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Raising the Price of Milk: A Minimum Wage Metaphor

in Communicating Liberty, Economics, Liberator Online Archives, Libertarian Answers on Issues, Libertarian Stances on Issues by Sharon Harris Comments are off

(From the One-Minute Liberty Tip section in Volume 19, No. 15 of the Liberator Online. Subscribe here!)

First, the bad news.

A strong majority of Americans favor increasing the minimum wage. A recent Reason-Rope poll asked Raising the Price of Milk1,003 American adults this question: “The federal minimum wage is $7.25 per hour. Do you favor or oppose raising the minimum wage to $10.10 per hour?”

Fully 67 percent supported raising the minimum wage.

But there’s more.

When the poll further asked: “What about if raising the minimum wage caused some employers to lay off workers or hire fewer workers? Would you favor or oppose raising the minimum wage?” the response changed dramatically. 58 percent opposed raising the minimum wage, and only 39 percent favored it.

And when asked: “What about if raising the minimum wage caused some employers to raise prices? Would you favor or oppose raising the minimum wage?” the vote was split almost evenly.

And that’s the good news. We can change minds and win the majority to our side on this issue — if we help people understand the true, terrible consequences of minimum wage laws.

How can we do that? It’s not easy. To many people, a higher minimum wage seems compassionate. It even seems to make economic sense. As one state representative said earlier this year: “Raising the minimum is a win-win. If you put an extra $700 or $800 in a worker’s pocket, that money is going to be spent. Everybody will benefit.”

One problem is that most people aren’t employers; they don’t “buy” labor. They don’t think in those terms.

But most people do buy milk. And that suggests a simple analogy that can cut through foggy thinking and help people understand why the minimum wage produces such bad results.

Ask your listeners: What if the government decided to mandate an increase in the retail price of milk? Suppose the price of a gallon of milk was doubled?

Would that help farmers, dairies, and grocery stores? Would it mean more money for them? After all, it would only be a small increase for most milk buyers, just a few dollars per week.

Ask your listener what they think would happen if the cost of milk doubled.

How would people react? Would people buy more milk, or less?

For some people, the price increase wouldn’t matter. They’d just keep on buying milk.

But for many consumers, the price increase would make a big difference. Struggling families would be hit especially hard.

Many people would start exploring milk substitutes. Instead of buying whole milk, they might switch to cheaper soy or almond or rice milk.

Others would simply cut back on the amount of milk they consume.

Still others might water down their milk after purchasing it, to make it stretch further.

Further, the cost of items that used milk — cheese, ice cream, butter, etc. — would also rise. Consumers would buy less of those items, too. And manufacturers, just like consumers, would switch to milk substitutes whenever possible, in order to keep the prices of their products as low as possible.

The bottom line? Consumers would buy less milk. And, ironically, many farmers — the very people the increase was supposed to help — would lose money or even go out of business.

Which brings us to the minimum wage.

Employers buy labor, not milk. But if you increase the cost of labor, employers will act in much the same way that our imaginary milk consumers did.

Some employers will no longer be able to afford to buy labor at the price mandated by the new minimum wage. As a result, some jobs will shrink (fewer bag boys, fewer check-out counters, fewer waiters, fewer warehouse workers, etc.). Some jobs will disappear altogether. (Remember movie ushers, and car attendants who pumped your gas and checked your oil for you?)

Further, as the price for labor is incorporated into the price of goods, prices will go up for some products, and others may simply disappear from store shelves.

Some employers will look for labor substitutes, just like our consumers above looked for milk substitutes. They will use technology. Check-yourself-out counters. Automation. Robots. When labor reaches a high enough price, substitutes suddenly become cost-effective. Even moving to a new country with cheaper labor costs may be feasible.

Still others will “water down” the work. They will hire fewer people, or fewer full time employees, and stretch the work out between them.

Most people understand that if you forcibly increase the cost of milk, less milk will be sold, and ultimately both consumers and farmers will be harmed.

This simple metaphor lets them see the same is true of labor, too. A mandated increase in the price of labor, via the minimum wage, brings fewer jobs, higher prices for goods and services, harder work loads, and other negative consequences.

That’s not what people want. When they learn such these things are consequences of the minimum wage, they will no longer support it.

(To learn more arguments against the minimum wage, see “Minimum Wage Maximum Damage” by economist Jim Cox, published by the Advocates. This short easy-to-understand booklet devastates every argument for the minimum wage.)

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Word Choice: Blowback — Foreign and Domestic

in Communicating Liberty, Foreign Policy, Liberator Online Archives, National Defense, War by Sharon Harris Comments are off

(From the One-Minute Liberty Tip section in Volume 19, No. 4 of the Liberator Online. Subscribe here!)

“Blowback” is a term that originated in the CIA in 1954. It originally referred to the unintended consequences of a covert foreign operation — consequences that are often suffered by the civilians of the nation whose government instigated the covert operation. This “blowback” may take the form of riots, demonstrations, hostage-taking, terrorist attacks, and similar hostile actions. The civilians on the receiving end of the blowback don’t realize that it was their own government’s secret activities that caused the anger and violence being directed against them.

Blowback is a term heard more and more when discussing foreign policy. And its definition is often expanded to include overt as well as covert foreign interventions that have negative consequences.

Ron Paul helped popularize the concept of blowback, as well as the word itself, during his GOP presidential campaign runs. For example, in the 2008 Republican presidential primary debates in South Carolina, he introduced it this way:

“I believe very sincerely that the CIA is correct when they teach and talk about ‘blowback.’ When we went into Iran in 1953 and installed the shah, yes, there was blowback. A reaction to that was the taking of our hostages, and that persists. And if we ignore [blowback], we ignore that at our own risk. If we think that we can do what we want around the world and not incite hatred, then we have a problem. They don’t come here to attack us because we’re rich and we’re free. They come and they attack us because we’re over there. I mean, what would we think… if other foreign countries were doing that to us?”

Scholar Chalmers Johnson also popularized the term in an influential trilogy of books: Blowback: The Costs and Consequences of American Empire (2000); The Sorrows of Empire: Militarism, Secrecy, and the End of the Republic (2005); and Nemesis: The Last Days of the American Republic (2006).

Johnson defines the term and tells about the operation that led the CIA to use it:

“’Blowback’ is a CIA term first used in March 1954 in a recently declassified report on the 1953 operation to overthrow the government of Mohammed Mossadegh in Iran. It is a metaphor for the unintended consequences of the U.S. government’s international activities that have been kept secret from the American people. The CIA’s fears that there might ultimately be some blowback from its egregious interference in the affairs of Iran were well founded. Installing the Shah in power brought twenty-five years of tyranny and repression to the Iranian people and elicited the Ayatollah Khomeini’s revolution. The staff of the American embassy in Teheran was held hostage for more than a year. This misguided ‘covert operation’ of the U.S. government helped convince many capable people throughout the Islamic world that the United States was an implacable enemy.”

Blowback is a useful word in describing the unintended, but often terrible,  consequences of foreign intervention.

But it is a very useful term for discussing domestic policy as well.

Just like foreign intervention, domestic government intervention has many unintended negative consequences. As the word “blowback” becomes a familiar, popular, colorful pejorative in foreign policy discussions, it is also beginning to be used to describe the unintended destructive consequences of domestic government activities.

Libertarians — who are very aware of the negative unintended consequences of government domestic policy — can use the word blowback to add power and color to our discussions of domestic issues.

Some examples:

“An increase in the minimum wage would lead to blowback in the form of the loss of hundreds of thousands of desperately needed entry level jobs. This blowback would hit the most vulnerable people in our economy: the low-paid, the unemployed, the under-educated, minorities, and the young.”

“Blowback from the War on Drugs includes crowded prisons and wasted law enforcement resources, overdoses from impure street drugs, the spread of AIDS and Hepatitis B and C from shared needles, drugs peddled to children, loss of fundamental Bill of Rights civil liberties, the enriching of violent criminal gangs, the funding of terrorism, drive-by shootings by warring drug gangs… and more.”

“The blowback from government welfare programs includes the break-up of families, multi-generational poverty, dependence on government, and a weakening of the vital role that voluntarily-funded charities play in our society.”

There are innumerable further possibilities.

Blowback is a powerful, provocative word that quickly and colorfully conveys a vital concept. Many people realize its significance in the foreign policy realm. Their ears will perk up, and they may reach new understanding, when you apply it to domestic policy as well.