friend at a restaurant; he hadn't realized it started today, and so my message was "up a buck, when do the layoffs begin?"

Some guy called the NARN show Saturday ranting about how this is increases tax revenues. I had a hard time telling what his point was, but my guess is that for restauranteurs and other businesses using minimum wage workers, there will be an increase in the amount of money they send to social security and medicare payments. The better way to say what this is explained in a comment to a nice case study at Coyote Blog.
In the final analysis, a minimum wage is a transfer of wealth from businesses and consumers to low-skilled workers. In most cases, such a transfer is now funded from general tax revenues, where society takes care of the less fortunate in as fair a way as possible with a high degree of transparency. The minimum wage tax, however, applies only to those who employ the lowest paid workers, and is imposed with little transparency or accountability.
Thus too with living wage proposals like that for St. Cloud -- it's an attempt to take more of the money government confiscates and turn it into a wealth transfer, simply targeting a different set of businesses. This is what happens when people think wealth is pie.

UPDATE (8/2): Reader and columnist Linda Seebach sends an oldie but a goodie: "Poverty is the problem. Not inequality."