Economic dunderheads all, Caddo Parish commissioners look to compound a mistake that will set back hopes of parish economic development.
In August, the Commission followed the lead of some Louisiana governments, including Shreveport, that have raised their minimum wages above the state level to pass an ordinance doing the same, in this case $15 an hour which is more than double the state’s. It applies at present only to what the parish pays its employees, to take effect at the start of next year.
Discussion on the matter actually began in February in a committee. Rookie Democrat Commissioner Greg Young spearheaded the move, which he characterized as one that addressed economic and crime concerns, in that by taking more tax dollars and/or reducing services in other areas to meet the increased personnel costs employees below the $15 level brought them closer to a “living wage” and that would reduce poverty and therefore the temptation to commit crime.
Young, who has spent most of his adult life in the military, has no special training in economics, which he said “is not based on logic, but based on reasoning.” And it showed in his stated justification, which flies in the face both of economic theory and hard data, as well as his characterization of economics as “based on reasoning” – logic is a tool of reason, or systematic thought to understand phenomena, rendering his characterization gibberish unless he posits that something other than logic is applied in the study of economics.
Which might explain his arguments for the ordinance, as from his formulation of the minimum wage concept and its consequences it seems there’s no logic at all to it. Young appears to believe that raising the minimum wage, if not its very presence, is a magic box sprinkled with fairy dust to create wealth out of nowhere. Jack it up, giving some people more money, they spend more of it to support more commerce, which means more wealth for everybody and less demand on government transfer payments and less crime committed and, presto, we’re all better off.
The simplest way to expose the fraudulence of this view is to introduce absurd parameters to demonstrate the absurdity of the idea. That is, why stop at $15? Why not $100? Doesn’t that pump even more money into the economy and make this better for everybody, according to his theory?
Of course it doesn’t, because analyzing an absurd case exposes fundamental aspects of the flawed concepts and their relationships of the underlying theory. Here, it’s this: wages reflect the contribution that the activity makes to society, when they are set by a free market without elements that force a degree of coercion onto transactions. Intuitively, we know that ditch-digging doesn’t contribute $100 an hour’s worth to society, but we may be harder pressed to understand that it doesn’t even contribute $15. That’s all right, a free market will tell us that.
Thus, when a job is paid more than its actual contribution such as through a minimum wage, the difference between wage and contribution is mis-deployed into a less productive use than if it remained available for other uses. This has a pair of deleterious effects onto the economy: it generally steers resources away from uses that will enlarge society’s wealth and it specifically reduces employment, because if an employer must raise artificially many employees’ salaries (and note that this also puts upwards pressure on jobs at or just above the minimum wage, which also must be raised in pay to differentiate) with the same number of dollars, fewer jobs can be divided into that sum.
Therefore, society becomes worse off. The economy grows less because of mis-deployment, meaning fewer jobs and less wealth for all, as well as spurs the need to cut jobs (perhaps by increased automation which is made relatively cheaper) to afford the artificial increase (an ongoing real world example illustrates this: California raised its minimum wage for fast food chains, except for the very smallest and those with political connections, to $20 an hour which has led to widespread industry layoffs, higher prices that have discouraged business, and closed locations). “Living wages” too often means no wages, and the resulting unemployment increases the strain on government transfer payments and encourage crime.
Young seemed blissfully unaware of all of this, and at that panel meeting only Republican John Atkins, if weakly, disputed his assertions. Eventually, a proposal including only parish employees advanced in April; Young originally had wanted it to apply to contractor employees as well. When it finally hit the calendar last month, all present commissioners, even Atkins, idiotically voted for it.
Fortunately, the damage was restricted. Caddo employs few people below that wage level, so the negative impact would be minimal. The problem is now there’s talk of extending the level to contractors, which would produce a virus much more widespread and economically lethal. Costs to complete capital outlay projects in particular would increase significantly, costing taxpayers more and/or reducing the number of projects pursued.
To afford these higher costs may be one reason why the parish looks to roll forward tax millages at its meeting next week. If so, by reaching into citizens’ pocketbooks with increased taxes to pay for this drains the local economy relatively, hampering its economic development and consequently depresses employment and wealth.
Hopefully, enough commissioners will shake themselves out of a seemingly self-induced economic illiteracy to halt any further expansion to the damage already done, if not reverse the previous ordinance.
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