Thursday, June 8, 2017


Americans have reached a bad state when it comes to wages. The trend in wages as priced in has been downward for decades in spite of upward movements during true advances in the economy.

Back on Friday, May 23, 2014, I published a work titled: MINIMUM WAGE IS AT AN ALL-TIME MINIMUM. IT SHOULD BE $20.12 AN HOUR, IF ...

In that work, I wrote about the sorry state of the federal minimum. Priced in True Dollars™, which is the only way you can account for the effects of inflation, the federal minimum wage is down to 48 cents.

Minimum wage priced in True Dollars has fallen -53% from it's all-time high.

To get same buying power as someone earning minimum wage in 1968, today's minimum wage would need to be $26.72. To match the 1981 minimum wage, today's minimum wage would need to be $25.53.

And here is the picture for wages paid to private sector workers as priced in True Dollars™.

Here, you can see, true wages and true capital spending flow in lockstep. True wages have been falling for years in lockstep with true capital spending per prime age worker, those between 25 and 54.

The above likely is most important chart ever that you shall see in the history of economics. It's the chart that socialists and politicians never would like for you to see and the chart that reveals how clueless contemporary academic economists are about all things economics and the economy.

True wages have fallen -48% since peak GDP during Q4 2007. True wages fell every year during the Obama presidency, a presidency during which the man himself claimed economic recovery. In truth, the economy collapsed during the Obama years, shrinking -38% (see: TRUE GDP UNDER THE PRESIDENTS)

Contrary to what many believe, wages rise when capital rises. Wages are a consequence of producing wealth under efficiency. The more wealth produced and gained by each worker, the higher wages would rise.

And so, it is for this, I like to remind all of my dictum:

Labor makes property. Capital makes property efficiently.

Socialists and other pro-labor agitators hate for you to know this because it reveals that more capitalism is the fountainhead of true progress rather than less capitalism.

There is one reason alone for the downward trend in wages: the true return to capital has fallen as a consequence of unchecked immigration, both legal and illegal, that has swelled the ranks of the prime working age population.

Ultimately, the living standards for Americans will fail to rise in the long run under the current policies of Congress. The is a fix for all of this, of course.

Two acts should happen. First, Congress should restrict immigration and not for months but for years. Congress should use these rules:

  1. The foreign-born population never should exceed 5% of the total population.
  2. No one with an IQ under 118, the IQ needed legitimately to graduate from an authentic academic at a unversity, should be allowed ever to immigrate into the USA.
  3. Freeze all immigration for five years, perhaps ten.

If Congress would evict the 20 million or so illegal aliens residing in the USA, a significant chunk of the pool of low wage bidders would be erased. That would go far to pressure wages upward for no-skill workers. And yes, it is far easier to evict 20 million illegals than you might suppose (MARCO RUBIO CLAIMS THAT AMERICANS ARE STUCK WITH ILLEGAL ALIENS. THE ROOKIE U.S. SENATOR RUNNING FOR PRESIDENT CLAIMS CONGRESS IS POWERLESS TO DEPORT ILLEGALS).

Second, Congress should move to end all welfare, and raise the minimum wage, during the meantime with the goal of eliminating the minimum wage and all welfare.

Contrary to what almost all believe, the combination of minimum wage and welfare amounts to a subsidy to employers whose capital structure gets predicated on using minimum wage workers on the whole. The net result of this is inefficiency in capital spending.

As no one would work at a loss (wages - living expenses), would-be workers would reject all wage offers at less than break even. On higher wages, capitalists would be forced into questing for efficiency. That would lead to new capital spending, innovation and whole new industries to take up hiring Americans.

So the right move is to end minimum wage laws and all political interference in trade.

True progress comes from the rise of the individual and his property, which is his right of ownership and not he owns. Since the advent of Modern Civilization as created by individualist-minded Protestant Christians from the North Sea, the living standard of mankind has only ever increased under increasing returns to capital. There is no other way to erase poverty.

To get a greater understanding of the linkage of the return to capital and wages, check out SOPHIE'S CHOICE OF CAPITAL OR LABOR. A FREE-MARKETS LIBERTARIAN BECOMES AN ANTI-CAPITALIST AND PERPETUATES AN ECONOMICS MYTH.