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.