Wednesday, May 12, 2004

Leftist Pipe Dreams

Brian Leiter seems to think that John Kerry should listen to Ralph Nader. Say what? For some reason the people on the left of the party still cannot come to grips with the notion that Al Gore lost (well, not really lost) in 2000 because he ran too far left. He lost Tennessee and Arkansas, both states he should have won handily. One does not lose moderate Southern states because one is too moderate or conservative.

Don't get me wrong. I like Prof. Leiter and his site is a valuable resource, but he is wrong, wrong, wrong this time. While an agenda of going after corporate crime and repealing the Bush tax cuts on the wealthy are both good policies, the imposition of a living wage is decidedly not. And to claim, as does Nader, that a living wage would create thousands of good paying jobs is simply preposterous.

I would like to think that I do not need to go through the steps to show why this is a fallacy. Though I think that my liberal readers are not particularly well versed in economics. So let us think it through a bit.

Imagine that company X has Z employees who now make $A per hour. We then impose a living wage of $B. What happens to that business and its employees? Assuming that the firm is not a monopolist or part of an oligopoly, nor does it exist in a world of near perfect inelasticity of demand, there would have to be an impact on jobs.

Now, the pushback argument that some would make is that all firms in all sectors would be affected, thus no one firm would face this sort of choice. However, if we impose a new cost on firms, the price has to be paid somewhere. Whether it is in higher prices to consumers or lay-offs or requiring increased worker productivity does not matter. Each would have a negative impact on the economy. And as wages increased across the board, prices would follow and thus what was a living wage in 2004 might not be a living wage in 2005 as inflation escalates.

It's as simple as that. Some of the left would like to believe that you can just impose these sorts of costs (whether they are wages or regulations) without any societal cost. But that is simply not true. And, if you do not believe me, then take at least an intermediate economics class and then maybe you will get it.


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