Remember the original “Star Trek” TV series from the 60’s? Captain Kirk, having maneuvered the Enterprise into dire circumstances, would bark orders to Chief Engineer, Scotty, asking for more power, or go to ”WARP 9“ or some such. In one episode Scotty barks back, “You can’t change the laws of Physics, Captain!”
I often think of this when I hear the latest economic scheme being proposed by some politician, wishing that Scotty or someone would jump up and yell, “You can’t change the Laws of Economics, you moron!!”
We have suffered through all manner of bailouts, stimulus packages and wasted subsidies for political favorites, none of which have had the desired or advertised effect. Let’s look at the latest craziness from Sacramento.
Jerry Brown and the Democrats have just passed into law a $15 per hour minimum wage for California, declaring that all workers “deserve to make a living wage” and that $15 per hour somehow meets that standard in accordance with whatever Ouija board they used to arrive at the value.
Using the logic that governments can legislate economic outcomes, it is curious that proponents of the $15 do not change the standard to “all workers deserve to be wealthy”, thus being able to justify an increase to $100 or even $200 per hour. Such a suggestion usually invokes cries of derision that that’s “silly”, or “stupid” or “unrealistic” or “wouldn’t work” with full recognition that such drastic hikes would effect immediate and dire consequences. The fact that $15 will have similar, albeit not as severe, negative consequences is either lost on or ignored by the proponents and politicians.
The basic laws of economics require that as the cost of a commodity or service goes up, the demand for that commodity or service will go down. This is true for labor and governments cannot change the rules by enacting legislation any more than they can repeal the law of gravity and require that Newton’s apple not fall to Earth. The new $15 minimum will have consequences, some of which are:
- A few workers may receive $15 per hour as mandated.
- Many workers will look forward to the new wage but will find that their jobs have been eliminated.
- Some businesses will be unable to make it work, and will simply cease operations.
- Some businesses will cease operations in California and move to more friendly climates such a Texas.
- Many businesses will find it now cheaper to automate some jobs than to pay labor.
The net result of the new $15 minimum wage will be fewer jobs in California, especially amongst those that the law is purported to help at the lower end of the economic scale. Higher unemployment amongst teenagers and other lower income groups might be of little concern to Governor Brown and other Pooh-Bahs in Sacramento but it should be of some concern to the rest of us.
But there is some hope! Union bosses have already begun petitioning for exemption from the onerous minimum wage laws for union members. Thus, lower income workers may be able to find jobs if they join the union.
Photo credit ThePeoplesCube