We Don’t Have A Wage Problem; We Have A Money Problem
Over the last several months, a concerted push to raise the minimum wage has grabbed headlines across the country. Several major cities recently passed minimum wage hikes, and protests by fast food workers demanding a $15 per hour minimum drew thousands.
Minimum wage advocates seek to solve a legitimate problem facing American workers. Their dollars buys less and less every year. But simply mandating employers fork over more dollars is a little like putting a band-aide on an amputation. It doesn’t do anything to address the underlying problem.
Our money is broken, and we need to fix it.
Our government’s monetary policy devalues our currency, and that means less purchasing power for you and me. Simply put, when the government debases currency, a dollar no longer buys the same amount of stuff it once did. Quantitative easing debases the currency and the Federal Reserve has engaged in the practice for years.
So, what does this have to do with wages? Well consider this. In 1964, the minimum wage stood at $1.25. To put it another way, a minimum wage worker earned five silver quarters for every hour worked. Today, you can’t even buy a cup of coffee with those five quarters.
But the melt-value of those five silver quarters today stands close to $15.
There’s your $15 per hour minimum wage.
This vividly illustrates currency debasement. In terms of purchasing power, the value of the silver remains relatively stable, but the value of a dollar shrinks. The long-term rise in the price of silver reflects this reality.
Now flip things around. It takes 60 quarters to make up the $15 minimum wage advocates want. If you paid that in 1964 silver quarters, the value of the metal would be something in the neighborhood of $175.
This demonstrates why precious metals are good investments. Silver and gold retain their value as the currency continues to debase – thus rising prices over the long-term.
In an economy with stable money, prices tend to fall, not rise. That means more purchasing power to the poor, to minimum wage workers, to those on fixed incomes, and to savers. But the government debases our currency. The politicians and central bankers claim their policies stabilize economies and protect the people from currency debasement. But in truth, these policies only enrich the politically well-connected at the expense of you and me.
Minimum wage hikes only mask the problem. We need to fix the money.
Disclosure: None.
100% agree!
Purchasing power of money is down by a factor of 100 in 50 years. Even 1970, as a college student in Indiana, I could buy a breakfast of 2 eggs, 2 sausages, a glass of orange juice, two slices of toast for a dollar. Gas was 25 -30 cents a gallon.
What is money worth today?
If the power (value) of money were down by a factor of 100, then things would cost 100 times as much. Then your $1 1970 breakfast would cost $100 today.
In 1967 I bought 64K of computer memory for $80,000 dollars. Today that amount of memory costs well under 1 penny. So money must have gone up in value over 8 million times in the past 50 years.
If you want silver, you can go to Potosi in Bolivia where there is a silver mine. You can buy a section and work there mining silver all you want. I hired a guide to help me mine silver in a section reserved for tourists. First, we bought dynamite, detonators and fuses. We also bought coca leaves to chew because it alleviates problems with the altitude at 8,000 feet and the air in the mine which you could cut with a knife. There are 300 levels in the mine. You drill a hole in a wall and insert a stick of dynamite. Since I had never used dynamite before, I was glad to have the guide who taught me to use it. After blowing away a section of the wall, we would load a cart with the dirt and push it along a track to the surface where the dirt was processed in a machine that separated the dirt from hard objects like silver nuggets and gravel. The section where I was working was probably reserved for tourists because all the silver had already been extracted there. I worked all day and came up empty handed. The miners live short lives due to all the dust they breathe. But, most owned hummers because they made a lot of money when silver prices spiked sometime before 2008 when I tried my hand at it. I am sure CNN would be able to describe the miners as victims, but they are there of their own accord because they are happy with their earnings. It is highly unhealthy, however. If you want dollars, then flip burgers.