My last post reminded me of an irony of modern politics, that the party who claims to love the poor tends to enact measures which not only do not benefit the poor, but keep them in poverty and actually make their lives worse.

The point in my last post which brought this to my attention was the following:

The irony is the victims most effected will be those who supposedly benefit. When companies expand, the biggest beneficiaries are the poor and unemployed, who are offered new job opportunities. Either in the new firms, or in jobs vacated by those moving to the new industries. As the economy expands, more and more marginal workers are given opportunities as the demand for labor increases.

Thinking about this irony reminded me that it is hardly the only example of such irony. While they claim to be the champion of "the working man" and friend of the poor, the truth is that the Democrats have adopted policies which make it harder for the poor to stop being poor, and benefits some working men at the expense of others.

For example, let us look at the minimum wage laws. On the face they sound like a good deal for the poor. Or would, if you believed that employers arbitrarily set wages.

But the truth is a little different. Employers set wages based on three rules. They will never pay more than they expect you to earn for them. If they are uncertain exactly how much you will earn, they will err in favor of caution. They will try to pay as little as possible, but enough to keep you form being lured away by a better offer. That last clause is the important part. Since the labor market is competitive, wages will generally be pretty close to the amount the employer expects you to earn, as if they are too low, it is worthwhile for a competitor to offer slightly more to get that profit for himself. Thus wages tend to rise pretty close to your worth to the company, with allowances made for uncertainty about your worth, especially if you have no work record to help assess your skills or work habits.

That being the case, there is really no need for minimum wage laws. Your wage will always be pretty close to, but usually a little lower than, the amount of income you generate for your employer. However, if they are useless for driving up wages, minimum wage laws are great for getting rid of jobs. And the jobs most needed by the poor, entry level jobs.

There are many jobs that are simply not worth the minimum wage, and many employees who could be profitably employed, but not at the minimum wage. Some of these have become the infamous "jobs Americans won't do", though in reality they are "jobs minimum wage laws make illegal for Americans to do". Were there no minimum wage laws, it is likely some employers would avoid the risk and headache of employing illegals and would instead hire our own poor to perform the jobs legally. But, as the law makes this illegal, it forced employers to either leave those positions unfilled, or to employ illegal labor.

But the harm is greater than that. Without entry level jobs to allow them to get work history, many poor youth are left out of the labor market entirely. Without higher education to allow them to start in a white collar career, many are unable to find jobs due to a lack of experience. Obviously, some can enter the work force by finding entry level jobs at minimum wage, but the number is much smaller than would be able to get work experience without the minimum wage. Worse still, because of minimum wage, some professions are entirely eliminated in America. Jobs such as hand sewing, assembly and other labor intensive, low paid work either goes overseas or simply does not get done because of our high minimum wage¹. Those are jobs that low skilled or entry level workers could do. Instead we simply leave them in poverty in order to keep a law supposed to lift them out of poverty.

Obviously minimum wages are not the only means by which the Democrats encourage poverty, there are many others. For instance, their strong support for unions and for closed shops. Now, granted, unions are great deals for those who can keep their jobs and get work. But by raising the general wage level for employees, unions general shrink the number of available jobs in the same way minimum wage laws do. However, in the case of unions it is even worse, as they tend to base promotions on seniority, while restricting the ability to fire, this means that employers are denied the right to promote based on productivity and to fire those who are not worth their salary. Thus, employers need to build in an allowance against such hardships, and reduce jobs even more than the higher wages alone would.  Again, this leaves fewer jobs, especially entry level jobs. Those who run union shops tend to be very reluctant to bring on new employees without a solid history, as they know they can't get rid of them².

And the impact of unions snowballs. The unions themselves only cripple a single industry, but by doing so they tend to suppress the wages in the economy as a whole. First, they hold down the profits in the unionized industry, which reduces the total output of the economy. Worse still, by keeping additional labor on the market, they suppress overall wages. When an economy is sufficiently unionized, there can exist both low wages and chronic unemployment, conditions which should not coexist in a free market. However, because of the slowed economic growth in unionized industries, it is often hard to find the capital to start a new enterprise to exploit the cheap unemployed labor pool, making it possible for heavily unionized economies³.

Add to these laws a host of other Democrat measures designed to help the worker. We won't get into specifics of each one, but all worker "protections", from worker's compensation, to unemployment insurance, to OSHA, to EEOC, all make it more expensive to employ workers. Whether it is because of an explicit tax or mandated "contribution", or because of compliance costs, or simply record keeping requirements, every worker protection adds tot he expense of hiring or keeping a worker, and, though he doesn't see a dime of it, it is figured as effectively part of a worker's salary. When combined with the minimum wage, this effectively prices even more new workers out of the market.

And then there is welfare. Even after welfare reform, the fact that there is a "safety net" makes it less and less likely that the poor will work. And it is not because they are lazy, but because they are rational. As I explained elsewhere in much greater detail, if you can do nothing and get $500 a month, or work and get $400, you would be a fool to work to earn $100 less. Even if you could earn $600, that would be like a job paying $100 for anyone else, as you could get the first $500 for doing nothing. And if a job has to pay $600 to make it attractive, it probably will not seem such a good job to earn just an extra $100. So, by making welfare available, the poor are actively discouraged from working, at least at any of the entry level positions many of them are likely to find.

Nor is that the only way that "helping the poor" hurts them Almost every social welfare scheme is means tested, from medical assistance, to fuel assistance, to college tuition breaks, and so on. As the poor begin to raise themselves out of poverty, they suddenly learn that the government no longer cares about them, and their costs rise astronomically. Not only does getting a job mean giving up free money, it suddenly means paying full price for things they once got for free, or for a pittance⁴. This can, once again, make the prospect of paying one's own way seem like a very bad idea.

The list could go on and on. The substandard schools, the opposition to vouchers, the stifling taxes, the "green" policies making gasoline prohibitively expensive, making even winter heat and summer cooling outrageously costly, and on and on. But I think I made my point.

Now many will reply, "So are the Republicans any better?" And I have to reply, not that much, as most have adopted the welfare beliefs of the left. In as much as they want less welfare, they are better, but many still seem to believe that the left really helps poor people, so they are just as bad.

The real solution is to treat poor people with respect, to treat them as adults, who can handle their own affairs. Allow private charities to help those who fall on hard times or cannot support themselves, or leave it up to families to help their own. Yes, some may fall through the cracks, but they do now, so there is no guarantee under either system. But returning welfare to charities rather than making it an "entitlement" has the big benefit that voluntary charity is unlikely to become a away of life the way the welfare dole has.

Beyond that, assume that workers are competent to bargain with their employers, and that if a job is intolerable, people will flee. In short, accept that the market works. Again, there will be some cases where a bad employer thrives for a time, or where an unsafe workplace stays in business for a time, but those things happen now as well, and at least without our stifling laws, the market will grow, making us all wealthier, creating more jobs, and making it much easier to leave bad jobs for better ones.

After all, it isn't as if our current system has created perfection, far from it. So, if our protections don't prevent abuses, why do we damn the market for every failing? Why do we forgive the failings of regulations which stifle the market without providing any significant benefit, while we condemn the market, which provides countless benefits, for being less than perfect?

But, I think the biggest point, as I said in my last post, is that we have to make it clear that the Democrats, and all those on the left, though they claim to help the poor and the working man, do not. That their plans amount to handing them a few coins while forcing them to remain in poverty. Yes, if they accept the market, they have to give up that pittance of a handout, but it will also open up opportunities they are now denied⁵.

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1. Granted, because of the generally high capital to worker ratio, I doubt the US would ever be a major player in labor intensive fields, especially as overseas labor is so cheap. But given transportation costs, the headaches of overseas politics, and so on, if we were not saddled with high minimum wages, I could see some companies preferring to establish their assembly or sewing plants in the US to avoid those headaches and to be able to use "Made in the USA" as a marketing appeal. However, because of our high minimum wages, that option is almost entirely absent.

2. The newscasts about job conditions in France during the Paris riots a few years ago highlighted this. As it is almost impossible to fire new hires in France, there was youth unemployment of 20 or even 30%, depending on the report you read. In any case, the conclusion is obvious. If an employer can't get rid of his mistaken hires, he will only hire those with a proven track record, making it hard for anyone to get a first job.

3. I speak only of unions in the NLRB sense. Unions as voluntary organizations without legally mandated collective bargaining rights have no negative impact. It is only when unions are granted legal recognition, especially the requirement that they act as sole negotiator for employees, or worse still, when closed shop rules require employees to join, that we see these problems.

4. The solution is not, as many on the left suggest, increasing the income limits for benefits, or gradually scaling them back. This still creates some threshold at which earning more is foolish. It doe snot make earning money any more attractive, at best it creates a permanent class of part-time employees who also collect welfare. The solution is to reduce or eliminate these benefits and turn it over to private charity which is less likely to become a way of life.

5. One example would be to turn around those arguments about "the widening gap between rich and poor", by showing how often the gap may be widening, but the poor are still much richer than they were before. Does it matter more to you that your neighbor has more than you or that you have more than you did yesterday? Would you refuse a billion dollars if you knew your neighbor would get ten billion? Then why care about the "gap"? That is how we must approach this sort of sophistry.