Why "Intent" and "Results" are not always the same in Public Policy

By Kevin J. Price

Liberal policy makers seem to live in a dream world. "It is terrible that the working poor have to live on such a low minimum wage," they say. They address this problem by arbitrarily raising the minimum wage, although many jobs are worth less than the amount they set. This leads to employers laying off many of the people this policy was intended to help. Fundamentally, most policy makers have failed to realize that those who are affected by laws, respond to the laws accordingly. After all, if business owners wanted to raise the income of employees, they would do so without government coercion. Not all of them want to change salaries and they are naturally resistant to policies that make them do so. Again, the victim of that are those who were suppose to benefit from such.

So what would be a logical alternative to minimum wage? The answer is simple, policy makers need to increase the demand for employment, which will naturally make the amount people can charge for their services go up. Increasing the demand on labor would lead to higher income for all, and would require several strategies:

· Eliminate the federal minimum wage and return this function to the states. It needs to be done in the states because that is where unemployment problems can be found. It is ridiculous that cities like Cleveland, Detroit, and East St. Louis -- which have real unemployment of over 20 percent -- to be additionally saddled with a large minimum wage.

· Eliminate taxes on businesses entirely. This would lead to a more responsible government as voters would be forced to pay taxes, instead of the government using businesses as "middle men" for its dirty work. Businesses do not pay taxes, they are merely tax collectors. If we eliminated taxes on businesses, America would become one of the cheapest countries in the world to do business and demands on jobs would explode.

· Reduce regulations on most sectors of the economy. The cheapest way of achieving this is to restore the state government's role in this area so that they would become competitive in providing the best number of regulations, while making sure they do not chase off industry to other states.

These few steps alone would eliminate many of the barriers between people and job. In a very short period of time, the demand for jobs would go up as the number of available workers would shrink. In no time it would be an employees' market.

It would be very similar to what happened in Japan. Following World War II, Americans complained about how cheap labor in Japan took American jobs (today the complaint is China and India). Following the war, that nation eliminated the barriers between people and jobs, which resulted in huge demand on employment to where today, Japan has among the highest personal incomes per individual in the world. Unfortunately, in recent years Japan has been modeling itself increasingly after the US and its economy has become quite weak. It, too, should have a discussion about eliminating the walls between people and jobs.

The reason politicians don't quickly approve such a logical approach is because of rhetoric, not reality. The rhetoric argues that low wages make people poor. The reality is, artificially high wages make everybody poor. Market priced jobs, on the other hand, generates demand, increases productivity, and gives everyone more for less dollars. Rhetoric argues that we should heavily tax those who can "afford" it, such as business. Reality tells us is that corporations are clever, they will simply move to where they can do business at a lower cost. They are in the business of getting customers and price is a driver for such. All artificially high wages do is drive prices up, forcing businesses to move somewhere else. The list goes on, but what we need is more reality and less rhetoric. We need to understand the results of policies, no matter how good the intentions.

--
Kevin Price
Host, Price of Business, M-F at 11 am on CBS Radio News
Frequently found on Strategy Room at FoxNews.com
Syndicated columnist whose articles appear on a variety of media outlets.
His http://BizPlusBlog.com/ is ranked in the top 1 percent of all blogs by Technorati.
Kevin Price's Profile: http://www.google.com/profiles/PriceofBusiness