Raising the minimum wage (Part 2)

In Part 1, I pointed out that by arbitrarily ignoring productivity and increasing the cost of production (by raising wages) the government effectively creates money out of thin air. No new wealth is created by producers, but costs have increased. Ultimately more money must be printed (injected into the supply of money) to adjust to this new situation which devalues the existing supply of money and adds to what we call the inflation of our currency.
As for employers (the creators of wealth), their labour costs have been increased by government edict, and in order to stay competitive they must raise their prices or reduce there input costs by releasing staff.  This effectively prices the lowest skilled workers out of the "legal" workforce. In Ontario this month, employers must decide to either pay their bottom rung of employees $10.25 per hour, let them go, or shorten their hours worked. Alternatively employers may keep wages for their more skilled workers lower than they may otherwise be, creating a class of under paid skilled workers that cannot secure a decent living wage (more about that later).
I'm sure this Ontario government action, raising the minimum wage,  is motivated by the best intentions of helping the working poor; the irony is that it may be doing exactly the opposite.
The people of Ontario are fortunate to have one of the most robust and wealthy economies in the world and as a result we have one of the highest standards of living in the world. And yet by my strictly unscientific measure, poverty seems to be increasing.
In my experiences living in the Greater Toronto Region (GTA), one of the fastest growing regions in the country, poverty was something I was always aware of. While my own family struggled as I was growing up, I don't ever remember being hungry. In 1983 one of the first food banks was created to address the problem of hunger in the GTA. Now 27 years later, this and other food banks have sprung up and food donations during key holiday periods has become a ritual in our society. The food banks have persisted during good times and bad and they don't just cater just to the unemployed. Today in the midst of the Great Recession over 30% of food bank users are employed earning an average $10.90 per hour working an average 20 hour week. Food bank users have increased in those 27 years (by the way inflation went up 103% in that time!!) despite government programs to address the issue of poverty, and despite raising the minimum wage. In fact Ontario began a poverty reduction strategy called Breaking the Cycle in December 2008 with a set goal of reducing poverty in children by 25% in 5 years. All of this in my view is the wrong approach.
In my view raising the minimum wage increases inflation, increases unemployment and creates an underclass of workers that cannot earn a living wage. To get a better understanding of some of these issues let me direct you to some of these sites:
The Ludwig von Mises Institute; Economics in One Lesson; and the Freeman Online.    

John Stossel - What Am I?

Yesterday I suggested that people should check out John Stossel's Junk Science program on YouTube. I also noted why I like Stossel, and why I continue to like his work. It's almost as if he were reading my blog (not likely). Today to publicize his FOX Business Network show he writes "What am I?". Perfect, have a look.

Junk Science - A refreshing look at things we believe

I've watched John Stossel's rants about "Junk Science" for years when he was a correspondent on the ABC program 20/20. As a former science teacher I've even used Stossel's program in video tape form to help teach or at least stir up some controversy among my students.
Today Stossel works for the FOX Business channel, which I don't even get, but thanks to the magic of the internet and YouTube I can share with you Stossel's latest foray into deflating some commonly held beliefs regarding science. There are few journalists that I know that have the enthusiasm and passion of Stossel. Better yet he has a libertarian fire in him that no one can seem to quench. This is in five parts and deals with everything from nuclear power to global warming to plastic garbage bags. Enjoy:
http://www.youtube.com/watch?v=MLRoeHXV-xo

Energy from Space

Last week in my "Earth Hour" rant I mentioned how human technology can distort carrying capacity and make a liar of Thomas Malthus . Malthus was one of the first to suggest the idea of limits to (human) population growth. The contrary influences of disease, famine, and war were outlined in his volumes Principles of Population. Of course he was proved wrong, again and again by the ingenuity of human technology.

Remember the whole Earth Hour thing was a reminder that we need to be aware of our impact on the environment and we must cut back our use of resources. For many this is a “motherhood” issue that has spread far and wide and is now infiltrating the public conscience. I can’t disagree with many of the ideas because waste is well, wasteful.

So when an idea is floated regarding energy production that is not the typical of the conserve, wind power, nuclear and solar capture stuff that is already out there, it may be wise to listen. Today in the Globe and Mail Neil Reynolds presents such an idea that may change the energy equation for the future and us. The idea is being pushed by the National Space Society and it even has a Canadian connection. The idea involves capturing solar energy in space (via a very large solar panel array) and "beaming" it down to Earth. Check out the pictures here. Interesting idea, could be a game changer, who knows.

Raising the minimum wage (Part 1)

Ontario's minimum wage increased as of March 31st, 2010. The general minimum wage increased from $9.50 to $10.25 per hour and so were several other wage categories clearly posted on this website. On the same day an article in the Globe & Mail by Jim Stanford (CAW) outlines his thoughts as to why this increase was "a reason to celebrate". On the surface it seems that this action by the McGuinty Liberal government was designed to assist the working poor and raise their living standard. But all economic actions have at least two sides and this action bears some close scrutiny.
In an unfettered market, wages and salaries are calculated by employers on the basis of the employees productivity. Productivity is a measure of the employee's output, and for a business to succeed, that output must be greater than the price of the employee (wages) and  all of the support costs that allow the employee to be productive. The difference is profit, and maximizing profit is the goal. Employees that achieve that goal, deserve a fair wage, and in a competitive market their skills can be shopped around to the highest bidder. Every employee has a price (wage level), usually commensurate with their talent, skill and experience. As these increase, the employee becomes more valuable and in an unfettered market the employee can demand a greater price - to a point.
When a government steps into the market and arbitrarily raises wages (across the economy) , it does so by ignoring productivity. The government only looks at one side (employee) of the economic equation. The link between the price of labour and the price of good and services is irrelevant to the government action. In fact the government assumes that employers will somehow absorb the added cost. What if the employer passes on the cost by increasing the price of their goods or services? What if this happens throughout the economy? The costs are passed on and prices for goods and services increase. Does this benefit employees? I think, eventually they are back to where they were in terms of living standard. Am I wrong? (Part 2, later).       

Flat tax good for Canada too

Did you submit your 2009 income tax form yet?  Do you ever wonder why it is so complex?  And then there is the paradoxical situation where the government gives us tips on how to save income tax and offers "tax breaks" if we perform certain actions then provide proof. Talk about manipulation. That is the carrot-and-stick approach to controlling us that governments in Canada and around the world seem to have perfected. They want, no need your money, as much as possible NOW! But they are willing to play a game with us all and see how clever we  can be at reducing or avoiding payment. Some of us even hire people to avoid payment - doesn't that seem ludicrous?

The income tax in Canada was a temporary measure instituted by the government in 1917 to help finance World War I. It was so easy to put into law and so easy to keep, that here we are 93 years later and it has become a fixture of life. The government even jokes about it on their website.  But most of us never really analyze what we get in return for this huge expense, maybe we should. In almost very other aspect of our lives we carefully shop around for the various goods or services that we use. There is choice, we buy this car not that one, we choose that peanut butter, not the other - choice is everywhere. Not in government "services" - someone else chooses for us but we pay. Of course they must know what they are doing, right?

About this time last year I wrote about the Fraser Institute's flat-tax proposal. You can see the tax form for individuals in the corner. It's just ten lines, simple, no loopholes. But if it were instituted it would destroy the industry built up around tax preparation, CA's, lawyers, publishers, tax preparers.....it boggles the mind. The government would have to bail them out....we don't want to go there do we? You wonder just who is the government working for, who are they protecting?   Is it us?

This week Dan Mitchell of the CATO Institute released a flat tax proposal for the Americans. It's worth a look, it's good for Canada too.

http://www.youtube.com/watch?v=nhUOpNve1bY

Canadian health care, like saving the melting snowman

Michael Bliss has a very thoughtful and sobering look at the sustainability of the Canadian heath care system today in the Globe and Mail. He likens care for the sick to keeping a snowman from melting, "the more we succeed at protecting the snowman, the more expensive" the costs.
Professor Bliss offers "no practical panaceas, quick fixes or easy answers". But I love these paragraphs with my emphasis added as he offers up possible solutions:

"Nor are the political gatekeepers of most health-care systems, certainly not Canada's, willing to unleash anything like the cost-reducing force of unrestrained competition in the health-care marketplace. It seems counterintuitive to suggest that flooding the market with doctors, nurses, hospitals and laboratories, all competing fiercely with one another, might actually reduce costs. Although other industries work this way – think about food and housing – free enterprise in health care is an experiment we are deeply afraid to try.

If we can't hold the line on health-care costs, how can we keep on paying? When governments take responsibility for health care, their only options are to raise taxes, run up debt and squeeze spending in other areas. All of this is happening in Canada, with no end in sight."

Read the article for yourself, unfortunately Prof. Bliss makes so much sense he is likely to be ignored. But the words are out there and the idea needs to be spread far and wide.

Earth Hour 2010

The one hour voluntary power outage was repeated last night. Lots of fanfare in the media locally, as if it meant something. The WWF who sponsor this annual event do it to raise consciousness for the environment. That's fine, it is good to be conscious. The problem of course is that these eco-groups like WWF, want concerted government involvement in all aspects of our lives because we - humans - are the scourge of Planet Earth. Our technology, our fecundity, and resulting billions, they say has raped and pillaged this planet and stolen habitat from organisms great and small.
One of the most important biological concepts taught in any basic environmental course is "carrying capacity". Usually it is used to describe how many organisms can be sustained within an ecosystem. The entire planet of course is a finite ecosystem and it has a carrying capacity. So more people, less of some other creatures in a natural system. Human technology can distort carrying capacity and make a liar of Thomas Malthus, and it has. Even so there are limits, and groups like WWF that support conservation of habitat and creatures are by implication advocating the downsizing of the human population. Because of the limits to growth, in many respects it is a zero-sum game. It's only a problem if you are among those going to be "downsized". How is downsizing accomplished? One way is to suppress technology, the thing that gives humans the "edge" on planet earth. I wonder, is that the unstated goal of the eco-groups? A return to simpler times, less technical, more natural, organic, back to the earth. The symbolism is certainly there, turn off the power en mass world-wide, light candles to dispel the darkness and be conscious of your carbon footprint. It has a folksy attraction, singing 'round the camp fire, who doesn't like that? It sounds good, but, be aware of the implied and unstated, that part is worrying.
By the way here is what I said last year.

Ann Coulter's Canadian Trip

Ann Coulter's recent visit to Canada has revealed some disturbing aspects of Canadian society.

We are censored here in Canada by each other, our overwhelming desire to be politically correct, and by government, through various "hate laws" - "sex laws" in the federal and provincial criminal codes. Most of the country (except maybe Quebec - see their niqab ban) bows to the sanctity of multiculturalism, forgetting that it's not the many cultures that make Canada great, but the rules and rights that protect individual Canadians in their daily lives that make this a great place to live. The peoples of those many cultures came here to escape the bad rules in their former countries. Speak against the government in many countries and face jail time or worse. But Canada like most countries have some restrictions on free speech, the United States being the exception (although with Homeland Security I'm not so sure any more).

The right of free speech either exists in a free society or not, there cannot be some kinds of free speech - some things allowed, but not others. That is difficult to stomach sometimes, hateful things are said, maybe provocative things, but unlike physical violence hate speech can be easily dismissed or argued against. Purveyors of hate if allowed to speak can be pointed out and identified. It's better to know your foes then to have them hide, I think.

So Ann Coulter's arrival in Canada was bound to cause consternation especially among multicultural elements at universities (because of her comments on Islam post 9/11), and I'm sure Coulter and her retinue were counting on the publicity that would be generated. Well that worked.

Coulter is a reality NEWS TV/Radio entertainer. She is to media what the contestants are to Survivor. The reality NEWS TV/Radio talking heads make for cheap programming for NEWS media outlets. No need to send out real journalists to dig up good stories around the world (expensive), just put on the talking heads and let them bash it out (good ratings), and by the way they'll do it for cheap so they can push their latest book. That is Ann Coulter.

The non-story of Coulter's arrival to speak at various Canadian universities was made into a story by the media. There are lazy journalists (or cheap media organizations) who prefer "streeters" (media jargon for street interviews) to real news. Coulter is an attractive shit-disturber, let her do her thing then record the "street" comments of the students, easy story. That is what happened.

The reaction at the University of Ottawa was best characterized by Ian Hunter in the Globe and Mail (full column definitely worth reading):

"Our universities can best be understood today as finishing schools in political correctness. From pre-kindergarten days, students have been brainwashed by the liberal consensus on all issues – political, moral, social. The university exists to round that off with a little learning." 

Thus Hunter explains the reasons the "louts and yobbos" prevented Coulter's Ottawa appearance. In the '60's, and '70s Canadian governments advocated multicultural policies  and politically correct  groupthink for all those teachers who now teach in our schools all over the country. It's no wonder students can't face controversy, they think their only recourse is to ban controversy. It's no wonder our politics seems boring to Canadian students - it is boring. Canadian politics is grey compared to the red-white and blue of our American cousins. Remember Canada's motto is "peace, order and good government". Well time to shake things up.
Remember these wise words I recently re-read from Ayn Rand: "No one’s rights can be secured by the violation of the rights of others."
 

         

American Health Care Reform

The so-called health care reform bill has been passed in the States by a very divided Congress. Not one member of the Republican Party voted for it. The Bill that was passed is really health insurance reform, and it requires all Americans to buy health insurance whether they can afford it or not. Those who can't afford it will be subsidized and its estimated by 2014 when the thing takes full effect 95% of Americans will have insurance.
I'm sure that the American system of health care is broken, but I have strong doubts that this new Bill is the solution. It is supposed to save money, well living in Canada I know that health care costs are rising at an unsustainable pace and eventually something will have to change. The Americans will likely find that their costs will also rise much faster than anticipated. This short video outlines three reasons why:
http://www.youtube.com/watch?v=Un505mz35dY

During the health care debate in the U.S., Michael Cloud of The Advocates for Self Government proposed six simple ways to dramatically cut costs for medical care without it costing taxpayers a penny. Here is what he wrote:


1. Allow price advertising. Let pharmacies, doctors, hospitals, and laboratories to publish their prices for goods and services. Eliminate all laws, regulations, and government provisions that hinder or prevent medical providers from posting their prices.

Charges for the same medical procedure can vary 30% to 300% within a 100-mile radius. But without price information, patients can't shop for the best value.

In the 1970's, U.C.L.A. Economist Sam Peltzman compared the costs of eyeglasses in states that allowed price advertising and states that outlawed it. Results? Much lower prices in states that allowed price advertising.

2. Let all Americans buy prescription drugs outside the United States. Do NOT force them to travel abroad. Allow them to have the prescription drugs shipped to their homes.

I've seen the 30% to 60% savings in prices of prescription drugs purchased in Mexico.

International competition for prescription drugs will drive down domestic prescription prices.

3. Let all people buy medical insurance across state lines. In New Jersey, a single man would pay $4,000 for medical insurance. If he lived in Pennsylvania, he'd pay $1,500. If the New Jersey man could buy medical insurance from a Pennsylvania provider, he'd save $2,500 a year.

Imagine this all across America.

This would cut medical insurance costs for millions who already have needlessly overpriced premiums.

AND, if the American Enterprise Institute study is correct, this would make medical insurance affordable for 12 million uninsured Americans.

4. Let doctors and patients negotiate discounts for paying cash. If a patient saves a doctor the time, trouble, delay and cost of dealing with insurance companies, Medicare, or Medicaid - let the doctor and patient share the savings.

5. Let patients, doctors, and hospitals enter into into legally binding, limited-liability contracts. This would reduce the cost of medical treatment by reducing the cost of malpractice insurance.

Just as Prenuptial Agreements limit marital risk, limited-liability contracts will limit medical risk.

6. End all government mandates that require businesses or individuals to buy medical insurance. End all government mandates that punish and tax those who do NOT buy medical insurance. Make insurance companies earn our business with lower prices and better quality - rather than lobby government to compel us to buy medical insurance by force of law.

Canada's Action Plan - Fixing broken windows

You have probably seen that picture on the left, either at the roadside or in the media. It advertises the Canadian government's plan to create jobs in the wake of the Great Recession.
Have you ever wondered how governments create jobs?
Governments obtain income from various kinds of taxes, fees, duties etc. Basically they redistribute a large portion of the wealth of the nation. Adding to the bureaucracy and hiring more government workers certainly creates jobs, but does not add to the wealth of the nation in fact it increases the size of the redistributed portion. Government can also hire private industry to add or improve government supervised infrastructure - effectively "creating jobs". Again this is just money that must be taken out of the private sector - all of us - through greater taxes eventually, or as often happens the government prints more money.
Suppose your after tax income was $6000 per month. That might be enough to take your family on a nice vacation for a week, but your normal expenses that month like mortgage, food, phone, cable etc., would not be paid unless you used savings or borrowed against future income. Generally governments borrow against future income frequently going into debt (deficit spending) which is added to the total debt of the government. The government of Canada and many other countries have done exactly that over the last couple of years. Does it work?
Not according to the Fraser Institute in a report issued today on what caused the economic turnaround we have experienced lately. The report can be downloaded for free, and it basically attributes the turnaround to private investment and exports.
Creation of jobs rarely works the way government claims. In a very entertaining video John Stossel, explains this type of thinking is what economist's call the "Broken Window Fallacy".  

http://www.youtube.com/watch?v=UPmo2e-bAMQ

Involuntary Charity by yet another tax: G8 Style

Canadians have every right to feel over-governed.  I pay taxes to my local Municipality, the Regional, Provincial and the Federal governments. Each successively higher level of government seems to have less beneficial impact on my life and I have less influence on their spending as my "vote" becomes more diluted.  

What if I told you that a Super-Federal government, a world government also wants your taxes to finance its projects? That is the proposal of some members of the G8 countries (see photo from last G8 meeting). The tax is called the Financial transactions tax (FTT), and it is tiny (anywhere from 0.005% to 0.05% depending on sources) but its revenue generation is huge. That's because the tax would be levied on financial transactions including stocks, bonds, foreign exchange and derivatives (futures, options etc.) trades world-wide. Its estimated that the tax would generate somewhere between $447US billion and $1022US billion (thats a trillion!) annually, not chicken feed. Apparently Canada does not support this tax. Julio Montaner and Stephen Lewis, in a recent Globe and Mail column think that Canada needs to get with the program. 

"Once a leader in health and equity, Canada is now the only G8 country that is determinedly, inexplicably and shamefully opposed to an innovative financing tool – the financial transactions tax (FTT) – that would produce billions of dollars to meet critical global health needs."

These guys go on to say that:

"It's one thing to oppose heavy taxes in a time of economic hardship. But the FTT, which has been endorsed by Britain, France, Germany and the International Monetary Fund (with friendly interest shown by U.S. President Barack Obama), would levy a fee so small (as little as 0.005 per cent) on the millions of daily bank financial transactions that one would need a magnifying glass to even notice it."

How could economies lose as much as a trillion dollars annually and not notice it?  Would you not notice that leech on your leg perpetually sucking your blood? I think eventually you would. That is the essence of this idea, charitable donations are "too voluntary" according to Montaner and Lewis. Funding for global health needs must be institutionalized and the best way to do that is to have this esoteric FTT that common folk won't even notice. Sneaky eh?  Imagine how diluted your "vote" is as a member of the G8 countries?

For those of us that live in Southern Ontario be aware that the next G8 meeting is in Huntsville Ontario, cottage country this June. You can be certain they are going to discuss the FTT. Time to exert whatever influence you have, write your MP and MPP and let them know that voluntary charity is the way to go. Do it.    

Libertarians at Manning Centre

  The Manning Centre Barometer was held last week in Ottawa and a Libertarian group was there hunting for libertarians. This photo is from a Maclean's-on-line article that shows how the Nolan Chart was being used to discern a participant's political leanings. 

Unfortunately the article associated with the photo failed to mention the libertarian presence instead it spoke about the rise of social conservatism in Canada. Libertarians are not social conservatives, on the contrary the libertarian attitude is extremely liberal in that regard. 

The article's author Paul Wells, seems to be saying that there are dangers in a Harper Conservative government because it still carries along the baggage of social conservatism the so-called "hidden agenda". I agree, and of course as the Canadian electorate ages (especially the Boomers) both fiscal and social conservative attitudes rise. This attitudinal shift was illustrated in the article by pollster Allan Gregg.

This creates opportunities for Libertarians in Canada. Libertarians demand fiscal restraint on government while simultaneously advocating the traditional "Canadian" attitude of social liberalism. To paraphrase Pierre Trudeau, the government does not belong in the bedrooms of the nation, or any other room for that matter.     

Environmentalism: Descent into irrelevance

I was scanning the "Mail Bag" in the most recent issue of MACLEAN'S (March 29th, 2010) and read a letter about plastic grocery bags. It seems that in Atlantic Canada, Loblaw's has dropped a five-cent fee for grocery bags because customers were switching to Sobeys rather than pay the fee. The letter writer went on to say "apparently, cheaper is more important than greener." Of course in some places (Toronto) the municipal government (one of the dumbest, most incompetent in the country) has made it a law that retailers will charge five-cents per bag in an attempt to curb their use.

Fortunately I don't live in Toronto, where the municipal council believes it knows how people should live their lives. My municipal council has other stupid laws - but not that one....yet. But I digress.
In today's Globe and Mail one of the regular columnists (Lawrence Martin) had an interesting comment about Elizabeth May and the Greens. The gist of the column is that May (leader) and her Party are slowly losing ground. Of course she has no elected MP's in the parliament (so not much to lose there) and the Greens seem to be a one issue team. That issue - with many names: environmentalism, climate change, green shifting. All of that seems to be fading away from the media spotlight and the public consciousness as Martin suggests, especially since the Copenhagen non-event. Whatever the reason, it is a good thing. Environmental responsibility need not be forced down each of our throats by zealots like the Gore's and Suzuki's and by governments that seek to pander to them.
Maybe now problems with the environment will be put into perspective, along with all the other important issues of the day. Who knows maybe people will start to see that the biggest issues can be dealt with right at home, right in your own country, your own province or state, your own town.  

Is the US Tea Party movement Libertarian?

It's a good question. They seem to want to limit the size and scope of government but, and its a huge BUT, they resemble too much the kind of Republicans that were just booted out of Washington last year. The Tea Party is a hodge-podge of disenchanted voters without a clear direction or director. Check out this libertarian point of view:
http://www.youtube.com/watch?v=GbjyqKUZBFk