Saturday, May 17, 2014

The Consequences of Increasing the Minimum Wage


I have written previously about the minimum wage and the effect this price-control has on the unemployment rate. Many economists are in agreement that raising the minimum wage has negative effects on employment, particularly among workers who are unskilled or inexperienced. By raising the wage above a given amount, the government makes it harder for those workers whose labour is worth less than that amount to find employment. That is why most victims of minimum wage legislation are typically the poorest and the youngest. However, this belief is not unanimous among economists, and I came across this article the other day by Jared Bernstein that argues in favour of raising the minimum wage. Some common misconceptions are espoused in the article and I will try to explain why they are incorrect.


Bernstein writes that minimum wage laws are integral to the functioning of the economy, much like laws against child labour, discrimination, wage theft, and overtime without extra pay. While I agree that discrimination and wage theft are generally bad for the economy and I support legislation that attempts to eliminate them, the absence of minimum wages laws in many developed countries suggests that we could easily survive without them. Despite having no minimum wages laws, Switzerland has a prosperous economy and a very low unemployment rate. While Hong-Kong was still a British territory, it had no minimum wages laws and its unemployment rate was only 2 percent.[1] However, in 1997, while under Chinese rule, employers in Hong Kong were forced to hire more workers and pay increased wages and benefits. This law had the predictable effect of raising the unemployment rate. In 2002, it was 7.3 percent, nearly triple would it was under British rule. In 2003, unemployment in Hong Kong hit an all-time high of 8.3 percent.[2] This example illustrates that legislation that attempts to artificially raise the wage rate has the effect of increasing supply and decreasing demand beyond the equilibrium level. When there is excess supply of a good, we call it a surplus. When there is excess supply of labour, it is called unemployment. The real minimum wage is always zero dollars, since you have to be employed in order to receive it. Unlike laws that mitigate workplace discrimination or wage theft, the minimum wage is an artificial price control that does not make workers better off than without it. Bernstein is being misleading when he claims that such wage laws are integral to the functioning of the economy.


Bernstein paints a rosy picture of how minimum wage laws came into existence. He quotes FDR and Frances Perkins, both proponents of minimum wage on the basis that it would establish an equal plane of competition and would prevent market failures. The first minimum wage in the United States was set at 0.25$ per hour in 1938 with the passing of the Fair Labour Standards Act. A previous attempt to establish a minimum wage in 1933 was declared unconstitutional (and rightfully so). However, wage controls were proposed earlier than that, namely in Canada and South Africa as early as 1920. The goal of these policies however, was not to raise the living standard of workers. People supported these laws with the explicit intention of keeping undesirables like blacks and Asians out of the workplace. [3]As I have already stated, the biggest victims of minimum wage legislation are typically low-skilled workers or those without previous job experience. Since most blacks and Asian immigrants to Canada in the 1920s fit those criteria, the racists of the time knew that enforcing a minimum wage would make such people unemployable. It is fortunate that these laws never came into existence, but the fact that they were advocated for this reason shows that even before they existed, people were aware of the inverse relation between minimum wages and employment.


Many social liberals like Bernstein advocate a high minimum wage so that those who receive it may live comfortably or even support a family. While you should seriously refrain from starting a family if you make 7.25$ an hour, the majority of those earning the minimum wage are young single people who still receive financial support from their parents. According to the Wall Street Journal, 42 percent of minimum wage earners still live with mommy and daddy. Only 15 percent are actually financially independent.[4] The condition of the working poor is a transient one. Most people do not work minimum wage jobs their entire lives; they work at McDonalds for a few years in high school, and as they gain experience, qualify for higher-paying jobs. This is corroborated by evidence. According to the US Treasury Department, the incomes of those individuals in the bottom 20 percent rose 91 percent from 1996 to 2005, while the incomes of those in the top 20 percent rose by only 10 percent in those same years.[5] This shows us that the wages earned by individuals fluctuates over time. Someone who is in the bottom 10 percent of wage-earners may be in the top 10 percent sometime in the future. This is why minimum wage legislation is so harmful—because it robs young people of the opportunities to gain work experience and qualify themselves for higher wages in the future. The poor are similarly affected. Therefore, when people advocate a “living wage” so that the poor can live more comfortably, they really are incurring misfortune upon the very people they claim to help.


Contrary to what Bernstein claims, market failures have never been caused by the absence of minimum wage laws. As I have shown, they are responsible for more failures than they attempt to mitigate. In an economy without a minimum wage, workers would not be paid in pennies (as Bernstein writes). Any business that paid their employees like that would not be in business for very long, as nobody sane would want to work for them. An excess supply of workers in relation to demand is only caused when there is interference in the economy. Workers must be allowed to earn whatever wage is determined in the market and employers should be legally permitted to pay it to them.



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[1] http://www.creators.com/opinion/thomas-sowell/minimum-wage-madness.html
[2] Philip Segal, “Hong Kong Solutions,” Far Eastern Economic Review, March 20, 2003, p. 13
[3] Charles H. Young and Helen R. Y. Reid, The Japanese Canadians (Toronto: The University of Toronto Press, 1938), pp. 49-50
[4] http://online.wsj.com/news/articles/SB121694456522983005
[5] “Movin’ On Up”, Wall Street Journal, November 13, 2007, p. A24

Wednesday, May 14, 2014

Why Study Military History?


Military history is a sub-discipline within the larger field of historical studies that focuses on the documentation and explanation of armed conflicts. Military historians may study tactics and strategies used in past wars, or the leadership, technology, and politics surrounding them. They strive to understand how wars begin, how they are fought and why, as well as how they end and the consequences they have in the long-term. Since wars have been waged since the dawn of recorded history, military historians have existed for just as long. Throughout university history departments, which have been increasingly dominated by identity studies, military history is often viewed as an antiquated field. It is frequently neglected by those who believe war is not important for analysing the larger causes and effects of history. Others may argue that war is too morbid and unpleasant a subject to read about or that learning about wars is not relevant to today’s world. There are also relatively few professors that specialize in the study of war and universities tend to be reserved about offering courses solely on the topic. Nowadays, identity studies and social history are the main fields of interest among historians and classical topics like war have been placed on the backburner. I believe that this neglect of military history is a misguided attitude, since the lessons of war are now more relevant than ever. Those who have the most to benefit from studying military history are soldiers, especially officers, in whose hands rests the responsibility for many lives besides their own. It is the duty of the officer more than anyone to learn from the mistakes of the past and strive not to repeat them in the future. However, they are not the only ones to benefit from studying military history. Due to the nature of wars today, it is as much the duty of the ordinary person, as well as the soldier to pay heed to the lessons of battlefields past. We must not make the error of neglecting them.


One of my favourite quotes is by George Santayana who said that “Those who fail to study history are doomed to repeat it.” Military history, of course is no exception. If high-ranking officers are ignorant about how past wars were fought and won, how can they be expected to command their troops to wage them effectively? Many of the most grievous disasters in war have occurred when officers issued commands out of ignorance of past mistakes. Adolf Hitler for example, would likely have conducted his invasion of the Soviet Union much differently, if not at all, had he possessed a greater knowledge of Napoleon’s campaigns in Russia. Many of the errors committed during the Battle of Stalingrad are eerily similar those made by Napoleon at Borodino. Both Hitler and Napoleon had ordered their men to march across the vast territory of Russia, thereby stretching out their supply lines. Even with the advent of motor vehicles, the Wehrmacht were mostly supplied by the same means as Napoleon’s armies—by horse-drawn carts. Once Hitler’s forces reached Stalingrad, they were already unprepared to hold the city in the long-run due to its poor logistics. Both Napoleon and The Wehrmacht underestimated the Russian will to resist and ignored several other decisive factors such as disease, local resistance, and Russian weather. Hitler’s obsession with Stalingrad and his irrational commitment to its capture was the same fatal flaw that underlined Napoleon’s attack on Moscow. The Germans should have also taken greater efforts in resupplying their troops and preparing them for harsh winter conditions, both things that Napoleon similarly neglected. Hitler’s invasion of Russia was poorly conceived and it reveals his fundamental lack of understanding of past military mistakes. Nearly a million Germans were killed at Stalingrad for following the orders issued by this madman. When the reins of power are thrust into the hands of someone like Hitler who was largely ignorant about matters of strategy and command, the horrors of the past are bound to repeat themselves. Although it is fortunate for most of the western world that he did not succeed in his goals, Hitler’s failure stands as a grim testament to the consequences of ignoring the past.   


It should be obvious that studying military history is useful for soldiers, but what about the average person? Even though the majority of human beings do not command armies or fight in battles, the lessons of war are still relevant to everyone and should be given a higher regard in the discipline of history. Even those who find the topic of war distasteful and would rather not have anything to do with it are not removed from the system that wages them. Wars often require the public support of a civilian population to be successful. When the public grants its approval for its nation to wage war beyond its capacity to win, casualties and hardships will ensue. The First World War began with enormous public support. European governments of the early twentieth century, especially Germany, fostered a militaristic zeal among the population and thus one of the costliest wars in human history began without any meaningful resistance. People paraded in the streets to celebrate the onset of the bloodiest war ever fought. It is easy in hindsight for us to condemn those over-enthusiastic supporters for their naivety. We feel they should have known about technological improvements in weaponry throughout the nineteenth and early twentieth centuries that made the prospect of war deadlier than ever. Machine-guns, airplanes, barbed-wire, and high-explosive ordinance turned Europe into a bloodbath between the years of 1914 to 1918. The immense size of European standing armies at the dawn of World War One only meant that a quick decisive war (as the public wished it to be) was impossible. The use of human-wave tactics against heavily fortified positions was trademark of trench warfare and was responsible so many dead. These tactics were adapted from those used in European warfare since the invention of gunpowder. When these out-dated tactics clashed against modern weaponry, it led such battles as The Somme, Ypres, and Verdun. It is debatable whether the First World War would have been as catastrophic, or if it would have occurred at all, had more people resisted their governments’ call to arms from the onset on the basis that such a war was counterproductive and ill-conceived. But hindsight is always 20/20. If we wish to mitigate the misery and destruction that wars bring, our duty is to educate ourselves about wars in the past: why they begin, how they are waged, and how they end. A public that finds itself ignorant of past conflicts is unprepared to face those of the future.

Pre-war celebrations in Britain

The study of warfare also has great value from a psychological or anthropological perspective, since many themes, feelings, and rhetoric in wars remain constant over time and therefore reveal unalienable lessons about human behaviour. Parallels can even be drawn between conflicts today and those of classical antiquity. The Tet Offensive of 1968 of the Vietnam War was an incident from which many important lessons can be gleaned. In early 1968, the American public was assured that the ongoing war in Vietnam was nearing a close and that they would soon emerge as victor against the wretched North Vietnamese. Tet would change all that. During the Tet New Year’s celebrations on 20 January, 1968, when a three day truce was traditionally observed, North Vietnamese commandos stormed major cities in South Vietnam, including Hue, Khesanh, and Saigon and slaughtered thousands.  Although the Americans quickly retaliated and recaptured all the cities lost during Tet with minimal casualties suffered, the damage had been done. The American public’s perception of the war back home had deteriorated. Even though Tet was a decisive American military victory, it showed them that the Communists were willing to sacrifice themselves on masse to get rid of the Americans. It demonstrated the tremendous will of the North Vietnamese to resist American occupation, whatever the cost. In short, it revealed to the Americans back home that Vietnam was not going to be the quick and easy victory they had hoped for, which ultimately influenced the decision to withdraw from Vietnam over the next five years.


But the Tet Offensive was only a microcosm of a larger trend in warfare, namely that a prolonged and unnecessary war in enemy territory is never beneficial, and that a people occupied by a foreign army will tend resist at all costs. Tet is certainly not the first instance of this. When he Athenian armies invaded Sicily in 415 BCE, they were in comparable situation to the Americans at Vietnam. Like the US, Athens possessed one of the fiercest armies in the western world. According to Thucydides in The Peloponnesian War, The Athenian expedition force to Sicily consisted of 5100 hoplites, 750 Mantineans, 1300 irregulars, and nearly 200 triremes, greatly outnumbering the Sicilians. The Athenians saw a few early victories, but once the Sicilians made a concerted effort to resist the invasion with the help of Sparta, attitudes about the war back in Athens began to sway. Just like after the Tet Offensive, anti-war sentiments on the home front undermined the campaign abroad. The Athenians began to question why they were even fighting in Sicily to begin with. The Athenian general Nicias expressed these sentiments when he argued to the Ecclesia that a war against the population in Sicily could not be won, given their enemies were too numerous and arduous to conquer. This lack of support for the invasion itself led to a lack of support for the troops they had already committed to the field. As a result, the entire expedition force was obliterated; everyone was either slaughtered or sold into slavery.


We should not be too quick to condemn the Americans for waging an unwinnable and counterproductive war in Vietnam. It is easy to compare the disastrous invasion of Sicily to the Vietnam War only through the clarity of hindsight. The truth is, history rarely offers cookie-cutter examples of past events to live by. That is why studying history is necessary—so that we may learn from the past and adapt these lessons to the unique circumstances and nuances of the present. The Vietnam War and the Invasion of Sicily were completely different events but the parallels between the two are obvious. They reveal that the outcomes of wars are often determined as much by people at home as they are by the troops in the field. Oftentimes, the public will clamour for war, but once war becomes a reality and victory is not as swift as people had imagined, they withdraw support and then seek to cut their losses. There have been countless examples throughout history of nations swept up in the fervour and rhetoric of warmongering without any real understanding of how the war is to be fought or why. Only by a firm grasp on the consequences of past wars can we hope to mitigate the bloodshed of future ones. It is only by the study of military history that one can know the true costs and rewards of waging war. Therefore, a public that is ignorant about military tactics and strategy is likely to support a war that is against its own interests or in which they become its many victims. All the examples I have cited, from the Invasion of Sicily in 451 BCE, to the First World War, The Battle of Stalingrad, and Tet are all disasters which reveal the cost of ignoring history.


I can imagine some people may disagree with me on the basis that wars are a thing of the past and that it would be best not to learn about ancient battles because they have no relevance to today’s world. The death of war has been proclaimed many times before. On the eve of World War One, many people thought that a large scale conflict was impossible due to the complex system of alliances that existed at the time. For the ninety-nine years between the Battle of Waterloo and the invasion of Belgium in 1914, there was a shaky peace throughout Europe. But as we have seen, peace was not to last. With tensions between Ukraine and Russia still unresolved as of June 2014, we still face the possibility of war in Europe today. The lessons of Sicily and Vietnam are more relevant than ever, with American involvement in Iraq ending as recently as 2011, a conflict that in many ways echoed these two. We still get threats of annihilation from North Korea every few months. Last year, as Americans urged their President to intervene militarily in Syria, we can see that for many people history continues to repeat itself. I do not believe that another large-scale armed conflict like the World Wars will necessarily occur any time soon, but it remains a distinct possibility. As long as there are human beings whose interests oppose each other, war will continue to rear its head from time to time.



It is foolish to disregard the importance of military history. Identity studies, social, and political history all have their place in the field, but war has been one of the dominant forces of change in our civilization. As such, military history deserves no less consideration than the study of gender, politics, race, class, or religion. 


Tuesday, May 6, 2014

The Economic Fallacies of Robert Reich



A recent article from our yellow journalist friends at Salon.com furthers the website’s tradition of economic illiteracy and unoriginality. The article, entitled “The 4 biggest right-wing lies about income inequality” was written by the economist Robert Reich, and as the title suggests, attempts to debunk several alleged economic myths. What makes this article significant is not the complete lack of economic understanding displayed, but that it was contrived by a person who has no small influence in the field. Reich is currently a professor of policy at the University of California, Berkeley. He was a member of Barack Obama’s economic advisory board, and has also contributed to such esteemed publications as the Wall Street Journal, the Atlantic, and the Harvard Business Review. Despite his reputation among economists, Reich’s Salon article is poorly argued, badly written, and espouses common misconceptions that should be above someone of his education. Many of his arguments are commonly made by people on the left and in this post, I am going to address them one-by-one.


The first lie (or so he claims) is that CEO’s are America’s Job creators and that they should be exempt from taxation. Reich argues that “the middle class and poor are the job-creators through their purchases of goods and services. If they don’t have enough purchasing power because they’re not paid enough, companies won’t create more jobs and economy won’t grow.” If all firms just paid their employees higher wages, they would not gain any more purchasing power since the market price for goods would also increase correspondingly. Higher nominal wages do not create higher real wages. The arguments he presents for the first two supposed “lies” are essentially the same. Reich writes that, “We’ve endured the most anemic recovery on record because most Americans don’t have enough money to get the economy out of first gear. The economy is barely growing and real wages continue to drop.” Social liberals like Robert Reich never tire of bringing up the long misconceived fact that real wages have either dropped or remained stagnant over the past fifty years. Although Reich fails to cite where he got this information, he is most likely referring to the often-quoted statistic regarding household incomes, which have only increased by six percent over the last fifty years. Many social liberals have suggested that this is evidence of wage stagnation. However, if you look at the average income earned per individual over the past fifty years, the numbers tell a different tale. Individual incomes have actually increased by a whopping fifty-one percent since 1969 when adjusted for inflation.1 There is also further evidence to suggest that people today are now working less than they did in 1960 to earn the same amount of goods.2 Real costs of living in the United States have generally decreased over the past decades, at least for individuals. The reason why the statistics regarding real income per household suggests stagnation is because of the decline in household size. As the standard of living has increased over the decades, people are more likely to live on their own instead of relying on their parents or siblings to supplement their incomes. As the number of individuals per household declines over time, so does income per household, and thus it appears to the uncultivated economist that wages have not increased since the 1960s, which is demonstrably false. Robert Reich’s argument and many others similar to his are based on misleading reading of statistics about real incomes. This is an amateurish mistake, and one that I suspect Reich may have intentionally overlooked for the purposes of the Salon.com article and to further support his own ideology.



In debunking the second supposed lie, Reich writes that, “Meanwhile, most American workers earn less today than they did forty years ago, adjusted for inflation, not because they’re working less hard now but because they don’t have strong unions bargaining for them.” Everything about this statement is incorrect. Not only have workers’ real wages not deceased over the past forty years, but workers indeed have been working less. There are more part-time employees in the work-force than there have been forty years ago, and since many labour statistics do not distinguish between full-time and part-time employees, it may appear that workers today earn the same as they did four decades ago for the same amount of work. However, part-time employees generally work less than full timers and thus their wages should not be compared on the same basis. Also, American workers today earn much more in employee benefits than workers forty years ago. When medical and dental coverage, unemployment insurance, and retirement benefits are taken into account, worker compensation rose by about a third from 1980 to 2004.3 Contrary to what Reich claims in the article, unions are not responsible for the creation of wages and benefits, nor do labour unions create wealth in general. Unions do nothing but siphon off wealth created by others. When a union succeeds in securing higher wages and benefits for its members, it always comes at a cost, which is usually passed onto the consumer. For example, If the coal-miners’ union gets a higher wage for coal miners, the market price of coal goes up. If a department store chain bargains for a higher wage for cashiers, then cashiers become more expensive and thus fewer will be employed. Those people who champion labour unions do not understand that higher wages for union members always comes at the expense of higher prices for goods in that sector, as well as lower rates of employment. Many firms will actually pay their employees more than the equilibrium wage in the market for the sole purpose of keeping the labour unions out.



Robert Reich’s third economic myth that he tries to debunk is that nothing should be done for lower-income children in America. This seems to me like nothing more than a twisted depiction of libertarian ethics. A desperate strawman. Nobody seriously argues that poor children should not be helped in any way and denied a proper education. In fact, the state of many schools in poor areas of the United States is indeed deplorable and the children who attend them truly deserve better. It’s difficult to disagree with Reich on this fact. However, the failure of American public schools is more an indictment against government ineptitude and a bloated and incompetent bureaucracy than it is against wealthy people. Try again, Reich. 


Reich saves the last economic myth to drop his bombshell of idiocy. He claims that raising the minimum wage does not contribute to unemployment and that it will actually benefit workers by giving them more spending money. Reich’s arguments can easily be refuted with only the most basic economic understanding. When a price is artificially raised beyond the market equilibrium, then supply will increase and demand will decrease. If the equilibrium wage in a market for shit-shovelers is x dollars per hour, increasing the minimum wage in this market simply means that the shit-shovelers are now more expensive to hire and fewer will be employed. The minimum wage, regardless of how high it is set, will not benefit someone who is unemployed. Sadly, the greatest victims of high minimum wage laws are young people. Since only 2% of workers above the age of 24 currently work a minimum wage job4, those people who are just entering the workforce are placed in the most disadvantageous position, lacking the skills and experience to justify the high price for their labour. If the labour of a high-school student has a value of 7$/hour, that student is unlikely to find a job in a state whose minimum wage is set at 10$/hour. Such is the plight of any worker whose labour is worth less than what the law demands an employer may pay him. Ironically, the poorest people in society have the most to lose from minimum wage legislation—the very people whom these laws are intended to help. Reich cites a study done by IRLE which lists unemployment rates across the United States as independent of the minimum wage laws. However, comparing data from the US alone would naturally differ a lot less than comparing data from the US to other countries with different policies. Most Canadian provinces have minimum wage rates that are a higher percentage of output per capita than American states. Canada correspondingly has a higher unemployment rate, a higher average duration of unemployment, and a lower rate of job creation than much of the United States.5 Nations such as Hong Kong and Switzerland do not have minimum wage laws and have a much lower unemployment rate than the United States and Switzerland especially has one of the lowest unemployment rates on earth.

Switzerland is pretty awesome.

Robert Reich’s call to action at the end of his article, “Don’t listen to the right-wing lies about inequality. Know the truth, and act on it” sounds like something I would read on a social justice warrior blog. It’s like a Smokey the Bear slogan for socialist retards. Reich’s poorly written article is definitely befitting of it though. It’s just one of the many gems you can find on Salon.com.

1 U.S. Bureau of the Census, "Changes in Median Household Income:
1969 to 1996," Current Population Reports, P23-196, p. 1.
2 http://econpapers.repec.org/article/fipfeddar/y_3a1997_3ap_3a2-24.htm
3 Alan Reynolds, Income and Wealth, p. 64.
4 U.S. Department of Labour, Bureau of Labour Statistics, Characteristics of Minimum Wage Workers: 2004, (Washington: Department of Labour, Bureau of Labour Statistics, 2005), p. 1 and Table 1.
5 Jason Clemens, Measuring Labour Markets in Canada and the United States: 2003 Edition (Vancouver, Canada: The Fraser Institute, 2003)