Raising The Minimum Wage Has Unintended Consequences

 

         There is a lot of talk now about the $15.00 per hour minimum wage in the US. When I was homeless and poor, I worked for $8.00 US per hour. I have great empathy for poor people. I have a different idea of how to solve the problem.

          First, please allow me to talk about my time living under socialism in Australia from early September,1981, to Valentine's Day 1986. There was some good news as follows:

1) In Sydney Maria and I rented a 4-bedroom home in a very upper middle-class neighborhood. It had a swimming pool and lemon trees all about. Such a property would rent for around $6,000 US per month in Silicon Valley. With rent control, we paid $650 Australian dollars per month rent ($650.00 US in those days)

2) Maria was hit by a car in Sydney. She had to be hospitalized with an injured leg. Physical therapy was required. With Australia Medicare, the final bill was zero.

3) I had a tragic accident with severe burns. I was six weeks in the hospital including two weeks in the ICU. Physical therapy followed. Imagine what the hospital bill would be here in the US or in Brasil. When I went to check out from the hospital, I was handed a bill for $17.00 Australian.

4) Australia then was probably the most middle-class country in the world. There were few poor people and few very-rich people.

    Now let us talk about the bad side of this life as follows:

1) The Australian Taxation Department was ruthless. 50% of your paycheck was taken with taxes. There were no deductions like in the US and I presume in Brasil.

2) The high minimum wage gave workers high wages. It also distorted life for most others. A restaurant meal was a once a month treat because of the high prices. You had to learn how to fix everything that went bad in your house or apartment. You could not afford a plumber, electrician, etc. You bought a new car and held it for three years. You could not afford repair bills. The list goes on.

3) Labor unions were militant and powerful. Disruptions from strikes were an everyday occurrence.

    My answer to bringing up the wages of poor workers rests with the IRS. It is the Earned Income Credit. This program started in the early 1970's. Richard Nixon conceived a system where, if a worker earned below a certain income, he or she would file their taxes at the end of each year. The worker would get a tax refund check to bring their income up to a minimum. Sadly, the IRS has come to view this noble program as a hotbed for theft and fraud. If you file for this benefit now, you are viewed like a criminal. You will be guaranteed an audit and hassles. I know this from friends who went through this bureaucratic ordeal. This program would keep costs to employers down. Our costs for many things in life would stay low. It would give people an incentive to work and a living wage.