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What happens when the wage floor is artificially raised by the people holding the guns, is that if it goes above what the natural free market has already set as a floating wage floor in any particular industry, then more people become unemployed.

A simple reading of Henry Hazlitt’s ‘Economics in One Lesson’ makes this clear to most intelligent people.

In natural settings you never see ‘unemployed’ wolves, or ‘unemployed’ goats, or ‘unemployed’ chickens, because the same evolutionary competitive forces which underpin the free market ensure that everything remains chaotically balanced at all times, in a world-girdling network of dynamic relationships. We do of course see ‘unemployed’ animals in zoos, usually bored, aggressive, unhappy animals, the same as we see ‘unemployed’ people on socialist welfare sink estates.

And that is of course what socialism and democracy have created, a world-girdling zoo, most clearly seen in fenced-off hard-communist countries, but also clearly visible too in soft-socialist countries every time you have to show your ownership animal branding tax slave papers (a.k.a. passports) to zoo employees, or every other time you have to unfortunately entangle yourself with your local mafia gang, known as ‘the state’.

If we had a zoo where people had to pay a certain price to see certain animals, the zoo owners would quickly find a natural equilibrium where they made the most profit on each animal cage.

For instance, it might be $2 dollars to see a gorilla, $1 dollar to see a wolf, and $4 dollars to see a Panda. These prices would feed the animals, pay the zookeepers, pay off the zoo construction loans, ensure a good flow of people through each animal enclosure turnstile, and provide a profit for the zoo owners.

Now imagine that the local mafia gang, in whose ‘territory’ the zoo lies, decided to force the zoo owners to put the gorilla price up to $3 dollars per visit. What would happen? Well, even a semi-intelligent Baboon could work out that less people will go and see the gorillas, profits on the gorillas would go down, the gorillas would soon stop being adequately fed, the zookeepers would not be paid enough, and eventually some of the gorillas would have to be ‘let go’ in some fashion (hopefully being sold to another zoo without such a malicious mafia gang ruling over the roost).

Remember, the $2 dollars per visit was established by the market as the ‘best’ rate for generating the most profit.

And this is of course what happens when minimum wages are raised by mafia gang governments, of all forms. People are driven into unemployment, and then supported by welfare payments taken from others, once again via force, thereby increasing the grip of the state on those people. Naturally enough, these forcibly unemployed people use their votes on whichever gang clique promises the most in welfare payments at the next election. And thus the socialist cycle of decline spirals further downwards.

As a thought experiment, simply imagine what would happen if the ‘minimum wage’ for your job was increased to $1 million dollars per hour. What would happen to you? Would you continue to be employed? If you were self-employed, would you continue to receive offers of work? To ask these questions is to know the answer.

What this means of course, is that anyone who tries to defend minimum wage laws (and who genuinely believes in their efficacy) is therefore less intelligent than a semi-intelligent Baboon.


A Black Swan over China?

A Black Swan over China?

While our Securities Investment 101 series lies within the realm of the yield curve, I thought it interesting that there appears to be a Black Swan event in China, which looks a lot like the Lehnman Brothers credit crunch:

Very interesting.