Reply #17: Raise wages without raising the minimum wage laws

[dcfirefighter]

For the record, I feel that generally, any law that 'requires' a large area of effect to be effective is probably a bad law. Some of the few exceptions I recognize are environmental laws, standards and measures, interstate transportation, and patents and trademarks. I feel similarly about taxation.

I think that, while the reasons are good, the method of raising wages through increased minimum wage laws is bad.

I tend to oppose concentrating power in the hands of the few - we've seen how easily that is corrupted. I fear that a 'Liberal Rennaissance' might result in lots of 'good' laws being passed at the federal level, eventually being corrupted by the greedy and shortsighted.

To raise wages in any area, no matter how small, demand for labor must increase faster than the supply of labor. There are an incredible number of laws and taxes that reduce the demand for labor:

Most egregious is the payroll tax. The payroll tax raises the cost of employment by 15.3%. This is 'tax wedge' - a wedge between what the producer (employee) receives and the consumer (employer) pays. It generally means that an employee must be 15.3% more productive than he recieves in compensation. Finding another means of raising this revenue would increase employment, probably between 5-20%.

Income taxes against wages have a similar effect. Most people's incomes is based on wages. The first $100,000 or so of income is generally from wages - higher incomes are usually from interest or rent.

Also deleterious are taxes on buildings. Property taxes against buildings increase the cost of a building by 20-40%. This reduces the supply of buildings, used for housing and locating businesses. Conversely, increasing the supply of buildings would 1) increase the number of people employed constructing, securing, cleaning, and maintaining these buildings 2) reduce the cost of starting or expanding a business, generally increasing the demand for employment 3) reduce the cost of housing, leaving more personal income available for consumption - increasing the demand for goods and services.

Sales taxes decrease the amount and value of retail sales - keeping people from being employed in retail, as well as in the production of goods and services.

This generally leaves, as sources of revenue: taxes on land values and other 'user fees' for government services, licenses, and permits. For example, most localities are pretty stingy with their liquor licenses - someone who holds one is protected against competition, allowing that person to enjoy 'extra' income over and above what is due to their personal industry.

Furthermore, taxes on land values have the beneficial effect of decreasing the demand for land as a speculative investment. Removing this demand decreases the cost of purchase, making it easier for potential employers to obtain land - and virtually requiring owners of VALUABLE (i.e. urban) land to use it productively (and therefore virtually requiring them to employ people).