Thank you, Mr. Governor

An open letter to Gov. Schwarzenegger:

Mr. Governor,

I thank you for making my life harder. By allowing a minimum wage increase, you are ensuring that my money, as well as the money of every other Californian, will buy me less. Fortunately, I don’t have to worry about much, since I’m not in the unenviable position of deciding between food, rent, and medicine. There are many in California who are in that position. You’ve just made their lives harder as well. You’ve made their food more expensive. You’ve made their medicine more expensive.

You are probably wondering how you’ve done this, aren’t you? Well, by capriciously deciding that the labor of minimum wage earners should be worth more, you’re sending ripples throughout the entire economy. You’ve forced business to pay more for the same thing. Who will bear the cost of this? Business, you say? Where is business going to get the money to pay for this? You don’t know, do you? You think that they’re just going to make less profit? As we all know from listening to the media, every business has plenty of extra profits to just spread around. Well Governor, I thought you’d be a little smarter than the second-rate socialists masquerading as our State Senators and Representitives. Apparently, you’re not.

Or, maybe you are smarter than they, and you do know that the citizens of California will end up paying for this, but you think that appeasing the left is worth the price. Either way, please open your eyes. You say you will stand up for the working people of California. Then do so. Stand up for us by not making us pay the price for feel good measures like minimum wage increases. Don’t make them pay more for food, medicine, gasoline, and everything else. You see, we are the ones who will pay this new minimum wage. Not businesses. We, the working Californians, are the reason most of the businesses here exist. They serve us because we pay them to. Now we will be paying more for their services. Can we look forward to another ten cents a gallon, another dollar per movie ticket, another quarter per loaf of bread because of this abomination? Absolutely.

The economy, as much as it can be viewed as a single entity, is a vast matrix of transactions based on worth. If you distort some of those decisions through the force of law, the people making other decisions will make them differently in reaction. The supermarket owner who has to pay employees $1.25 per hour more will raise the prices of his products to adjust, or he might fire an employee. Either way, the effects of this decision will ripple through the matrix and the whole will find a balance acceptable to those making the decisions. The force of law is not enough to overpower the judgement of millions of people acting in their own interests; it will never be.

Please, Governor, let your own judgement and your observation of reality be your guide. Rise above petty partisan games, and don’t repeat the same mistakes of your lamentable predicessor. If you can’t, we will all be worse off.

~A Concerned Californian~

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  • Makeshift Patriot

    I can’t agree with you on this but if your willing to engage in debate and back up your thoughts with facts, I might be pursuaded. That being said I have read studies that show raising the minimum wage in reality causes a boost to the economy.

  • joan

    At last a honest reason for not wanting minimum wage hike. No concern shown here for the poor unemployed teenagers.

    “They serve us because we pay them to. Now we will be paying more for their services.”

    I love this!!!

  • Quincy

    Makeshift Patriot –

    You can study and debate “facts” all you like, but I’ve never heard the answer to the basic question, who pays for it? That is THE fact that should fuel this debate. So I ask again, who pays?

    Joan –

    If you claim to be helping working Californians by forcing them to pay more for goods and services, as the Democrats and Schwarzenegger are doing, what does it make you? Either blind or a deliberate liar.

  • Brad Warbiany

    Makeshift Patriot,

    I’ve got a study on this, that most definitely shows how raising the minimum wage hurts employment:

    But you’re seriously making the claim that government artificially raising costs are a boon to the economy? Do you think legislators can arbitrarily overrule the laws of supply and demand?

  • Brock

    Makeshift Patriot –

    I’ve read ( )that correlation is not evidence of causality. Any links to your studies? For a fact-based discussion, it would be nice to have common readings and agreement on the sufficiency of the methodology employed in the study.

  • Eric

    Looking at the data available from analysis and study, it would appear that the minimum wage has one of two potential effects on employment:

    1. It reduces the number of unskilled, low wage jobs available.
    2. It has no net effect on the number of unskilled, low wage jobs available.

    Aside from that, anyone who has ever built a cost model for a business knows that if you change the cost of your labor then you have other trade offs you must make to reduce your price to your customer OR you have to increase your price to your customer. Since almost all retail (where most minimum wage jobs are found) businesses work on very thin margins (WalMart is less than 4%, for example), it becomes quickly obvious that the only way to account for an increase in labor cost is to change something else. Pay less benefits, cut staff, increase product price. You have to do something or you stop making a profit.

    So, there are two gross impacts from minimum wage increases:

    – Low wage employment remains the same or decreases somewhat.
    – Retail prices and cost models increase somewhat.

    Put those two things together and ask yourself if reducing the number of WalMart jobs available, while simultaneously increasing the price of a widget at WalMart, really helps those young, low wage, unskilled workers.

    The socialists among us, like Joan and Makeshift, will claim that we are either neutral, or negative, towards the poor and that is why we oppose minimum wage increases. I counter that by quoting Mises on the topic:

    Reasonable action is distinguished from unreasonable action by the fact that it involves provisional sacrifices. The latter are only apparent sacrifices, since they are outweighed by the favorable consequences that later ensue. The person who avoids tasty but unwholesome food makes merely a provisional, a seeming sacrifice. The outcome—the nonoccurrence of injury to his health—shows that he has not lost, but gained. To act in this way, however, requires insight into the consequences of one\\\’s action. The demagogue takes advantage of this fact. He opposes the liberal, who calls for provisional and merely apparent sacrifices, and denounces him as a hard-hearted enemy of the people, meanwhile setting himself up as a friend of humanity. In supporting the measures he advocates, he knows well how to touch the hearts of his hearers and to move them to tears with allusions to want and misery.

    Note: Mises uses the word liberal in its original meaning, what many today would call a libertarian. He does not use it in the modern sense that indicates a socialist approach to government and society.

  • John Newman

    Studies, schmudies. The problem isn’t the raising of the minimum wage, the problem is the government forcing an employer to pay any certain wage. It is a clever way for the government to collect more taxes though.

  • Quincy

    “The problem isn’t the raising of the minimum wage, the problem is the government forcing an employer to pay any certain wage.”

    And we have the most concise statement of the problem. Thank you, John.

    Now, in addition to answering the question of who would pay for this increase, anyone want to argue what part of government’s job this is?

  • Eric

    A concise statement certainly, but there is a flaw in dismissing studies, in saying it’s the principle that matters. If the best way to achieve more wealth, more comfort, more good for the largest number of people doesn’t align with our principles, then those principles won’t get to play in the real world.

  • Quincy

    Eric –

    Point well taken. In my experience though, John’s statement is essentially correct, that government dictating a what employers should pay is a problem, not a solution. (This is of course leaving aside the property rights issues of a minimum or otherwise mandated wage, which have a whole set of small, but not insignificant, impacts.)

    Punchline? Show me a study with a solid structure and sound data that proves otherwise and I’ll reconsider. Until then, I’ll back John’s statement that government mandating a wage is a problem.

    (Also, notice that I didn’t quote all of what he said.)

  • Eric

    Quincy, first thing. I believe our principles and the reality of how to make the world a better place ARE aligned. That said, studies, ideas, proof are necessary to convince others of that same thing. If you don’t do that, your principles will not be accepted. Saying something like “studies, schmudies” won’t work. Saying something high faluting about property rights won’t work. Showing people that principle and practical align will. See Doug’s post above yours.

  • Irene

    I’ll bet anything that Concerned Californian doesn’t have to live on minumum wage. Do you not see anything wrong with the fact that people who work even two jobs at minimum wage cannot support their families? I cannot believe the selfishness and callousness of people who have so much, wanting to deny others a little leg up. Where’s the outcry over more and more tax cuts going to people who have too much already?

  • Eric

    Irene, I bet you don’t live on minimum wage either. And I’m more than willing to bet that you don’t have to decide how to afford things that are already expensive when the price goes up because the labor costs more.

    How about if you provide details for your claim that tax cuts are going to people who have “too much already” (side note, who says it’s “too much”? You? Why do you get to say that?). Tell me how pushing prices higher benefits people on minimum wage.

  • Quincy

    Irene –

    Don\’t you get it? In the long run, it hurts many and gives NO ONE a leg up. Things end up costing, in relative terms, just as much since prices rise, plus some people making minimum wage lose their jobs.

    My position is not callous at all, in fact it is quite the opposite–I want to *prevent* harm to the working poor, while the left wants to inflict it in the name of helping them. As I\’ve asked several times now, who pays for this increase?

    Eric –

    Yes, we do need studies and proof to make our point, I never meant to imply we didn\’t. But, we must also, in looking for those studies and that proof, make sure that they actually show the whole picture, and not just desireable portions. If you pick the right portion of a photo of lower Manhattan on 9/11, you could very well make it look like it was any other morning. Pull back and show the entire scene, it\’s different. Before we begin looking for proof, we need to be sure we can see the totality of what we\’re addressing. That means finding the right question to be answered.

    Finding the truth on this issue means answering the essential question, who pays? It\’s a disarmingly simple question, yet one that is being avoided by every one of my critics on this thread. I could very well go out in the immediate window after a hike and ask minimum wage earners whether they\’re better off, or calculate how much their spending power increased, or calculate how many have been lifted out of poverty. So what? It ignores what\’s happening in the rest of the economy and what the repercussions there will be. Those data are almost meaningless in supporting a minimum wage increase, since the minimum wage has consequences throughout the economy that need to be considered in calculating the benefit to those that the minimum wage was intended to help.

    In addition, supporters of the minimum wage need to argue that the harm inflicted on the rest of the citizenry by this increase is justifiable for the benefit for the beneficiaries. At a minimum, this would include a comparison of the harm done to the many against the benefit of the few. This doesn\’t make it right or aligned to any principles, but it is a basic filter for the issue.

    I don\’t claim to have all the answers, nor do I claim to have all the right questions. All I can do, without the background that you or Brad or others in the group have, is ask questions and put opinions out to spark debate.

  • Eric

    For a better understanding of the issues involved in price fixing of wages I highly suggesting reading Mises discussion of the topic in Liberalism.

    When the relationship between employer and employee is left undisturbed by legislative enactment’s or by violent measures on the part of trade unions, the wages paid by the employer for every type of labor are exactly as high as the increment of value that it adds to the materials in production. Wages cannot rise any higher than this because, if they did, the employer could no longer make a profit and hence would be compelled to discontinue a line of production that did not pay. But neither can wages fall any lower, because then the workers would turn to other branches of industry where they would be better rewarded, so that the employer would be forced to discontinue production because of a labor shortage.

  • VRB

    I guess that is with assumption that the worker would have an alternative.

  • Quincy

    Eric –


    VRB –

    When does a worker truly not have a choice? Can you point to a situation in this country when one is truly bound to stay in his job?

  • VRB

    Don’t you get it? Not everyone gets it as you do. I think for myself, know my experiences, and draw conclusions from my own thought process just like the philosophers. The events in the world and the books I’ve read; have also influenced the way I think. Opinions come from more than statistics and dialectics. Don’t you get it?

    I would imagine that the cost of my cup of coffee in the morning might go up.
    The cost of clothing is dependant on more that wages, availability, desirability and variety are more important.
    Where I live, desirability determines more of the housing cost. It’s the neighborhood. New construction or not.
    Don’t think any energy companies pay minimum wage. Would putting gas in my car and heating my house get more expensive because the minimum wage is increased?
    Now food is being produce with less than minimum wage workers. What’s driving that cost up?
    These things are what I consider basic. Energy cost have kept my standard of living at status quo for most of my working life.

  • VRB

    I can’t point to a current example, because I don’t work where minimum wage workers are; but at one time I worked in an area where if a worker looked for a job within that area they could be fired. Leaving that area would have been improbable because of cost of transportation and housing. This area covered several industrial parks. This was a gentleman’s agreement among employers to ensure they would have enough employees and the wage sructure would not change. Many minimum wage workers are not the teenager, the student, or a person who is working until they get something better. They not persons who are slothful, have addictions or who lack initiative. Their initiative is not recognized, becaused they are not the right kind of people or don’t have the credentials. Now, this is only from my observations.

  • Eric

    VRB wrote: This was a gentleman’s agreement among employers to ensure they would have enough employees and the wage sructure would not change.

    Certainly such things happen. The question, of course, is not whether such things are bad. Nor even whether capitalism is bad. The question is, can any social structure other than capitalism be better than capitalism for society? If the answer is yes, then we should replace capitalism immediately. If the answer is no, then we should fully embrace capitalism.

    Oh, and so far as that gentlemen’s agreement goes, such things may exist in a small area, for a short time. However, like any other unnatural cartel, they are inherently unstable and cannot last. It requires no government intervention to fix the problem, the laws of supply and demand will bring about the end of it. Soon enough one of those employers will need more labor than is available in the area and begin to offer better wages. The rest of the story is easy to figure out.

  • Eric

    VRB wrote: Energy cost have kept my standard of living at status quo for most of my working life.

    That seems unlikely. Oil prices reached their peak in 1981 and steadily declined after that, especially when adjusted for inflation. This summer they peaked slightly higher than 1981 and are now beginning to slowly decline again. However, oil prices didn’t begin to climb back towards that point until just the past few years.

    There are some local monopolies of energy (electricity and natural gas), although many fewer than existed 20 years ago. Add to that the fact that energy consumption occupies a much smaller portion of the full economy now than in 1981 and the argument that energy prices have kept the standard of living at status quo doesn’t look very good.

    As far as whether your standard of living is status quo, I find that not likely as well. Clearly you have internet access, something you likely did not have as few as 10 years ago. It is likely you have cable or satellite television, a better television than in 1981, a safer, more fuel efficient car, a VCR, DVD player and many other electronic items in your home. All of these things, which provide entertainment, productivity or more leisure time (like a dishwasher) are items that you likely did not have, or weren’t as good, 25 years ago. All of them contribute to a better standard of living than was possible 25 years ago. I’m using 25 years ago because oil is now at the same price, adjusted for inflation, as it was then.

    Generically speaking, the average person spends a smaller portion of their income for energy needs, has more luxuries, more energy saving devices, more entertainment, eats out more often, buys more quality clothes (the cost of a pair of Levi’s has gone up much less than inflation, for example), has a safer, more fuel efficient car than they did in 1981. I remember the 25″ console TV my father bought in 78 or 79, with an infrared remote. He paid $1000, or so, for it. Today you can buy a 27″ flat panel LCD HDTV monitor for less than my father paid for that very high end 25″ console 28 years ago.

    In other words, by any measurement I can think of, we are wealthier, by far, than we were in 1981. I’d be interested in a source for the statement since it doesn’t jive with evidence that can be gathered statistically or empirically.

  • VRB

    In your world you say. I don’t really know. I was only answering Quincy’s question, not trying to point to any other system. I just don’t like all the assumptions made. If this happens that will happen. That situation stunned me and I was faced with a moral dilema. Go along or leave. This is why I don’t like to place any moral value on an economic system. I have said before that I don’t trust either government or the market place to promote the good of society. I believe there are some people that would not be able to function in your society and they would not be able to count on the kindness of strangers. What will temper the young person’s utopian ideals?

  • VRB

    You would think wrong. Internet access is almost a luxury to me. There are other varibles as well. I did not drive 30 years ago and since then my heating cost have always increase more than my salary. I guess I am one of those people who don’t stive enough to get ahead.

  • Eric

    I suspect your heating costs have increased more than your salary has due to local energy monopolies. However, the fact that youd didn’t drive 30 years ago, and you do now, doesn’t imply that the cost of energy has caused your standard of living to stay at a status quo. In fact, if you now have a car and drive (which you imply), then your standard of living is improved compared to 30 years ago. You have a PC? I would consider Internet access a luxury, regardless of the amount of money one has. It is not, usually, a necessity of any sort. I think you mean that it is something on the edge of what you can afford?

    VRB: This is why I don’t like to place any moral value on an economic system.

    Fundamentally, “classic” liberalism places no moral value on economic/social systems. Liberalism leaves moral value to the spiritual realm and asks only whether something leads to a measurable improvement, or not. Unlike socialism, fascism and conservatism, liberalism is dispassionate and objective. Of course, this leaves it vulnerable to rabble rousing demagogues who will claim that liberalism is heartless. Yet, the foundation of liberalism is the desire to find paths forward that are better for all people, not just one group of them.

    VRB: I have said before that I don’t trust either government or the market place to promote the good of society.

    The government is about power, nothing more and nothing less.

    The market, on the other hand, has only one function. The most efficient distribution of goods and services possible. The market place cannot “promote the good of society” because that is not its function. Only people can do that, we who make up society.

    VRB: I believe there are some people that would not be able to function in your society and they would not be able to count on the kindness of strangers.

    There are some people who will not be able to function in any society. The question, as with any other such statement, is whether that number is lesser, or greater, in capitalism than other systems. Evidence, such as the number of alcoholics per capita, suggest that socialism leads to more people who cannot function within the society based upon it. There is no perfect system. The question is not whether bad things occur within capitalism, they do. The question is whether you can propose something that will have fewer bad things. So far, no one has succeeded in proposing that something.

    VRB: What will temper the young person’s utopian ideals?

    Unlike Quincy, I’m neither young nor utopian. When I was young and utopian I believed that anarchy was a real solution that could work in a real world. Now that I’m middle aged and pessimistic, I believe that the only solution is to give the government enough power to protect the life, liberty and property of others while limiting that power so that it cannot intrude on my own life. And keep my powder dry, for the government will surely overstep those bounds, most likely due to some well meaning busy body who wishes it do something for “my own good”.

  • Eric

    A final thought. I’m not sure what you mean when you say “your world”. We live in the same world. I have gone through several iterations of wealth in my life. I have been in such dire straits that I wasn’t sure if I would be able to feed myself until my next paycheck (and so stiff necked I refused any charity and only took something if I could pay it back). Now I am in a position where I have enough wealth to own a home, cars, take vacations. Regardless, my views on whether the government should intervene in the market or not has been the same. If anything, I have a bit more tolerance for government now than when I had no wealth.

  • Quincy

    “I would imagine that the cost of my cup of coffee in the morning might go up.
    The cost of clothing is dependant on more that wages, availability, desirability and variety are more important.
    Where I live, desirability determines more of the housing cost. It’s the neighborhood. New construction or not.
    Don’t think any energy companies pay minimum wage. Would putting gas in my car and heating my house get more expensive because the minimum wage is increased?
    Now food is being produce with less than minimum wage workers. What’s driving that cost up?
    These things are what I consider basic. Energy cost have kept my standard of living at status quo for most of my working life.”

    VRB –

    Costs are not all that goes into a price. They are a component, as is how much people are willing to pay. Housing is a perfect example. Around here, the actual cost of land plus the replacement of the house is, on average, about half of the selling price of the home. What makes up the other half? The value of the home in the eyes of the other people who want it.

    Also, I’m not quite as utopian as you might imagine. I don’t believe that there is any single solution to our problems. What I do believe is that we are best off when government, through protecting our rights and our lives from those who wish to deprive us of both, leaves us in a situation where we are empowered to solve our own problems. And yes, I believe there will always be problems, it’s part of the way the world works.

    Too many times, though, government tries to solve our problems for us. The effect of that is disaster, since we are slowly turned into people who cannot solve our own problems.

    I’ve had the dubious privilege of growning up in a generation whose parents are only a cell phone call away. I know people with child-like mentalities who have access to cars, money, drugs, and sex and are continually hurt by these things, though not because the things are bad. They, by being shielded by their parents for far too long, have been doomed to remain children.

    What the parents of these poor souls do in great measure is the exact same thing that a paternalistic state does bit by bit. It erodes the judgement and trust in oneself with every problem it solves. In doing so, it becomes another problem with which we have to deal.

    OK, I’ve ranted long enough.

  • VRB

    I don’t like you speaking on my wealth. Why is it that things I reveal about myself are disbelieved. It is almost like I can’t count, do percentages or understand ratios.

    No, I am not considered poor. Having a car only gave me the ability to have a job, no more. I have a PC which financial aid paid for and now I owe beaucoup loans. I have gotten an education that now seems useless. I have been poor as you, and probably worked twice as many years as you and I can’t say I have obtained as much wealth as you. Most of the things you mentioned are on my wishlist. BTW I’m do not easily ask for help. I do seem to live in a different world. I still live in a world where age, gender and race matter. I have been told that the economy is not about me.
    I am ranting too, this post is not about me, either.

  • Eric

    VRB, I’m not disbelieving you. I’m sorry if it came out that way. I think what I’m saying is that a general observation of the economy shows us that energy is a much smaller portion of it than it was 25 years ago. I was also trying to point out that we, each of us, have things available to us that we could not have 25 years ago.

    Age, gender and race have an impact, sadly, in the world today. That said, they don’t have the impact that they did when I was a young man. In fact, in the organization I currently work for, of the 6 senior IT leaders, 3 are women, 3 are men. That would have been unthinkable 20 years ago. Of the 6 senior executives of the organization (a 6 billion/year corporation), 2 are women, 4 are men. That also would have been unheard of not all that long ago. This is not to say that we have a perfect world where your gender is not taken into account, but that it is, from my observation, much better than 2 decades ago.

    Having more, or less, wealth makes me no “better” or “worse” as a person. Money has no bearing on such subjective value judgements. I’ve had some luck, some skill and some hard work that paid off for me. And, using money to count I’m successful. That doesn’t measure if I’m a good person though. And I have no intention of trying to say that it does.