Discriminating Through the Minimum Wage

Now that Nancy Pelosi is going to be speaker of the house, we can look forward to her "first 100 hours." I'd like to call it her first 100 errors. She has put forth a list of things she wants to do in the first few days after taking control. Along with funding stem cell research, reversing the recent tax cuts, and investigating Bush and nearly all the Republicans, she plans to raise the minimum wage - possibly as high as $7.25. On the surface this seems like a good idea; raise the minimum wage so poor people can make more money. The problem is that it doesn't actually work that way.

The first myth to clear up is that people are not poor because of the minimum wage. The Bureau of Labor Statistics reports that in 2005 only 2.7% of employees working in the private sector and 1.1% in the public sector were earning at or below the minimum wage. But you must take into account who these 2.7% are. The BLS also reports that "About three in four workers earning $5.15 or less in 2005 were employed in service occupations, mostly in food preparation and service jobs," and these people generally make above minimum wage with tips. Of this small percentage making below minimum wage, half are under the age of 25 and a fourth are between the ages of 16 and 19. Only 15% of workers still earn minimum wage after 3 years. So, if only a very small portion of the population is making at or below minimum wage, then only a very small portion of the population can claim they are poor because of the minimum wage. In general, people are poor because they aren't skilled or productive enough to be worth more money.

In fact, it can be argued that people are unemployed because of the minimum wage. Let's say you own a business and you can afford to pay $30 per hour for labor. So, you hire 5 employees and pay them $5.15 per hour. We'll say it costs you $.85 for benefits (sick leave, workers comp, insurance) for a total of $30 per hour. If the minimum wage gets raised to $7.25 per hour it costs $8.10 per employee. Now you can only afford to hire 3 employees with benefits or 4 without benefits. Either way someone is unemployed, and it will most likely be the least productive employee who gets the pink slip.

Raising the minimum wage will only discriminate against the unskilled/uneducated and increase unemployment.

Are We Running Out of Oil?

"Non-renewable" "Limited" "Run Dry" - These are some of the buzzwords used in reference to oil. Many people are talking about the coming oil extinction, but are we really going to run out of oil soon? The NCPA (National Center for Policy Analysis) states that "Estimates of the world’s total endowment of oil have increased faster than oil has been taken from the ground." This is due to new technologies which increase the amount of oil that we can use as well as the discovery of new oil fields.

Ever since oil was first used for energy people have warned of its limited lifespan. It is beginning to sound like the Boy Who Cried Wolf. The NCPA lists many of the limited oil claims that turned out to be false, including an advertisement from 1855 - four years before the first U.S. oil well was even drilled!

The problem is that oil figures are actually much different from what is traditionally stated. When someone says, "We have enough oil for only 10 more years," they mean that with current technology and the number of oil fields we can/are using, without changing anything, we will have enough oil for 10 more years. A number of advances (such as the Electric Downhole Steam Generation process and the Discoverer Deep Seas) have increased the amount of "usable" oil. Also, large oil fields are being discovered which increase the number of possible sources.

"But isn't the staggering increase in price due to a limited supply?" First of all, no. There are many things that can raise the price of oil (and I don't mean George Bush). Second of all, the price really isn't that high. Sure it seems high since it went up rather quick, but if you adjust for inflation we're not doing so bad as can be seen in the chart below (courtesy of Wikipedia).