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Ron Paul's Texas Straight Talk: Government Policies Hurt Low-Wage Workers 12/30/13 (AUDIO)

Ron Paul's Texas Straight Talk: Government Policies Hurt Low-Wage Workers 12/30/13 (AUDIO)


Texas Straight Talk
December 30, 2013
by Ron Paul

Fast-food workers across the county have recently held a number of high profile protests to agitate for higher wages. These protests have been accompanied by efforts to increase the wages mandated by state and local minimum wage laws, as well as a renewed push in some states and localities to pass “living wage” laws. President Obama has proposed raising the federal minimum wage to ten dollars an hour.

Raising minimum wages by government decree appeals to those who do not understand economics. This appeal is especially strong during times of stagnant wages and increased economic inequality. But raising the minimum wage actually harms those at the bottom of the income ladder. Basic economic theory teaches that when the price of a good increases, demand for that good decreases. Raising the minimum wage increases the price of labor, thus decreasing the demand for labor. So an increased minimum wage will lead to hiring freezes and layoffs. Unskilled and inexperienced workers are the ones most often deprived of employment opportunities by increases in the minimum wage.

Minimum wage laws are not the only example of government policies that hurt those at the bottom of the income scale. Many regulations that are promoted as necessary to “rein in” large corporations actually hurt small businesses. Because these small businesses operate on a much narrower profit margin, they cannot as easily absorb the costs of complying with the regulations as large corporations. These regulations can also inhibit lower income individuals from starting their own businesses. Thus, government regulations can reduce the demand for wage-labor, while increasing the supply of labor, which further reduces wages.

Perhaps the most significant harm to low-wage earners is caused by the inflationist polices of the Federal Reserve. Since its creation one hundred years ago this month, the Federal Reserve’s policies have caused the dollar to lose over 95 percent of its purchasing power—that’s right, today you need $23.70 to buy what one dollar bought in 1913! Who do you think suffers the most from this loss of purchasing power—Warren Buffet or his secretary?

It is not just that higher incomes can afford the higher prices caused by Federal Reserve. The system is set up in a way that disadvantages those at the bottom of the income scale. When the Federal Reserve creates money, those well-connected with the political and financial elites receive the newly-created money first, before general price increases have spread through the economy. And most fast-food employees do not number among the well-connected.

It is not a coincidence that economic inequality has increased in recent years, as the Federal Reserve has engaged in unprecedented money creation and bailouts of big banks and Wall Street financial firms. As billionaire investor Donald Trump has said, the Federal Reserve’s quantitative easing policies are a great deal for “people like me.” And former Federal Reserve official Andrew Huszar has called QE "the greatest backdoor Wall Street bailout of all time.”

Many so-called champions of economic equality and fairness for the working class are preparing to confirm Janet Yellen as next Chairman of the Federal Reserve. Yet Yellen is committed to continuing and even expanding, the upward redistributionist polices of her predecessors. Washington could use more sound economic thinking and less demagoguery.

By increasing unemployment, government policies like minimum wage laws only worsen inequality. Those who are genuinely concerned about increasing the well-being of all Americans should support repeal of all laws, regulations, and taxes that inhibit job creation and economic mobility. Congress should also end the most regressive of all taxes, the inflation tax, by ending the Federal Reserve.

Permission to reprint in whole or in part is gladly granted, provided full credit is given.

Audio: http://www.youtube.com/watch?v=Phvz-nlqkGQ


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Ron Paul is wrong on this one ...


Why should workers just slave away for 45-50 hours a week (and often under poor conditions), only to then live in a state of poverty and desperation?

Big Corporations make plenty of profit (the CEO's are multi-billionaires), yet they do not want to pay their workers enough money to escape poverty. And people think that's okay? I ain't buying it.

This is a system of legalized slavery here. Actually, slavery was better then what we have today because at least slaves had someplace to live and their food assured. Today's workers are left impoverished, homeless, and broken.

A proper and fair system would permit workers to directly share in the profits of the company itself to augment their own wages -- so if the CEO's are getting rich, at least the workers are also getting some benefit growth too for their own labor, sweat, and key contributions. But it would also assure that their wages minimally at least go well beyond the poverty threshold level.

There is no liberty at all when you live in a state of poverty. And you cannot ever get ahead in life, if you can't even pay the rent and food to begin with.

Sorry folks, corporate slavery is not an option.

Pay the damn workers a living wage for chrissakes! This is not too much to expect here.

Labor is no different than cheese

The price should be determined by the market.

I've demonstrated mathematically elsewhere that the most profitable price to charge for a good can be estimated accurately as the sum of the cost of production (including labor) with the average value as determined by a mass of consumers. Thus, any overhead added to the process will be directly passed to the consumer.

As a result of the higher prices beyond the natural equilibrium, profits decrease which reduces the desire for entreprenuers to enter affected markets. An added effect occurs because when overhead is increased, marginal producers are pushed out of production. As a result, the gross number of jobs tends to decrease under the strain.

Both workers and consumers lose.

It would be wonderful if it worked as you desired. It's a nice dream that has become popular for that very reason, but unfortunately, it lacks when the rubber meets the road.

mathematics don't add up...

Walmarts profits are based upon volume of sales (mass consumption), due to their low prices (generally) and "superstore" convenience.

As long as they keep their prices low, then their enormous profits remain perfectly assured and certain. Nothing would be lost for them if they paid their workers a decent wage for their labor. This is a multi-billion dollar corporation (clearly they can afford better treatment for their own workers).

Abstract arguments about the wonderfully self-correcting marketplace never seem to align with the grim on the street reality of human life.

The reason, as our founding fathers knew, is because man is not a virtuous animal. The unmovable drive to get as much as you can (i.e, greed, and corporate greed) will always warp things (for which there is no self-correction).

And Comcast does not use your nicely made formula to determine its own prices. They (and others) will just rip-off their consumers as much as they can if they can get away with it because they have a de-facto Monopoly. And they got that Monopoly the same way The Banks did, because the power with private wealth to bribe and control Congress (and the executive branch) for the benefit of purely private interests -- was never prohibited by Law (and/or "loopholes" were made legal).

So the rich always get what they want, and the poor always lose. This is why we even have a "Military Industrial Complex", "Wall Street", and such mass economic suffering. The lack of "equal rules" (as you would have in a Football game), assures a one-sided, unjust, "dog eat dog" Plutocracy (for the rich).

Until that changes, self-correcting theories are for the theoretical. But as a practical matter if we had a system where the workers were allowed to share in the company profits that would be a more honestly conceived model, and might make a big difference.

However, nobody who is working everyday at 45 - 50 hours a week should ever live in a state of poverty and despair. I recall reading something about "the American Dream" one day -- and this ain't it.

Brilliant logic, from the greatest economic and political mind

of our time. The Doc just opened up a can of Austrian econ whoop ass!

Michael Nystrom's picture



He's the man.

I hope that

in some future article Ron Paul will specifically address the issues of technology and outsourcing vis a vis unemployment and underemployment.

When we try to pick out anything by itself, we find it hitched to everything else in the Universe.
~ John Muir

He should do a video series

I agree, this topic is too important.
It is widely misunderstood.

I Wish I Could Write Something Short And Sweet,

In response to Dr.Paul's very fine post, but I can't.
So, here is a long series of video/audio {s} on real U.S. Constitutional money, by Bruce G. McCarthy :