Tuesday, March 18, 2014

Changes...


Times are changing, and we are once again seeing a shift in the political parties.  Rather than a change as previously seen, where the GOP switched from Liberal to Conservative and the Democratic Party switches from Conservative to Liberal, we are seeing the changes move more Conservative, or further left.

But this is not actually a shift if the parties themselves, this is more of a shift in the people who vote for the parties.  As someone who was Moderate fifteen years ago when I first took a political spectrum test, I have swung left.  I went liberal, while some of my peers swung right on the spectrum.  The fact is, people are moving towards their extremes, and we are driving ourselves to it.

Conservatives, the party of "No!", the party that seems to always side with business moving more and more towards the old ways, while Liberals, the party of "Change!", siding with the poor and weak, the minorities, the workers are wanting new fresh ways of dealing with the problems we face.

And the fact is, this is natural, it happens every so many years (50-75 years give or take), but this time as mentioned it is different, the parties are not realigning themselves, they are polarizing themselves, and that my friends is a bad sign of things to come.  Further divisions can be expected in this flight, and its going to get worse.  Depending on how it plays out, it can be marginally worse, or it can get a whole lot worse.

I think it is safe to assume that the majority of people want the same things.  We want people to have the right and ability to marry the person they love, without a bunch of BS.  We want people to have the basics.  We really want people to get ahead in the world, well as much as they can from the sweat on their brow.  We want people to be happy, succeed in life, and be treated as people.  But that is the majority, and I do feel that if we act in accordance of our will, the minority, the homophobic idiots, the racists, and bigots will either be silenced, or they will grow up and move forward to the modern times.  I want to keep that hope alive.

The problem is, we see different ways to get to those goals.  I have one path to end poverty, but my conservative friends have a different path.  We equally believe that our path is the right one, but the problem is we have tried both paths.  One has been weighed and found wanting, while the revisionists want to say the other has been.  There is also this pesky little problem with spending standing in our way.  The other problem a minimum wage.  Both things that my conservative peers see as bad things.

The problem does not lie with spending, but what we spend on.  The problem isn't minimum wage, but the idea that profits are best, and long term outlooks only harm business.  Ultimately we spend double of the next country on the list in terms of military spending.  Scary thought given the size of China in terms of population, and population growth.  But lets focus for a minute on the minimum wage, and what happens.  I know, I am back to beating on that poor dead horse.

Ideally what happens is that I as a low wage earner, attempting to support myself and a family get a pay raise when the minimum wage increases.  This happens even if I am not a minimum wage earner.  At one job I worked I made 8.15 an hour, but as soon as the minimum wage increase to 8.15 comes into effect, I would instantly get a pay raise as well, due to my position.  Now my employer could demote me, to keep me from a pay raise, but they it would also eliminate a supervisor.  So, ideally, I would have more income, which I would spend, which would create more demand for products, which increases the need for more workers through the entire process.  The results are not going to happen overnight.

The results are long term, they are something that slowly happen.  This is where the minimum wage increase opponents gain their traction.  What happens is that short term profits decrease because the company has more expenses on both employees and product in the service sector.  Basically companies like WalMart see a drop in profit, they are paying more for goods made or shipped in the US, plus they pay more to their employees, assuming they work for minimum wage or around it. 

The short term loss is then covered by raising in store prices, which kills spending, because people are essentially in the same boat.  Now, if they looked at the long term prospects of profit, they would see that by eating the loss for less than a quarter, they would quickly rebound, and make more profit.  There are other reasons that cause a lag in the economy when dealing with minimum wage.

First as a low income earner, I carried debt, most likely it was similar to what other earners carry in relation to what I bring in.  Someone making double what I had, like has twice the debt, but it is manageable because, they have double the money coming in.  So, how does this create a lag effect between the raise in minimum wage and spending?  Low income earners first attempt to pay off their debt.  See people like to think that as soon as you hand someone more money every week, they run out to by a new Play Station 4 or X-Box 0, but this isn't true.  We tend to ensure that we spend that money catching up anything that we might be behind on, or ensuring that we have more food on hand.  Only after we feel we have gotten debt under control, do we go spend money on new game consoles or other things. 

This can take a month or two to reflect in some cases.  It also depends on the mindset of the people.  In this area, some people actually saved up the extra money they earned on the new minimum wage, unwilling to "squander" it.  It was only a few months later that they came out of their shell, but that should not have slowed economic growth, but I will tell you what really did it in.

The increases are too little.  The last minimum wage increase in this state jumped the wage from $6.50 to $7.25, an increase of .75 cents an hour.  That sounds like a ton of money, but really it only equates to around $30 a week in pre-tax pay.  $30 does not go very far when dealing with low wages.  Certainly when you go raising the minimum wage, you have to do so in such a way that companies can adjust to it.  If you went and raised the wage by $5.00 a hour, you would bankrupt everything.

However, we might seek to tie it into the CPI (Consumer Price Index), with an inability to lower the wage, which would be a novel experiment in dealing with minimum wage.  At that point, it would not be wise for everyone to raise their prices to protect profits, because the wage would increase with the price of goods.  Sure they could raise the prices, then lower them, but the CPI is calculated monthly, not annually, so it would do more harm than good.  Now I know there are some critics out there, but the goal here is to create an environment where people are employed, and spending money as they have it to spend.

That is something that does not happen currently.  Remember, protect short term profits, at long term expense.  By tethering the lowest wages to the CPI (like Social Security is), we can ensure that prices remain stable, while people are able to maintain the same standard of living, with the possibility of many increasing their standard of living.  But in doing this, we also raise the standards for everyone.  More people spending is the ultimate goal currently, which breeds more jobs.  But we are too hung up on profit, for anything like the current model to work.  Furthermore, I will also point out that the minimum wage was created to put a floor in the economy, the basic standard of living, without needing social assistance, and because of greed, that has failed miserably.  Lets try the new path shall we?