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Ron Paul: Government Policies Hurt Low-Income Workers

Fast-food workers across the county have recently held a number of high profile protests to agitate for higher wages. These protests have been accompanied by efforts to increase the wages mandated by state and local minimum wage laws, as well as a renewed push in some states and localities to…

Fast-food workers across the county have recently held a number of high profile protests to agitate for higher wages. These protests have been accompanied by efforts to increase the wages mandated by state and local minimum wage laws, as well as a renewed push in some states and localities to pass “living wage” laws. President Obama has proposed raising the federal minimum wage to ten dollars an hour.

Raising minimum wages by government decree appeals to those who do not understand economics. This appeal is especially strong during times of stagnant wages and increased economic inequality. But raising the minimum wage actually harms those at the bottom of the income ladder. Basic economic theory teaches that when the price of a good increases, demand for that good decreases. Raising the minimum wage increases the price of labor, thus decreasing the demand for labor. So an increased minimum wage will lead to hiring freezes and layoffs. Unskilled and inexperienced workers are the ones most often deprived of employment opportunities by increases in the minimum wage.

Minimum wage laws are not the only example of government policies that hurt those at the bottom of the income scale. Many regulations that are promoted as necessary to “rein in” large corporations actually hurt small businesses. Because these small businesses operate on a much narrower profit margin, they cannot as easily absorb the costs of complying with the regulations as large corporations. These regulations can also inhibit lower income individuals from starting their own businesses. Thus, government regulations can reduce the demand for wage-labor, while increasing the supply of labor, which further reduces wages.

Perhaps the most significant harm to low-wage earners is caused by the inflationist polices of the Federal Reserve. Since its creation one hundred years ago this month, the Federal Reserve’s policies have caused the dollar to lose over 95 percent of its purchasing power—that’s right, today you need $23.70 to buy what one dollar bought in 1913! Who do you think suffers the most from this loss of purchasing power—Warren Buffet or his secretary?

It is not just that higher incomes can afford the higher prices caused by Federal Reserve. The system is set up in a way that disadvantages those at the bottom of the income scale. When the Federal Reserve creates money, those well-connected with the political and financial elites receive the newly-created money first, before general price increases have spread through the economy. And most fast-food employees do not number among the well-connected.

It is not a coincidence that economic inequality has increased in recent years, as the Federal Reserve has engaged in unprecedented money creation and bailouts of big banks and Wall Street financial firms. As billionaire investor Donald Trump has said, the Federal Reserve’s quantitative easing policies are a great deal for “people like me.” And former Federal Reserve official Andrew Huszar has called QE “the greatest backdoor Wall Street bailout of all time.”

Many so-called champions of economic equality and fairness for the working class are preparing to confirm Janet Yellen as next Chairman of the Federal Reserve. Yet Yellen is committed to continuing and even expanding, the upward redistributionist polices of her predecessors. Washington could use more sound economic thinking and less demagoguery.

By increasing unemployment, government policies like minimum wage laws only worsen inequality. Those who are genuinely concerned about increasing the well-being of all Americans should support repeal of all laws, regulations, and taxes that inhibit job creation and economic mobility. Congress should also end the most regressive of all taxes, the inflation tax, by ending the Federal Reserve.

ron paul

Ron Paul is a former U.S. Congressman from Texas and the leader of the pro-liberty, pro-free market movement in the United States. His weekly column – reprinted with permission – can be found here.

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24 comments

Smirks December 30, 2013 at 9:10 am

By leaving minimum wage ridiculously low, we will still have people working 60-80 hours per week and still drawing food stamps and Medicaid. We pay for it either way.

Of course, I’m sure Paul would also say welfare hurts the poor too. Lord knows any help getting food or seeing a doctor is worse than leaving you on your own.

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CNSYD December 30, 2013 at 9:12 am

Ron Paul is so learned. He ought to run for President. I am sure he would win…..oh! wait. He did. How did that turn out?

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Torch December 30, 2013 at 9:37 am

Not tooooo good.

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TontoBubbaGoldstein December 30, 2013 at 10:32 am

If You See Goober…Tell Him I Said “Duh Huh”.

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TontoBubbaGoldstein December 30, 2013 at 9:59 am

Nope.
Ron Paul didn’t win.
Barrack Obama did.
How is that turning out?

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CNSYD December 30, 2013 at 10:02 am

not good at all. but I didn’t vote for him either. Ron Paul has as much chance of winning as you or I and I don’t know about you, but I am not running.

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Frank Pytel December 30, 2013 at 10:05 am

Hoping for Change
#ObamaFailsAgain

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The Colonel December 30, 2013 at 11:32 am

Something Ol’Ronbo left out is that the average hourly wage in 1913 was 19 cents. In fact, it didn’t climb above a dollar until the end of 1944 when the lack of workers made it necessary for businesses to raise their salaries in order to attract workers.

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MashPotato December 30, 2013 at 12:59 pm

The world’s richest country is enrolling more people on food stamps than they are employing. We’re only a little more debt, a few more taxes, and a few trillion in spending away from economic success. C’mon everybody! If we all blame capitalism instead of government, everything will be ok!

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The Colonel December 30, 2013 at 10:35 am

Ron Paul: “Government Policies Hurt Low-Income Workers”
And in other breaking news, water is still wet and farts still stink…

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MashPotato December 30, 2013 at 12:52 pm

Yeah, sometimes I wonder how he still has the patience to say what should be so obvious. To say the same things for forty years without people listening would exhaust the average soul.

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The Colonel December 30, 2013 at 2:22 pm

So Ron’s solution to the problem is to do away with the Fed!?! While I might agree that it is time to drive a stake through the heart of the Fed I don’t see how that action alone will fix the problem and Ol’Ronbo doesn’t even bother to offer a reasonable solution to dealing with the minimum wage

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MashPotato December 30, 2013 at 3:39 pm

Ron advocates a three-step solution:

1. Audit the Fed

2. Legalize Competing Currencies

3. End the Fed

Auditing the Fed would bring to light exactly how much they manipulate the world economy and would gain support for the next two steps. Competing currencies is a right that people deserve so they can back their wealth by the commodities of their choice, not just government fiat. Then as people diversify their money, the Fed is no longer needed and can be ended.

The minimum wage, Ron would argue, is not a critical function of the federal government, nor a power enumerated in the Constitution. It should be left to the states, not the federal government. And he addresses it in this article:

“Raising the minimum wage increases the price of labor, thus decreasing the demand for labor. So an increased minimum wage will lead to hiring freezes and layoffs. Unskilled and inexperienced workers are the ones most often deprived of employment opportunities by increases in the minimum wage.”

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The Colonel December 31, 2013 at 7:46 am

I won’t argue the merits of closing the Fed – I support it. I do argue the completeness of Ronbo’s plan. Your explanation of what he wants to do is pretty clear, it took a whole paragraph ad it appears no where in the “

MashPotato December 31, 2013 at 3:44 pm

I supported Ron Paul in the last two presidential campaigns, so I became very familiar with his platform. He details his three step solution in his book “End The Fed”. The explanation for not supporting a minimum wage just comes from being a strict constitutionalist; he has expressed the same position on everything they do that is not within Article I Section 8 of the Constitution. He also references the tenth amendment to reinforce his argument for states’ rights.

America has turned deaf ears to Ron Paul’s voice of reason for nearly four decades. It is her loss.

I think we agree that minimum wage incurs maximum damage. If income were a ladder, minimum wage knocks out the bottom rungs and wonders why some people can’t climb. It’s a legislated income gap, encouraging class stratification and warfare. But liberals feed off class warfare, perhaps explaining their vehement support of it.

The Colonel December 31, 2013 at 3:58 pm

One of my many problems with Ol’Ronbo is his inability to make a sane case as this article demonstrates. You clearly outline his plan in a couple of paragraphs while Ol’Ronbo revisits well trodden ground and makes trite observations that really do nothing to illustrate his case – neither Warren or his secretary have anything to do with a debate about minimum wage.
This is an example of one of the many reasons he was so ineffective as a legislator.

MashPotato December 31, 2013 at 5:31 pm

Even Ron accepts the criticism that he struggled to communicate effectively. But I chalk much of his failure as a legislator up to the overlap of willful ignorance and criminal negligence.

It’ll be interesting to see if they party goes for his son.

SouthofBroadSnob December 30, 2013 at 1:07 pm

Your thesis is a joke. Raising the minimum wage stimulates the economy. A rising tide lifts all boats.

Next week 13 states will raise the wage floor, and this is a great victory for the working man and woman. Costco has an average wage of $11.50 and after 5 years they make $19.50. Pretty nice, huh? Costco is the anti-WalMart.

There are high costs associated with low wages.

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TheSaltMiner December 31, 2013 at 8:45 am

I am really appalled at our school system, because most of you that came out of it can’t seem to grasp simple math. Minimum wage goes up, demand for labor goes down. There are so so so so much data to prove that. I can’t wait for the final economic collapse to hit America so you all can eat your words while Ron Paul and the rest of us who have half a brain say “I told you so.”

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euwe max January 1, 2014 at 6:20 pm

Why don’;t we just do these things whole-heartedly and get the results on paper, instead of dragging it out endlessly, like we’re just trying to avoid legalizing marijuana?

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TheSaltMiner January 2, 2014 at 11:04 am

“There is no maxim, in my opinion, which is more liable to be misapplied, and which, therefore, more needs elucidation, than the current one, that the interest of the majority is the political standard of right and wrong.” —James Madison

Broad support for something doesn’t make it right or a good idea. Hitler was very popular at first, even elected by a very large majority in Austria.

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euwe max January 2, 2014 at 11:09 am

I’m in total agreement – allow the church to run the damn thing – that way you can blame God.

400 years of the Inquisition proves to me that the majority can’t find it’s ass with both hands.

Let’s not collect data, and make “theories” that might contradict the vagaries of God’s will – like when He planted the bones of dinosaurs in billion year old dirt to test our faith.

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euwe max January 1, 2014 at 10:29 am

down with government policies!

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euwe max January 1, 2014 at 6:14 pm

Colorado is has a better party policy

La cucaracha, la cucaracha
Ya no puede caminar
Porque no tiene, porque le falta
Marijuana que fumar.

Ya la murio la cucaracha
Ya la lleven a enterrar
Entre cuatro zopilotes
Y un raton de sacristan.

Cuando uno quiere a una
y esta una no lo quiere
es lo mismo que si un calvo
en la calle encuentra un peine

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