When will they learn?
Chicago’s City Council recently passed an ordinance mandating that retail stores with more than 90,000 square feet of space owned by companies with more than $1 billion in annual sales must pay their employees a minimum wage of $10 an hour and $3 in benefits by 2010.Target stores responded to the Council by cancelling plans to open a new super-store in a depressed and run-down neighborhood on the city’s north side. Wal-Mart then announced it was putting “on hold” its plans to build 20 new stores in the city over the next five years.I wonder how many politicians considered the cost of lost jobs and higher property taxes that would result from losing the sales tax revenue if these “big box” stores leave the city or are never built.What is it about politicians that compels them manipulate the laws of supply and demand, and why do they feel income re-distribution is their god-given right? Capitalism isn’t perfect, but history has proven that when governments set wages and prices (See Russia circa 1917-1989) its only guarantee is equal distribution of misery.The issue of what constitutes “a living wage” has been the subject of heated debate. Some feel it’s the wage necessary to support a family of four, but that definition begs the question of while one individual may make the decision to have a family, is it reasonable to expect that another must pay the price of that decision by paying whatever wage it takes to support them? Topics of “fair pay” or worker exploitation are always emotionally charged – usually without clearly defined parameters. Nevertheless, some commonly accepted notions about income distribution in the United States should be examined carefully before government goes off half-cocked and meddles in areas best left to free markets. For example, the “rich” and the “poor” in America are commonly referred to as if they’re different classes of people, but as noted economist and Hoover Institution senior fellow Thomas Sowell writes, in reality they are frequently the same people at different points during their lifetimes.Sowell succinctly asserts that because of the movement of people from one income bracket to another over time, the degree of income inequality over a lifetime is not the same as the degree of income inequality in any given year.According to the U.S. Department of Labor statistics, the absolute majority of low income-earning Americans (bottom 20 percent) go on to become high income-earning Americans (top 20 percent) sometime during their lives. The reason is simple – time gives people the opportunity to gather experience, become better educated and get on-the-job training – all of which lead to increased income levels.One problem with the statistics of income distribution is that raw statistical data seldom contains enough information about skills, attitudes, experience, performance, absenteeism and work habits among differing groups of people.In addition, changing demographics must also be factored into any comparative discussion of economics. To wit, statistics tells us that between 1970 and 2000, real income per American household rose only 6 percent – a statistic frequently used to push one political agenda or another and probably a factor in the decision to mandate an increase in the minimum wage by Chicago’s City Council. But upon closer examination these studies also reveal that during that same period, real per capita income rose 53 percent. This seeming disparity exists because the size of the average American household declined significantly during that same period, resulting in smaller households earning what larger household earned just a generation earlier.To again quote Mr. Sowell, “Despite some confused or misleading discussion of ‘the rich’ and ‘the poor’ based on people’s transient positions in the income streams … there are people who will live in luxury or poverty all their lives, but they are much rarer than gross income statistics would suggest.”Another seldom-discussed reality of economics in America is the fact that the vast majority of Americans who are born poor do not remain poor; just as most Americans who are rich (defined here as those with a net worth of at least one million dollars) were not born rich – they earned their wealth through years of hard work and wise investing.Statistics can be twisted to suit most any purpose, but here are two that should be considered in any discussion of income distribution: 1) 80 percent of American millionaires (4.6 percent of the population) earned their wealth within their lifetimes and inherited nothing, and 2) only 3 percent of the population actually remained in the bottom 20 percent of American income-earners over the course of their lifetimes.Free market capitalism has its share of flaws, but it has also produced the highest standard of living the world has ever known – a reality some politicians have apparently lost sight of. Workers are entitled to dignity, respect and a fair wage; but wouldn’t the citizenry be better served if government and business focused their energies on creating job opportunities rather than ensuring that certain sub-groups earn an additional 50 cents an hour?There are always two sides to every issue, but I can’t help but feel that a greater number of people would benefit if our politicians spent more time studying the cause and effect relationships within free markets and a little less time tinkering with pet projects that are too frequently designed to garner votes rather than to genuinely assist the less fortunate among us.Butch Mazzuca, a local Realtor and ski instructor, writes a weekly column for the Daily. He can be reached at email@example.com.Vail, Colorado
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Lindsey Vonn no longer has a home in Vail, but a big piece of her heart will always remain here.