I don't know much about the "Economic policy institute". The Wiki page says its a very liberally biased lobbying group. Which makes sense if you look at the topic.
Economic Policy Institute - Wikipedia, the free encyclopedia
In my view, the major problem with all liberal points-of-view, is their inability to see passed the first step. Or they are incapable of understanding "price relativity".
What the EPI is basically doing in this article, is saying "If the poor were paid higher wages, we wouldn't need welfare anymore, and the government would save billions".
There are multiple things wrong with this argument.
This entire theory rests on this idea that you can raise wages only for the poor, and that nothing else would change. In reality, a change of minimum wage changes everything. Wages are "relative". For that matter, poverty is relative, because prices are relative.
If I told you that someone was making $100,000 a year. You would understand that that is a lot of money. Why? Because we know what $100,000 can buy relative to current prices. If we were to go to the future, $100,000 won't be much money. In the same way that the first minimum wage in America was just 25 cents.
The problem with the minimum wage, is that it has been increased repeatedly over the last 80 years, and it has never created any of the sort of government savings that its proponents have claimed. Why? Because as wages rise, prices rise. The people making $10 an hour now, will just get paid more when minimum wage goes up.
The minimum wage simply isn't an effective way of accomplishing anything good. At best it is useless, and at worst it is harmful to people with low-skills.
Even when I was a "liberal" or even a "Marxist", I recognized that the minimum wage was useless. One of my major complaints then was CEO pay and even the compensation for pro athletes. I felt both of them were far too high. Not only that, but both of those groups have incomes that grow at a much faster rate than inflation, and in relation to middle-class and working class wages. Why?
In truth, the entire discussion about the minimum wage is actually a side show for the real issues.
You need to ask the question, why does the minimum wage constantly need to be raised? That is simple, inflation. What causes inflation? That is also simple, the Federal Reserve and its associated banking interests.
Then you ask, how do the rich seem to always get richer and richer, even relative to inflation? Keep in mind, when the Federal Reserves loans out money; They are loaning it out to this "wealthy class". You know, Wall Street(investors and bankers). Who use that money to "speculate" in the stock market, as well as equities(IE real estate), and commodities(oil, food, etc). Driving up prices for everyone else, while earning themselves a profit.
If you can't control the Federal Reserve, you cannot control wages, pay equity, nothing. I never understand why Americans seemingly so overwhelmingly support the Federal Reserve. I could almost understand it if the Federal Reserve was directly controlled by government. But outside of some basic regulations, it operates completely independently and largely in secret.
Regardless, if we return to the "actual effects" of wages and this study. We need to understand that government spending on its own is sort of irrelevant. Money itself isn't even all that useful on its own. What we are really talking about when it comes to wages, and government, is the "allocation of resources". In the most basis sense, money is just a carrier of time. Money is a way for you to trade your time for someone else's time. This exchange of time is "productivity" and productivity is a "resource" within a given economic system.
When the government taxes you, they are effectively taking away your resources and using them somewhere else. Whether the government taxes us all at 1% or 100% doesn't matter on its own, as long as the total amount of resources and their allocation stays the same. In that sense, if the government is taxing the rich to provide welfare for the poor, or if the rich are paying higher wages to the poor to the extent that they don't need welfare. It doesn't really matter as long as the total resources and their allocation stays the same.
In the simplest terms, if government provided $10,000 a year in benefits to me, and I earned $10,000 a year on my own. Then my total allocation would be $20,000 a year. If I suddenly was paid $20,000 a year but no longer qualified for government benefits, then my total allocation of overall resources would stay exactly the same.
In that sense, this talk of minimum wage, and saving government money is pretty useless.
The only actual issue here, is first, whether or not these government benefits, or higher compensation have a net benefit to overall productivity. And secondly, whether these government benefits, or higher compensation have a net benefit socially.
As Milton Friedman said, "The minimum wage says you must discriminate against people with low skills".
What that means in effect is. If the minimum wage was $10 an hour, and someone really only had the skills that warranted $8 an hour, or $6 an hour; Then he becomes "unhirable".
When we look at unemployment rates. The "Young black male" unemployment rate is at nearly 40% right now. What benefit is a minimum wage to a young black man who cannot even get a job as it is? Would a rise in the minimum wage reduce young black unemployment?
Unemployment rates are higher for young people, minorities | PBS NewsHour
What benefit is it to this country to have 40% of young black men unemployed? What benefit is it to a young black male from a social level to be unemployed? What do people do when they can't get a job?
To put it lastly in perspective. There is something called the "laffer curve". One of the people who was a major critic of the "Congressional budget office"(because they were always so wrong), asked the CBO to give an estimate of how much tax revenue would be raised by raising the income tax rate to 90%. When they scored the proposal, they assumed that total economic activity would stay the same. So total revenue from such a tax increase would increase total government revenues by about four-fold.
The problem with such a prediction, as I said before, assumes that nothing else would change. But you need to ask, who would work if they were being taxed at 90%? Or at least, who wouldn't be working "under the table"?
The point is, my objection with liberals, is that they just seem to look at the world in an overly simplistic way. Which always seems ironic since they like to see themselves as the intellectual elite.
They never try to understand anything or anyone. When they disagree with you, they just attack you as heartless, greedy, fearful, or just flat crazy.
As a general rule, anyone who calls an entire political ideology "crazy", is a moron.
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