Two years ago, Swiss voters had a national referendum that would have set the nation’s minimum wage at $25 an hour. A whopping 76.3 percent of voters voted NO to the referendum. Switzerland has no minimum wage and Swiss workers are among the highest paid in the world! The Swiss get it....why don't Americans?
Be sure to visit http://www.ronpaullibertyreport.com for more libertarian commentary.
Two years ago, Swiss voters had a national referendum that would have set the nation’s minimum wage at $25 an hour. A whopping 76.3 percent of voters voted NO to the referendum. Switzerland has no minimum wage and Swiss workers are among the highest paid in the world! The Swiss get it....why don't Americans?
Be sure to visit http://www.ronpaullibertyreport.com for more libertarian commentary.
Two years ago, Swiss voters had a national referendum that would have set the nation’s minimum wage at $25 an hour. A whopping 76.3 percent of voters voted NO to the referendum. Switzerland has no minimum wage and Swiss workers are among the highest paid in the world! The Swiss get it....why don't Americans?
Be sure to visit http://www.ronpaullibertyreport.com for more libertarian commentary.
He is also the editor of the RonPaul LibertyReport.com.
Chris, welcome to the program today.
Great to be back with you, Dr. Paul.
Thank you.
Good.
You know, just recently, our friend at Future of Freedom Foundation, Jacob Hornberger, did a blog, and he reviewed the history of what was going on in Switzerland with dealing with the minimum wage.
And he has some interesting new points about it.
And we've talked about the minimum wage often.
And I think most people who have an inkling about free markets understand how detrimental they are, and they actually hurt the people they're trying to help.
Most people who are for the minimum wage are bleeding hards, and they think, oh, if we could just raise the wages of the poor people, it would be everything good.
And they put this full trust in the government.
So they put a lot of dependency on the government to solve the problems of economics, and yet it's the government that creates them so much.
But he did a neat review about this, and I actually learned some things about where the Swiss have stood on minimum wage laws.
In this country, we take it for granted.
First, if there's a federal government law that mandates minimum wage, hardly anybody thinks anything about it, but nobody asks the question at a presidential debate, well, you support minimum wage or don't you?
Where does the government get this authority?
It doesn't tell us in Article 1, Section 8, that Congress has the authority to regulate any wages, let alone the minimum wage.
And also, the economic issue gets discussed now and then, but we seem to lose that argument all the time.
But very rarely do we talk about the moral issue.
By what right does government come in to regulate voluntary contracts?
And we who are libertarians see voluntary contracts, both economic and social, as being the same.
And just because one seems to be different, that you can regulate economic activity, but not morality and social conditions, that there's entirely difference.
But they're all in the one.
But I know, Chris, that you had a chance to take a look at Jacob's article.
And I imagine you have a few comments to make about what this minimum wage law and controversy is all about.
Yes, I actually learned a few things too about Switzerland.
It turns out that a few years ago, Switzerland had a national referendum that would make the nation's minimum wage $25 an hour.
And that's $10 more than that's being proposed here.
And I think 76% of the Swiss voted against the minimum wage of $25 an hour.
Furthermore, Switzerland has no minimum wage.
Now, in America, unfortunately, most people, if there was no minimum wage, were so hardwired to think that people would be dead in the ditch somewhere.
And if they were working, they'd be working for pennies and eating grass.
But amazingly, over in Switzerland, even though they don't have a minimum wage, and they defeated a proposal for a $25 minimum wage, they have amongst the highest paid people in the world.
Swiss Wage Wisdom00:11:34
So what does that tell us, Dr. Paul?
Well, first off, you know, 90% of them make more than the $25.
They could care less.
Even the people who made less didn't vote for the referendum because they were afraid they might lose their jobs, and they were smart enough about this.
But it goes to show that governments aren't very smart and that if you have a healthy economy and even Switzerland has far from a perfect economy and Europe certainly has problems throughout and we do too, especially the underemployment of marginal workers.
So when they come in and they do this and they raise these wages, what they're doing is literally legislating unemployment and giving people a chance.
This is the most remarkable thing in a free market.
Everybody gets a chance.
They really ought to pay for some of these jobs.
And in some places you do.
A real good job of apprenticeship, you could end up paying for it.
But that's what it's all about.
But when you're competing with welfare benefits and then wages that are not market-oriented, it's underemployment.
And the people who get laid off first are the marginal workers.
And also what happens and why we all suffer is the fact that it really motivates automation.
So if there's a marginal worker, I'll tell you what, there's going to be a lot more effort because financially it'll work out better to have automation supplement the worker rather than just raising wages, which then again, it causes prices of food and other products to go up for the poor people.
Poor people lose their jobs and it doesn't work.
And there's so much trust placed on the fact that somebody in government's wise enough to know what the wage should be.
But it's literally saying to somebody that's a marginal worker and they come in and they know they're a marginal worker and they'd like to just get started and they're willing to work for six bucks an hour.
And the people come along and the government says, no, $10 an hour.
So the voluntary approach of somebody wanting to work for $6 an hour and somebody willing to pay him for $6 an hour and they have this agreement, they make it illegal.
They say the businessman is going to be arrested.
He's going to be fined.
This is wrong.
And yet it's just a voluntary aspect of this.
The one thing is the freer the market, the greater demand for high-priced labor.
So the labor costs go up.
In the Industrial Revolution, wages didn't go down.
Wages went up.
Even though some jobs were put by the wayside, some industrial jobs come in and they ended up paying a lot more.
So it's really hard for people to understand that the market is smarter than it is by a bunch of bureaucrats and politicians who are always pandering, you know, for votes.
Yes.
And to piggyback on that a little bit, the minimum wage only outlaws jobs.
That's all it does.
They make it sound really good, like they're helping, as government always tries to portray itself, but it only outlaws jobs under a certain wage level.
And when it comes to automation, none of us like to overpay, no matter what.
And if we're forced to overpay, we'll do so only until a workaround comes about.
And that's what automation is.
There are plenty of entrepreneurs out there that they notice, hey, there's going to be a great demand for automation.
They'll start creating things.
That's why we're seeing kiosks in fast food places.
When you go to the airport, now you're ordering off of a computer screen.
The higher the government pushes this arbitrary wage, the more automation they incentivize it.
And now there's nothing wrong with automation per se, because it frees up people to work on other needs that are necessary out there.
However, government puts like a rocket underneath automation when it pushes up the minimum wage.
Now, one question I have for you, Dr. Paul, is if the minimum wage is such a great thing, why is Bernie Sanders so cheap?
Why $15 an hour and not $50 an hour?
I would venture to say that most people watching this show would be thrown out of work immediately, don't you think?
Well, we used to kid about that when they come to the House floor and they'd have a bill that's moved the minimum wage up to $8 an hour, $7 an hour.
Well, why don't you make it $15?
Well, there's a little bit of risk in that.
Then they go and ask for $15 and they don't even get the point.
But no, you're right.
They don't know.
And how would they possibly?
It's no better, they can't do any better job than the Fed does at picking what the interest rates should be.
They don't know what the interest rate should be.
The market should determine it, or you get into financial trouble.
Same way with wages.
If you want full employment, you have to have wages adjusting.
You have to have people have an incentive to learn and move up the ladder.
And if they're not distracted by welfare benefits, you know, there are two black economists, Tom Sowell and Walter Williams, who have written extensively on how so many of these laws hurt poor black people.
But they have shown before the minimum wage law, black unemployment was equal to white unemployment.
And people, oh no, that's not possible because there's always been bigotry and all this stuff.
And they say it's purely a racial thing.
But now, black unemployment is like 40%, and teenage unemployment is higher than ever.
And even college graduates, they're underemployed or unemployed.
So it's all this interference in the marketplace.
And the price of labor is very important.
We talk a lot about the price of money and interest rates, how important that is.
But the price of labor is very important.
And they say, oh, yeah, that's why these business people, the price of labor goes up here, you know, because of minimum wages and because of union wages and all, and they price themselves out of the market.
So some businesses, due to regulations and taxes and labor, they go overseas and they say, oh, this is terrible.
This is terrible.
And then somebody else comes in and they say they're stealing jobs.
Well, there's a lot of jobs available in this country.
It's under training.
Even it involves the public school system because they're not training anybody to get a good job, but the system is designed to get degrees and they're graduating from college and they haven't even learned arithmetic.
If you spend tens, if not $100,000 on a college degree, you can't get a job and you end up with a debt, there's something wrong with it.
Government management of the economy, whether it's labor costs or monetary costs or the regulations that are supposed to make us safe and happy, this stuff just doesn't work.
So this was really neat to find this story that refutes so many of those myths out there about why it's necessary.
And here's a country that doesn't even have minimum wage laws, and they're doing quite well.
They're prosperous.
No minimum wage laws.
And they're probably the highest paid in all of Europe.
So this is very remarkable.
It's even better than I would have predicted.
I knew it would be better, but it turns out how useless legislation is to regulate.
It's economic planning.
That's what communism and socialism and Nazism, Keynesianism, that's all they do.
You've got to have planners.
You've got to use the computer.
You've got to calculate.
And this is how we'll get full employment.
The truth is that they don't know anything about getting full employment and they have caused all this trouble.
And then, of course, when the country really gets in trouble and the American people think we're really in trouble, what happens?
It's open field for the demagogues to come in and say, I'll take care of this.
We're going to, you know, put on tariffs and people prevent people from coming in and will penalize people who come in to do work and want to send the money back to their families.
It's just one problem leads to another.
That to me is such a tragedy.
Yes.
I mean, it saddens me when I see politicians, especially on the Democratic side, that on the one hand, they complain about youth unemployment, and on the other, they're going to fix it by making it even harder for a youth to become employed.
It's so backwards, and it makes you wonder what's the motivation?
Why are they so willing to just kick the poor to the sidewalk?
Do they want them on unemployment?
Do they think they're going to be better voters if they're on the dole?
I mean, it's really sad that you're going to outlaw somebody for getting a job.
The way that the free market would handle it is people could bid.
If there is no minimum wage, you could try to sell your labor for $10 an hour, $8 an hour.
At least you would have a job.
With the minimum wage, you get nothing except unemployment.
And that's the sad part.
And, you know, we're a long way away from a majority of Americans, at least, believing that, because they're so hardwired to believe that you need this.
But, you know, at least we're doing our part to try to speak some sense here, Dr. Paul.
So, you know, one other thing that they forget about, because I like to deal with some of these problems in the sense of morality and overall, what does it mean?
If you concede to the government the right to set wages at the lower end, you concede to the government the right to limit governments on the upper end.
And they have this.
I was very much aware of what was happening in the early 70s.
And matter of fact, when I really started getting interested in economics and in politics, because we had wage and price controls.
So there was a limit on what you can do.
So if you concede this principle that government is all wise and they know how to raise wages and help the poor, they also know how to suppress wages in order to diminish the bad effects of monetary inflation.
So that is always the problem that they have.
They create one problem and they try to correct it and they get two more.
But I would say that the main problem and why people do these things, I didn't meet many people in Congress that were malicious.
They just weren't, they were bleeding hearts at time or what else can I do?
Yes, you're right on the long run, but we have this, such, this, and this here, so we can't do it.
But they've also been hit with bad education, not just in the last 10 or 15 years, I would say last 70 or 80 years when we started to go with this interventionism where we had Keynesian economic planning, inflationism, printing money.
See, they still believe that printing money is wealth, which is absolutely false.
It diminishes wealth.
So they claim that, oh, well, if we just give the poor people more money with higher wage, it'll be okay.
And this will lead to something that we may well see that if the people won't spend money, of course they're frightened or they may not have any money.
The government now, they printed a lot of money, but it hasn't gotten into the hands of the right people to spend it.
So I see a time where they're going to be passing out the money and just give everybody money, you know, the helicopter approach and get people to spend money and the economy is going to do fine, which will absolutely backfire on them.
So that is what we have to face.
Government Spending Folly00:01:47
Chris, I want to thank you very much for being with us today.
My pleasure, Dr. Paul.
Thank you.
Good.
And I want to thank our audience for tuning in today.
And I think this little history and this idea about how the Swiss have handled the minimum wage law, I think is fascinating.
But once again, government interference, government planning, whether it's on foreign policy, interference in personal habits or interference in the economy.
All this failure.
What just really bewilders me is the economic planners, the people who like government, complain about what's happening and they complain about business and everything else, but they want to take the worst out of there and put them in government and have them control everything.
Sure, there are mistakes made in a free society, but a lot less, and it only affects the people who might make mistakes on their own investments.
But when people accept the notion that government knows what's best, what they're doing is making sure that their mistakes hurt everybody.
And believe me, government essentially makes mistakes all the time.
They aren't smart enough, they're well-intended, but they're misled by economic policy and they're misled by the fear-mongering that goes on for the justification for us to be involved in many wars.
So what we need is a revival of the love for liberty and actually make an advancement in the cause of liberty because we had a pretty good start, but we've lost our way in this country.
So I think emphasis on individual liberty would solve all the problems.
And under those conditions, none of us would have any minimum wage law and a lot more people would be more happy and more prosperous.
I want to thank everybody for tuning in today to the Liberty Report.