Peter Schiff

[Repugnant Abomination]

I'm sure some of you know who this guy is, but for those of you who don't he's someone worth checking out.

Peter Schiff - Wikipedia, the free encyclopedia

Schiff is best known for his bearish views on the United States economy and for his prescient predictions of the economic crisis of 2008. He has risen to media prominence following the publication of his book Crash Proof: How to Profit From the Coming Economic Collapse, published in 2007.
Schiff appears on American financial news programs on networks such as CNBC, CNN, CNN International, Fox News, Bloomberg TV and Fox Business.
Schiff is a supporter of the Austrian School of Economics and the Ludwig von Mises Institute, and was an economic adviser for Ron Paul's campaign in the 2008 Republican Party primaries, through which Schiff also expressed support for sound money, limited government, and free market capitalism.

He does a video blog here and updates it frequently: YouTube - SchiffReport's Channel

He knows his shit. I've learned a lot from the guy about the economy and if you're in it then he's an excellent person to learn from.

[f3lix]

Schiff is the shit.

[Repugnant Abomination]

Minimum wage, maximum stupidity

In a free market, demand is always a function of price: the higher the price, the lower the demand. What may surprise most politicians is that these rules apply equally to both prices and wages. When employers evaluate their labor and capital needs, cost is a primary factor. When the cost of hiring low-skilled workers moves higher, jobs are lost. Despite this, minimum wage hikes, like the one set to take effect later this month, are always seen as an act of governmental benevolence. Nothing could be further from the truth.

When confronted with a clogged drain, most of us will call several plumbers and hire the one who quotes us the lowest price. If all the quotes are too high, most of us will grab some Drano and a wrench, and have at it. Labor markets work the same way. Before bringing on another worker, an employer must be convinced that the added productivity will exceed the added cost (this includes not just wages, but all payroll taxes and other benefits.) So if an unskilled worker is capable of delivering only $6 per hour of increased productivity, such an individual is legally unemployable with a minimum wage of $7.25 per hour.

Low-skilled workers must compete for employers’ dollars with both skilled workers and capital. For example, if a skilled worker can do a job for $14 per hour that two unskilled workers can do for $6.50 per hour each, then it makes economic sense for the employer to go with the unskilled labor. Increase the minimum wage to $7.25 per hour and the unskilled workers are priced out of their jobs. This dynamic is precisely why labor unions are such big supporters of minimum wage laws. Even though none of their members earn the minimum wage, the law helps protect their members from having to compete with lower-skilled workers.




Employers also have the choice of whether to employ people or machines. For example, an employer can hire a receptionist or invest in an automated answering system. The next time you are screaming obscenities into the phone as you try to have a conversation with a computer, you know what to blame for your frustration.

There are numerous other examples of employers substituting capital for labor simply because the minimum wage has made low-skilled workers uncompetitive. For example, handcarts have replaced skycaps at airports. The main reason fast-food restaurants use paper plates and plastic utensils is to avoid having to hire dishwashers.

As a result, many low-skilled jobs that used to be the first rung on the employment ladder have been priced out of the market. Can you remember the last time an usher showed you to your seat in a dark movie theater? When was the last time someone other than the cashier not only bagged your groceries, but also loaded them into your car? By the way, it won’t be long before the cashiers themselves are priced out of the market, replaced by automated scanners, leaving you to bag your purchases with no help whatsoever.

The disappearance of these jobs has broader economic and societal consequences. First jobs are a means to improve skills so that low skilled workers can offer greater productivity to current or future employers. As their skills grow, so does their ability to earn higher wages. However, remove the bottom rung from the employment ladder and many never have a chance to climb it.

So the next time you are pumping your own gas in the rain, do not just think about the teenager who could have been pumping it for you, think about the auto mechanic he could have become – had the minimum wage not denied him a job. Many auto mechanics used to learn their trade while working as pump jockeys. Between fill-ups, checking tire pressure, and washing windows, they would spend a lot of time helping – and learning from – the mechanics.

Because the minimum wage prevents so many young people (including a disproportionate number of minorities) from getting entry-level jobs, they never develop the skills necessary to command higher paying jobs. As a result, many turn to crime, while others subsist on government aid. Supporters of the minimum wage argue that it is impossible to support a family on the minimum wage. While that is true, it is completely irrelevant, as minimum wage jobs are not designed to support families. In fact, many people earning the minimum wage are themselves supported by their parents.

The way it is supposed to work is that people do not choose to start families until they can earn enough to support them. Lower wage jobs enable workers to eventually acquire the skills necessary to earn wages high enough to support a family. Does anyone really think a kid with a paper route should earn a wage high enough to support a family?

The only way to increase wages is to increase worker productivity. If wages could be raised simply by government mandate, we could set the minimum wage at $100 per hour and solve all problems. It should be clear that, at that level, most of the population would lose their jobs, and the remaining labor would be so expensive that prices for goods and services would skyrocket. That’s the exact burden the minimum wage places on our poor and low-skilled workers, and ultimately every American consumer.

Since our leaders cannot even grasp this simple economic concept, how can we expect them to deal with the more complicated problems that currently confront us?

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Okay, so what Schiff says makes perfect sense to me, but I wish he would have addressed a few obvious issues that are raised by getting rid of minimum wage.

My question is how can you make sure employers don't take advantage of employee's? Like, I know for example one of the biggest reasons minimum wage laws were introduced is because employers were taking advantage of sweat shop workers. If we're talking about free markets and no government intervention then isn't it natural for exploited workers to band together and form a union? If the answer is that if employer exploits his workers then his workers will quit, couldn't I just counter by saying that some people are so poor and so desperate for a little bit of money so they can survive that they're willing to endure horrendous conditions? And if that's the case I'm not sure it sits very well with me. At the same time, I see how minimum wage and unions can cripple an employers ability to run a profitable business, so I'm really at a loss here.

[f3lix]

The free market always declares the true price of anything.

[DDTempest]

Originally Posted by f3lix

The free market always declares the true price of anything.

Especially Mexicans.

[DJ FC]

Originally Posted by f3lix

The free market always declares the true price of anything.

The true price, maybe.

The true value, NO

[angry pancake]

I get what Schiff is saying. But that's piss poor usage of anecdotes.