by Peter Schiff, Schiff Gold:
The minimum wage debate obscures a more significant problem in America. We don’t primarily have a wage problem. We have a money problem. Government devaluation of the dollar over the years has stolen money from average Americans. But instead of dealing with the core issue, the fight centers around wage policy and offers solutions that will just exacerbate the problems.
While we’re on the subject, a recent study by the Congressional Budget Office put a little bit of a damper on the “Fight for 15” minimum wage initiative.
The nonpartisan government body projected that increasing the minimum wage would boost pay for about 17 million workers, but it would eliminate up to 3.7 million jobs. The median job-loss – the number you probably saw touted in headlines – was estimated at 1.3 million.
The CBO concluded that the job losses would have the biggest impact on women, workers without high school degrees and part-time employees. According to a report published by The Hill on the study, the CBO estimated that a $15 minimum wage would reduce family incomes by $9 billion.
None of this should come as any surprise. The fundamental economic laws of supply and demand tell us that artificially raising the wage level will decrease the demand for low-wage employees. From this simple economic truth, we can safely say that employment levels for low-skilled workers will be lower with a higher minimum wage than it otherwise would have been. The CBO study confirms this reality. But we really didn’t need a study to tell us this.
Raising the minimum wage might be good politics, but it’s bad economics. As with any government policy, it will produce winners and losers. People who keep their jobs will benefit from higher wages. But some people will suddenly have their wages cut to zero. Advocates of government intervention love to highlight the winners, but they sweep the losers under the rug.
But we shouldn’t lose track of the fact that minimum wage advocates seek to solve a legitimate problem facing American workers: their dollars buy less and less every year. But simply mandating employers fork over more dollars is a little like putting a band-aid on an amputation. It doesn’t do anything to address the underlying problem.
Our money is broken, and we need to fix it.
The US government’s monetary policy devalues our currency, and that means less purchasing power for you and me. Simply put, when the government debases the 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 silver melt-value of those five quarters today stands at around $14.80
That’s getting close to 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. It’s the very reason people buy silver and buy gold.
Now flip things around. Today, 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 over $175.
This demonstrates why precious metals are good investments. Silver and gold retain their value as paper currencies continue to debase – thus raising prices over the long-term.