X

Elizabeth Warren’s Minimum Wage Fallacy

by Rush Limbaugh - Mar 19,2013

RUSH: Let’s go to the audio sound bites. This is always fun to try. It’s one of the hardest things to explain to people who have a difficult time understanding economics. You know, economics is one of these things that’s so common sense simple that it’s complicated. Really, even to me. Economics is one of the most complicated simple things. By that I mean once a simple, logical explanation is given to answer a question about economics, everybody who hears the answer says, “Oh, that’s so simple. Why wasn’t I able to think of that?”

It’s curious. It has always been curious. Now, the minimum wage. I’ve been doing this program a long time. We’re in our 25th year, and the minimum wage, like clockwork, is gonna come up every other year. And it’s gonna come up the same thing way it always comes up. “Nobody can live on the minimum wage! It’s unfair. It’s un-American. A family of four can’t live on the minimum wage! We need to raise the minimum wage.”

People go, “Yeah! Yeah! It’s really not fair. People can’t live on $10 an hour,” and then you explain to people why the minimum wage actually causes unemployment and you lose ’em. Before the program today, I watched one of the most easily understood and brilliant economists of our time Milton Friedman, explain this to Charlie Rose. It’s from many, many moons ago back when Charlie parted his hair on the side and there was a lot of it.

I mean, his hair was so odd looking, I didn’t recognize that it was Charlie until I took a second and third look at it. I still wasn’t sure ’til he opened his mouth and started responding to Dr. Friedman. The way it always gets started is, “The minimum wage is too low! A family of four couldn’t possibly live on this. It’s so unfair. We’ve gotta raise the minimum wage,” and then somebody will come along and say, “No, no. The minimum wage is the best way to guarantee that low-skilled or unskilled labor never gets hired,” and that’s where you lose people.

I think one of the reasons people have a tough time understanding it is they don’t really fully understand what a job is, and they don’t really fully appreciate what the purpose of a business is, a large or small business. Even as we speak today, I would wager you’d be shocked if you went out and picked an average focus group of low-information voters and asked them, “What is the purpose of a corporation?”

You would be shocked at the answers that you would get. “Well, it’s to provide health care for people in the community. Well, a corporation is to provide jobs.” Or you would get, “Well, corporations aren’t people! Corporations are evil and they just make products that kill people and they overcharge.” You’d get everything under the sun but the right answer. And then what’s the purpose of a job? “Well, so that the community has people that work and can get health care.”

No, that’s not why there are jobs. So then the minimum wage gets thrown into this. It’s always an interesting exercise for me. I haven’t done it lately because everybody in this audience is now up to speed on it, but in the early days of this program I would try a trick. Minimum wage is the topic, and let’s say at the time it’s $7.50 an hour. Somebody calls and says, “It ought to be $10!”

I’d say, “Yeah, you’re right. Why not $15?”

“Yeah, okay! Make it $15.”

“Well, why stop there? Why shouldn’t a minimum wage be $20 an hour?”

“Yeah, okay. Right!”

I’d finally say, “You know, let’s quit beating around the bush. Let’s make the minimum wage $50 an hour.”

At some point, they would stop me and say, “No, no, no. That’s high enough.”

At that point, you had them. Whatever the dollar amount they thought was too high was, that’s when you’d ask, “Well, why?”

“Well, I mean, who are we talking about here? The minimum wage is for people that really don’t know anything. It shouldn’t be that much.”

“Well, why?”

That’s been the only way I have found to properly get people that don’t understand it to understand why the minimum wage is a bad thing. If you try to say that a wage that is arbitrarily chosen — that has no relationship to skill, ability, or work output — is no good, you lose people, because they think a job is charity. They think what somebody earns is almost a charity thing. People are owed money just because they’re alive, and the purpose of a business is to be nice to the people that hire us and make sure that they can live.

That’s not what the purpose of a job is or the purpose of a business.

But that sounds too cold and unfeeling for your average low-information voter.

Now, it’s gotten to the point now where even accredited institutions of higher learning academics don’t get the minimum wage — or you newly elected senators, such as Elizabeth Warren who said, “You didn’t build that! You couldn’t make that happen. All of us made that happen for you.” Last Thursday during a Senate Help Committee hearing entitled “Keeping Up with the Changing Economy, Indexing the Minimum Wage,” Senator Elizabeth Warren asked University of Massachusetts economics professor, Dr. Arindrajit Dube, this question…

WARREN: If we started in 1960, and we said that as productivity goes up — that is, as workers are producing more — then the minimum wage is gonna go up the same, and if that were the case, the minimum wage today would be about $22 an hour. So my question, Mr. Dube — with a minimum page of $7.25 an hour — is, “What happened to the other $14.75?”

RUSH: So, you see what’s being set up?

The minimum wage, based on what it was when we started it — and then you factor in economic growth, inflation, and all the differing factors that have changed. If the minimum wage today were to stay equal to $7.25 or whatever it was when it started, it would be $22 bucks an hour now. “Why isn’t it? Why are people getting screwed, Dr. Dube? Why are these evil corporations hoarding that money and not giving it to ‘the workers’?”

Now, this Dr. Dube himself is entirely clueless, and this is one reason why it is a risk for you to send your kids to a college today, because they’re gonna come out also clueless, and they’re gonna end up being politically — well, not educated, but propagandized, indoctrinated. Here is Dr. Dube’s response to the question, “What happened to the other $14.75?”

DUBE: That’s correct. Since the early seventies, what we have seen is a divergence in the prosperities of different sections of our population. So, for instance, had the minimum wage kept pace with productivity since 1960, you’re correct, it would have stood around $22 an hour today. Now, the answer to your question, who got the other $14, we can answer with the following comparison. Had the minimum wage grown at the same pace of incomes going to the top 1% of the taxpayers, the minimum wage would have stood at $33 an hour before the recession in 2007.

RUSH: Oh, my God, it’s even worse, the conspiracy. The rich people took the $14.75 and even more, they just took it. It should be $33 an hour. But you see, folks, it’s a lost cause to try to explain this to people. ‘Cause if you are rooted in this emotionally and all you think about is the concept of fairness, and corporations and businesses are evil and try to get away with hurting people, you’re never gonna understand. Never. There’s nobody better than I, El Rushbo, at making the complex understandable.

(interruption)


Well, can you go to their bank accounts and get it? Yeah, that’d be fair. That’d be fair, a little Cyprus action. Just go to their bank accounts and get it from ’em. They didn’t earn it anyway, the top 1%, everybody knows this is exactly how, in fact, the rich got rich. This how they stole the money that was due the poor. This is how it happened. Minimum wage people ought to be getting $33 an hour today, and they’re only getting seven. The 1% grabbed it, and that’s how they got rich. That’s the conclusion here. It is woefully wrong, embarrassingly, woefully wrong. I can tell you why, but if you are invested in all this emotionally, you don’t stand a prayer of understanding it. I’m sorry. And it may not even be worth my time to try.

BREAK TRANSCRIPT

RUSH: Now, the first thing they’re gonna tell you is that all of these numbers that Elizabeth Warren and Dr. Dube used were made up. There is no equivalent today of $22 an hour minimum wage. I went to the US government’s own inflation calculator website. I went back to 1968, and I plugged in $1.60. In 1968 I was making a buck and a quarter. It was not minimum wage, it’s just what the job offered. Somebody who had never done it before. That’s what it was worth to the people that hired me. And I’m gonna tell you this. If the minimum wage had been five bucks, I would not-a gotten hired. They woulda hired somebody that knew what they were doing.

They were not gonna pay somebody five dollars an hour who had no idea. It was not an apprenticeship. They had a real job that needed to be done. The fallacy of the minimum wage is it eliminates jobs. It keeps inexperienced people out of the workforce. The higher it goes, the more unemployment there is. You’ve gotta totally wipe out this notion of fairness. That’s not what a job is. It isn’t charity. The price of a job is not related to what it costs to live. The price of a job is what the business owner values that work to be. And, of course, he wants to pay as little for it as he can and still get the job done.

When I worked at the Kansas City Royals — and this is not to criticize them — 1979, I’m 28 years old, $12,000 a year. That, folks, was nothing. And you know what? There were people who would have done it for less than that. Baseball teams, sports teams have groupies lined up all down the block wanting to work there. There was no reason to pay what I was doing any more than that. It didn’t matter, fairness or any of that. It’s what the job was. And if I wanted it, that’s what it paid. And the minimum wage, if there had been a minimum wage of $20,000 a year for that job, I wouldn’t have gotten it. I’d never done the job before. Or they would have eliminated the job, more than likely.

But when you arbitrarily attach a price to a job, any job, minimum wage, be it hamburger flipper or working at a department store, whatever, when there’s no relationship to the job itself, just it’s a job, then there’s no market force involved, and it’s totally artificial, and I’m gonna tell you the real reason there’s a minimum wage and the real reason people want it high. It’s the labor unions. The higher the minimum wage, the more they can claim they are owed. If the minimum wage, the highest it can be is what you pay somebody that doesn’t know diddly-squat about what they’re doing, and make no mistake, minimum wage is entry-level work. If you’re gonna pay somebody that has no experience and no know how and doesn’t know beans about what they’re doing, ten bucks an hour, then I, the union bricklayer, ought to make 50, and that’s what they do.

It keeps truly, novice unqualified people out of the workforce, and that’s not good because they don’t learn skills. You want people working. The minimum wage was never designed for people to be able to feed a family of four on it. The minimum wage is a flawed concept from the get-go anyway. But people can’t get their arms around the notion of how it eliminates jobs. Now, in 1968, I don’t know what the average — I don’t even know if there was a minimum wage in 1968 — I don’t know when it started, but I just chose an arbitrary figure of $1.60 an hour as a minimum wage, 1968, when I was 17. So $1.60 in 1968 is worth $10.67 today.

So when Elizabeth Warren sits there with Dr. Dube and tells you that the minimum wage ought to be $22 an hour based on what it was when it started, that’s entirely made up. And then when he comes back and says, “Well, yeah, and if you relate it to the wage gains in the top 1%, ha-ha, then, Senator, it ought to be 33.” They’re just making these numbers up. So $1.60 in 1968 is equivalent to $10.67 today, not 22, and not 33. Anyway, that’s the best I can do, and if you’re still lost, you are forever going to be lost on this.


Related Links