Economists disagree about the effects of raising the minimum wage—but not as much as you might imagine. Almost all of the serious debate is whether an increase of 20 percent or less will have a detrimental or negligible effect on workers and the economy.
Some economists, especially those who think the minimum wage should be $0, content that any increase is harmful. Others think the current federal minimum wage could be bumped up by 20 percent before it would lead to increased unemployment. That’s a change from $7.25 an hour to $8.70 an hour.
In a more economically literate world, that would be where the debate remained. Instead, we have advocates in America (including the entire Democratic Party) who want to raise increase the federal minimum wage by 107 percent. The ‘Fight for $15’ continues even as many prominent left-of-center economists are warning that such an increase would be incredibly risky.
“At the $15 wage level, even liberal economists acknowledge the law of unintended consequences,” said Michael Saltsman, research director at the Employment Policies Institute. “If Democratic candidates are interested in helping the poor, they could start by listening to their own economists…”
But while some liberals in the U.S. choose to ignore economic reality, socialists in Venezuela refuse to admit that any such reality exist. Yesterday, Venezuela’s socialist President Nicolas Maduro announced a 50 percent hike in the minimum wage and pensions.
If a 50 percent increase sounds reasonable—at least compared to the DNC’s policy—keep in mind that this is the fifth such increase since February 2016. Over the past year Venezuela has increased it’s minimum wage by a cumulative 322 percent.
(To put that 322 percent increase in perspective, if that policy were adopted in the U.S. the federal minimum wage in America would rise to $30.60, an annual salary of $63,648. That would be 15 percent more than the current average hourly wage of $26.00. At $30.60 the minimum wage would be higher than the current median salary for marketing managers, registered nurses, police officers, and electricians. It would be on par with the median salary for a manufacturing engineer.)
What is most ironic about the increase is that Maduro is raising wages because of increased inflation. Since he became president, inflation in Venezuela has increased by 4,200 percent—the highest inflation rate in the world. By raising the cost of labor over the past year, Maduro has only created more inflation—which lead him to increase wages even more.
This vicious cycle of wage increases and increased inflation has led to shortages of basic goods like food, toilet paper, and medicine. The nation, where more than 70 percent of the people already live in poverty, has become so crippled by shortages of goods and services that last summer the socialist government resorted to a dire solution to fix the food problem: slavery.
According to CNN, Venezuelan officials indicated that public and private sector employees could be forced to work in the country’s fields for at least 60-day periods, which may be extended “if circumstances merit.” The decree also says that workers would still be paid their normal salary by the government and they can’t be fired from their actual job.
Unfortunately, this is not a novel idea. Forcing lawyers and college professors to work in the fields was also a feature of Soviet-style socialism, as Robert Tracinski notes:
This is what used to be known as “universal labor conscription,” which was imposed by the Soviets in 1918, in which “all those capable of working, regardless of their regular jobs, were subject to being called upon to carry out various labor tasks”—a system pretty much identical to the Medieval institution of serfdom. The measure under which this system was imposed was called the “Declaration of the Rights of the Toiling Masses and Exploited People.” George Orwell never had to make anything up.
Advocates of socialism often forget that giving the government control over a country’s “capital” means giving the control over the labor of the citizens. That’s why no matter how benign the intention, the logical outcome of socialism is slavery.
In Becoming Europe, Samuel Gregg examines economic culture - the values and institutions that inform our economic priorities - to explain how European economic life has drifted in the direction of what Alexis de Tocqueville called "soft despotism", and the ways in which similar trends are manifesting themselves in the United States.