Category Archives: Economic

Economic Impact Payment Quandary

Shortly after April 7, I by chance discovered that my Savings Account had been enlarged $1,400.00 by the Economic Impact Payment (“EIP”) authorized by the American Rescue Plan Act of 2021 (“ARP Act”); this amount yet remains there untouched, pending a decision of how to respond to it. (By being bypassed by the $600.00 EIP authorized by the Consolidated Appropriations Act, 2021 (“2021 Appropriations Act”), I was relieved of the earlier necessity of any decision on how I should respond.)

I, at the time of the enactment of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), considered the $1,200.00 EIP authorized by it to be a prudent response to the severe disruptions caused both by private and public actions in response to the unforeseen COVID-19 onslaught. This was an invasion for which adequate preparations could not have been instituted, and which then appeared to require certain protective action — albeit the scope of such action being then and later still problematic. The response caused extensive unanticipated hardship for which few could have prepared, thus justifying some financial relief for those afflicted.

The passage of time though allowed modulation in those putative protective actions, as experience enabled clarification about those measures that were or were not effective and those that were or were not necessary. Moreover, interim medical advances had ameliorated, to some extent, the danger caused by this virus and the prevalence of being afflicted by it. Therefore, in my mind, by the end of 2020, the necessity of further financial relief was questionable.

I thus then, when the expectation of being confronted with the receipt of an additional $600.00 EIP presented itself, realized that a decision would apparently be required. Accordingly, I investigated whether a response was available and discovered that a mechanism existed for rejection of this payment. I then conceived providing a response, to accompany a check returning this amount, in the following possible terms:

“As acceptance by me of this amount of $600.00 would constitute my contributing to the continuing fiscal and moral bankruptcy of this nation — the repercussions and dangers of which are already and will be further manifold, and an apparently-constant progression in which I decline to participate — I hereby refuse and return the amount of this second Economic Impact Payment.”

The absence of receipt thereof however allowed me to defer the decision to take this action. Now, though, I no longer have this luxury.

For all of my adult life, a period which alone is of no-small duration, the juggernaut in the District of Columbia has demonstrated little inclination to quench its insatiable appetite. While there have been periodic, albeit few, aberrations by way of limited retrenchments in its expansion, the direction of the process has generally been unabated. In this both major political parties bear substantial fault.

As the benefits to be conferred are usually more visible than the costs to be incurred, new or expanded entitlement programs have the intrinsic greater potential to garner advocates and popularity. The existence of this potential is regrettable for various reasons, not the least of which are: the engendered expectation of the permanence of these benefits as well as the accession by additional ones; and the weakening of the fiscal health of the nation, a severe (perhaps fatal) condition already apparent. Nevertheless, these considerations have not proved to be frequently successful in hampering the enthusiasm of expansion advocates.

Yet it now though appears that there could be an exponential growth of this monstrosity we call the Federal Government. While the necessity of the CARES Act was partially justifiable, there was still significant wasteful excess in it. Far less justification existed for components of the 2021 Appropriations Act and the ARP Act; moreover all three (3) of these Acts inordinately increased the U.S. National Debt. However, though the adverse impact upon the current and future fiscal and economic posture of the nation through the exorbitant magnification of debt from these Acts can already be envisioned, the deterioration will pale in comparison as a result of the projected cost of new programs proposed by the current administration.

While the proposed American Jobs Plan and American Families Plan would constitute the largest expenditures, it is expected that further likely proposals would also substantially increase Federal expenditures. The expenditures for those two alone would aggregate in excess of Four Trillion Dollars ($4,000,000,000,000.00), in addition to the One Trillion Nine Hundred Billion Dollars ($1,900,000,000,000.00) authorized by the ARP Act. Whether either of those plans is enacted, or whether sufficient revenue is generated through new tax revenue in order to pay for those expenditures, is of course presently unknown. Suffice it to say that these proposals, along with the CARES Act, the 2021 Appropriations Act and the ARP Act, have and would greatly expand the role of the Federal Government in both the economy and Civil Society. (While non-fiscal proposals of the current administration would also greatly expand the role of the Federal Government in Civil Society — many, if not most, of which the author considers highly objectionable — this post is limited to considering the ramifications upon the economic and fiscal health of the nation. Therefore any comment on the excess intrusiveness of these other proposals would be deferred to possible later posts.)

While these incipient proposals would exponentially increase the National Debt, this insatiable trend has been consistent now over more than the last Half-Century. (A PDF version thereof may also be reviewed.) With rare exceptions all administrations, of whatever political composition, have demonstrated their addiction to extravagant spending. The warnings by the Congressional Budget Office of the unsustainability of these expenditures and deficits have generally fallen on deaf ears. As graphically demonstrated, not only does the recent accentuation of the National Debt consume a far greater proportion of the Gross Domestic Product (“GDP”) than it did on average over the past Half-Century, it now is equal to One Hundred Percent (100%) of the GDP!

In the opinion of the author, as well as many others, this is clearly unsustainable. To liquidate it: in say ten (10) years, we would have to reduce all expenditures to equal revenue, continue to pay the same amount in taxes as currently, plus divert an additional Ten Percent (10%) of GDP to its payment; or, in say one (1) year, to continue to produce at the same rate but for every inhabitant to simultaneously go into suspended animation for a year! Thus, to the author, it clearly appears we are already in a Crisis Situation.

It is tendered that perpetuation, much less accentuation, of the present course can only result in extreme social upheaval, inasmuch as: increased diversion of fiscal resources to and through the government would cause economic disruption by supplanting the natural and ordinary employment of those resources by the populace; and social disruption through the corollary preference of certain social sectors and denigration of others, as these policies by definition would only benefit those selected recipients who are anticipated, by the use of those resources, to contribute to or enable the attainment of the objectives thereof. But perhaps only an extreme social upheaval can result in an inversion of the present destructive path and a reorientation toward reduced governmental participation in and ramifications upon the economy and Civil Society.

Even a Crisis Situation can degenerate into a more-critical state, as there are degrees of crisis. At an earlier stage of a crisis certain actions can be taken to eliminate the causes and remediate the damage; at later stages the scope of those actions are restricted, and ultimately reach a point where any effort is virtually, or absolutely, ineffective. If there was presently any indication of sufficient awareness of this crisis, then vigorous advocacy to inspire corrective efforts by those with this awareness is apropos. However, from what is reported, it appears that few in government are sufficiently-concerned but rather that most are feckless.

Perhaps then the prudential course is to accelerate the crisis by exploiting the opportunities offered — and thereby assist in a propulsion beyond the brink of this fiscal and moral bankruptcy — in order to broaden the awareness of this crisis and make it apparent to even the most injudicious. In this instance it might consist of acceptance by everyone of every EIP and other opportunities that might be offered. But is this the most-principled course?

In embarking upon a course to attain an objective one is often confronted by the conundrum of adhering to principles consistent with the objective and actions, albeit possibly contradictory, more-efficacious in attaining it; compounding the question is the effectiveness of one small action among many countervailing ones. Yet can the action, combined with a declaration of the rationale behind it, resolve this conundrum? Hence the quandary …

WAYNE A. SMITH
Sanilac County, Michigan USA
07 May 2021

Fossil Fuel Retrenchment  — The Law of Unintended Consequences?

This is a topic that I don’t recall I have addressed previously. Thus, since I today composed the following as an e-mail message to a friend in response to an editorial cartoon, it occurred to me that I ought to post it here — to provide an expression of my thoughts and possibly to engender some in others. From the circumstances of its composition it is not as elaborate an articulation as it might otherwise be; thus it likely ought to be later expanded, but should suffice, for the moment, as to an outline of these considerations. (The original text has been somewhat revised in verbiage as well as format, but, due to time constraints, has been retained in its original brevity.)

Though I’m not a tree hugger (in the sense in which that term has been pejoratively used), I’m all in favor of environment conservation; this preference is a product of my opposition to excessive, conspicuous consumption as well as my religious beliefs. But I recognize that attaining this objective is not going to be as easy or painless as many people think.

It would require much personal sacrifice and alteration of normal behavior. My style may be an example, including: minimization of use of a motor vehicle to less than 5,000 miles/year; avoiding much restaurant visitations; grouping necessary errands in a single trip; grouping purchases of regular staples for a couple months usage; eschewing leisure travel/vacations; and no air conditioning and maintaining the thermostat during the Winter at no more than 64 to 65 Degrees.
If everyone voluntarily adhered to similar retrenchments, then many of the adverse effects upon the environment from human activity would be eliminated; but it will have severe effects upon many economic sectors, e.g. restaurants, airlines, automobile industry, lodging establishments, etc.

Moreover, in addition to the many counterproductive effects you have mentioned in a switch to replacement energy modes — these consisting of equivalent or near-equivalent energy expenditure in extraction or production of the materials required by these replacement modes — there will be substantial economic distress, at least during the interim. If electric motor vehicles become prevalent — either as the compelled or voluntary mode — it will necessarily increase the price of gasoline due to amortization of the same fixed costs over a smaller volume of purchases. (The old rules of supply and demand will be reversed because of contortions of the market by these external influences and factors.). Those then who cannot afford these new vehicles or who have to travel long distances will suffer extensive hardship.

The discouragement of vehicle use within cities appears to be the new trend, and is from an isolated view attractive for many reasons. But it ignores the fact that not everyone lives in these densely-populated elitist enclaves. Those who do will benefit the environment and experience advantages while circulating there. But the prices on items they purchase that depend on long-distance transport, such as food and non-locally produced materials, will increase exponentially — as the cost of those hardships on persons engaged in long-distance travel will have to be passed on to the beneficiaries thereof — and they will be restricted from travel outside those enclaves. Prospects of the consequences of the early abandonment of fossil fuels then are being viewed through excessively rose-colored glasses.

WAYNE A. SMITH
Sanilac County, Michigan USA
10 November 2020

Income Inequality / MINIMUM WAGE

Various discussion has recently been generated over the issue of “income inequality”. Ancillary to this has been controversy over the practical repercussions and moral posture of an increase in the Minimum Wage. It is possible that in the noise some perspectives have been ignored. (One which the writer believes can be ignored is the effect or lack thereof on income equality from such an increase, since to this individual it seems clear that any effect would be de minimis.)

In analyzing the questions we should first consider: Who is the Minimum Wage intended to benefit? It would seem a fair conclusion that it is those who are only marginally skilled, either by being new to the work force or by not having had the opportunity or inclination to develop any skills other than the rudimentary. Thus, it would seem that most persons would or ought to be relegated to this category only for a relatively-brief duration. (For those who do not have the capability to develop these skills, due to various physical, mental or psychological deficiencies, there should be provided some type of permanent financial support; since this, hopefully, will only be a small segment, its effect on diminishing overall resources should not be controversial.)

Now, would an increase in the Minimum Wage have the intended effect and the desired efficacy? It may well be doubtful since, by definition, it would only benefit those with marginal skills. The basic and introductory premise, it would seem, is that those with these marginal skills have the least job security since they would most easily be able to be eliminated and replaced, and would only be supplying a limited benefit to the employer. Can we now, from this perspective, further analyze these questions?

This limited benefit to their employer necessitates a conclusion that these employees are of marginal value to the employer. As the differential between the value and the cost to the employer is thus narrow, any magnification of the cost will be material. And if the cost is increased too much so that the cost exceeds the value, the employer may decide termination of these employees, and the investigation of alternatives, is required.

Even if the differential is only narrowed — with the value of the employee still exceeding the cost it is likely the same result will be yielded. For marginally-skilled employees, because of their minimal level of abilities and consequent similarity between equivalent employees, are relatively fungible. Now, even if the differential in value is somewhat diminished, the employer may still continue the relationship out of convenience, habit or tradition. But if the differential between value and cost narrows too much, an exchange for an employee who may be more compatible with the position and of more value may be more easily justified. Thus, the inherent dubious tenure of these employees will be threatened even more under such a regime, viz, where the Minimum Wage is significantly increased.

The above examination of course has proceeded from the position and perspective of the absolute and relative attributes of the employees. It should be at least equally pertinent to consider the position and perspective of the financial status and considerations of the employers.

To this writer it would seem the type of employer who might most often utilize the marginally skilled are also those who experience only marginal profitability. For more skilled employees are of course capable of performing more efficiently and at a higher level of quality. If a person is operating at sufficient profitability, it would normally then be expected they might seek the more qualified (as long as they are not overqualified) employees. If the employer utilizes instead the marginally skilled, it is likely due to it being unable to afford higher-value employees due to their own marginal profitability. Now, if the cost to them of these employees increases, they may be faced with the prospect of becoming unprofitable, resulting in either elimination of some of their current employees or termination of their operations. In either event, the already-questionable tenure of this class of employees becomes even more tenuous.

Thus, it is doubtful that an increase in Minimum Wage levels would in fact attain its objective. Nevertheless, I perceive there being a sound policy that would support and induce such a change. And this would be the pressure it might exert to eliminate or at least reduce so-called Economic Stimulus programs.

A switch of activities or programs to attain this objective from the governmental sector to the structures within society already would be salutary indeed. If this were to result in private, rather than public, organizations being the ones to help others up by their bootstraps, then such a change in policy certainly would be most beneficial.

Now, one could attempt to condition a Minimum Wage increase on an offsetting reduction in appropriations for Economic Stimulus programs. However, it may be sufficient simply to induce a change in the mentality of recourse to resources looking first to and relying upon the private sector by resort to employers rather than government agencies for magnification of disposable income. Thus, even if their is no immediate reduction in governmental expenditures, adoption of such a change in attitude ought to justify obstruction of or even reduction in later expenditures for, much less enhancement of, these programs since the objective thereof ought already to have been attained by the greater disposable income flowing from the private sector. I consequently would think such a Minimum Wage increase should be supported for the above reasons; the conclusion that the purported income inequality reduction argument is merely a phantasmal exercise without weight or logic should not be deemed a reason to refrain from pursuing a policy that has its own good and sufficient rationale.

WAYNE A. SMITH
Forester Twp, Michigan USA
3 March 2014

Economic | PHILOSOPHICAL VISTAS

Category Archives: Economic

Economic Impact Payment Quandary

Shortly after April 7, I by chance discovered that my Savings Account had been enlarged $1,400.00 by the Economic Impact Payment (“EIP”) authorized by the American Rescue Plan Act of 2021 (“ARP Act”); this amount yet remains there untouched, pending a decision of how to respond to it. (By being bypassed by the $600.00 EIP authorized by the Consolidated Appropriations Act, 2021 (“2021 Appropriations Act”), I was relieved of the earlier necessity of any decision on how I should respond.)

I, at the time of the enactment of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), considered the $1,200.00 EIP authorized by it to be a prudent response to the severe disruptions caused both by private and public actions in response to the unforeseen COVID-19 onslaught. This was an invasion for which adequate preparations could not have been instituted, and which then appeared to require certain protective action — albeit the scope of such action being then and later still problematic. The response caused extensive unanticipated hardship for which few could have prepared, thus justifying some financial relief for those afflicted.

The passage of time though allowed modulation in those putative protective actions, as experience enabled clarification about those measures that were or were not effective and those that were or were not necessary. Moreover, interim medical advances had ameliorated, to some extent, the danger caused by this virus and the prevalence of being afflicted by it. Therefore, in my mind, by the end of 2020, the necessity of further financial relief was questionable.

I thus then, when the expectation of being confronted with the receipt of an additional $600.00 EIP presented itself, realized that a decision would apparently be required. Accordingly, I investigated whether a response was available and discovered that a mechanism existed for rejection of this payment. I then conceived providing a response, to accompany a check returning this amount, in the following possible terms:

“As acceptance by me of this amount of $600.00 would constitute my contributing to the continuing fiscal and moral bankruptcy of this nation — the repercussions and dangers of which are already and will be further manifold, and an apparently-constant progression in which I decline to participate — I hereby refuse and return the amount of this second Economic Impact Payment.”

The absence of receipt thereof however allowed me to defer the decision to take this action. Now, though, I no longer have this luxury.

For all of my adult life, a period which alone is of no-small duration, the juggernaut in the District of Columbia has demonstrated little inclination to quench its insatiable appetite. While there have been periodic, albeit few, aberrations by way of limited retrenchments in its expansion, the direction of the process has generally been unabated. In this both major political parties bear substantial fault.

As the benefits to be conferred are usually more visible than the costs to be incurred, new or expanded entitlement programs have the intrinsic greater potential to garner advocates and popularity. The existence of this potential is regrettable for various reasons, not the least of which are: the engendered expectation of the permanence of these benefits as well as the accession by additional ones; and the weakening of the fiscal health of the nation, a severe (perhaps fatal) condition already apparent. Nevertheless, these considerations have not proved to be frequently successful in hampering the enthusiasm of expansion advocates.

Yet it now though appears that there could be an exponential growth of this monstrosity we call the Federal Government. While the necessity of the CARES Act was partially justifiable, there was still significant wasteful excess in it. Far less justification existed for components of the 2021 Appropriations Act and the ARP Act; moreover all three (3) of these Acts inordinately increased the U.S. National Debt. However, though the adverse impact upon the current and future fiscal and economic posture of the nation through the exorbitant magnification of debt from these Acts can already be envisioned, the deterioration will pale in comparison as a result of the projected cost of new programs proposed by the current administration.

While the proposed American Jobs Plan and American Families Plan would constitute the largest expenditures, it is expected that further likely proposals would also substantially increase Federal expenditures. The expenditures for those two alone would aggregate in excess of Four Trillion Dollars ($4,000,000,000,000.00), in addition to the One Trillion Nine Hundred Billion Dollars ($1,900,000,000,000.00) authorized by the ARP Act. Whether either of those plans is enacted, or whether sufficient revenue is generated through new tax revenue in order to pay for those expenditures, is of course presently unknown. Suffice it to say that these proposals, along with the CARES Act, the 2021 Appropriations Act and the ARP Act, have and would greatly expand the role of the Federal Government in both the economy and Civil Society. (While non-fiscal proposals of the current administration would also greatly expand the role of the Federal Government in Civil Society — many, if not most, of which the author considers highly objectionable — this post is limited to considering the ramifications upon the economic and fiscal health of the nation. Therefore any comment on the excess intrusiveness of these other proposals would be deferred to possible later posts.)

While these incipient proposals would exponentially increase the National Debt, this insatiable trend has been consistent now over more than the last Half-Century. (A PDF version thereof may also be reviewed.) With rare exceptions all administrations, of whatever political composition, have demonstrated their addiction to extravagant spending. The warnings by the Congressional Budget Office of the unsustainability of these expenditures and deficits have generally fallen on deaf ears. As graphically demonstrated, not only does the recent accentuation of the National Debt consume a far greater proportion of the Gross Domestic Product (“GDP”) than it did on average over the past Half-Century, it now is equal to One Hundred Percent (100%) of the GDP!

In the opinion of the author, as well as many others, this is clearly unsustainable. To liquidate it: in say ten (10) years, we would have to reduce all expenditures to equal revenue, continue to pay the same amount in taxes as currently, plus divert an additional Ten Percent (10%) of GDP to its payment; or, in say one (1) year, to continue to produce at the same rate but for every inhabitant to simultaneously go into suspended animation for a year! Thus, to the author, it clearly appears we are already in a Crisis Situation.

It is tendered that perpetuation, much less accentuation, of the present course can only result in extreme social upheaval, inasmuch as: increased diversion of fiscal resources to and through the government would cause economic disruption by supplanting the natural and ordinary employment of those resources by the populace; and social disruption through the corollary preference of certain social sectors and denigration of others, as these policies by definition would only benefit those selected recipients who are anticipated, by the use of those resources, to contribute to or enable the attainment of the objectives thereof. But perhaps only an extreme social upheaval can result in an inversion of the present destructive path and a reorientation toward reduced governmental participation in and ramifications upon the economy and Civil Society.

Even a Crisis Situation can degenerate into a more-critical state, as there are degrees of crisis. At an earlier stage of a crisis certain actions can be taken to eliminate the causes and remediate the damage; at later stages the scope of those actions are restricted, and ultimately reach a point where any effort is virtually, or absolutely, ineffective. If there was presently any indication of sufficient awareness of this crisis, then vigorous advocacy to inspire corrective efforts by those with this awareness is apropos. However, from what is reported, it appears that few in government are sufficiently-concerned but rather that most are feckless.

Perhaps then the prudential course is to accelerate the crisis by exploiting the opportunities offered — and thereby assist in a propulsion beyond the brink of this fiscal and moral bankruptcy — in order to broaden the awareness of this crisis and make it apparent to even the most injudicious. In this instance it might consist of acceptance by everyone of every EIP and other opportunities that might be offered. But is this the most-principled course?

In embarking upon a course to attain an objective one is often confronted by the conundrum of adhering to principles consistent with the objective and actions, albeit possibly contradictory, more-efficacious in attaining it; compounding the question is the effectiveness of one small action among many countervailing ones. Yet can the action, combined with a declaration of the rationale behind it, resolve this conundrum? Hence the quandary …

WAYNE A. SMITH
Sanilac County, Michigan USA
07 May 2021

Fossil Fuel Retrenchment  — The Law of Unintended Consequences?

This is a topic that I don’t recall I have addressed previously. Thus, since I today composed the following as an e-mail message to a friend in response to an editorial cartoon, it occurred to me that I ought to post it here — to provide an expression of my thoughts and possibly to engender some in others. From the circumstances of its composition it is not as elaborate an articulation as it might otherwise be; thus it likely ought to be later expanded, but should suffice, for the moment, as to an outline of these considerations. (The original text has been somewhat revised in verbiage as well as format, but, due to time constraints, has been retained in its original brevity.)

Though I’m not a tree hugger (in the sense in which that term has been pejoratively used), I’m all in favor of environment conservation; this preference is a product of my opposition to excessive, conspicuous consumption as well as my religious beliefs. But I recognize that attaining this objective is not going to be as easy or painless as many people think.

It would require much personal sacrifice and alteration of normal behavior. My style may be an example, including: minimization of use of a motor vehicle to less than 5,000 miles/year; avoiding much restaurant visitations; grouping necessary errands in a single trip; grouping purchases of regular staples for a couple months usage; eschewing leisure travel/vacations; and no air conditioning and maintaining the thermostat during the Winter at no more than 64 to 65 Degrees.
If everyone voluntarily adhered to similar retrenchments, then many of the adverse effects upon the environment from human activity would be eliminated; but it will have severe effects upon many economic sectors, e.g. restaurants, airlines, automobile industry, lodging establishments, etc.

Moreover, in addition to the many counterproductive effects you have mentioned in a switch to replacement energy modes — these consisting of equivalent or near-equivalent energy expenditure in extraction or production of the materials required by these replacement modes — there will be substantial economic distress, at least during the interim. If electric motor vehicles become prevalent — either as the compelled or voluntary mode — it will necessarily increase the price of gasoline due to amortization of the same fixed costs over a smaller volume of purchases. (The old rules of supply and demand will be reversed because of contortions of the market by these external influences and factors.). Those then who cannot afford these new vehicles or who have to travel long distances will suffer extensive hardship.

The discouragement of vehicle use within cities appears to be the new trend, and is from an isolated view attractive for many reasons. But it ignores the fact that not everyone lives in these densely-populated elitist enclaves. Those who do will benefit the environment and experience advantages while circulating there. But the prices on items they purchase that depend on long-distance transport, such as food and non-locally produced materials, will increase exponentially — as the cost of those hardships on persons engaged in long-distance travel will have to be passed on to the beneficiaries thereof — and they will be restricted from travel outside those enclaves. Prospects of the consequences of the early abandonment of fossil fuels then are being viewed through excessively rose-colored glasses.

WAYNE A. SMITH
Sanilac County, Michigan USA
10 November 2020

Income Inequality / MINIMUM WAGE

Various discussion has recently been generated over the issue of “income inequality”. Ancillary to this has been controversy over the practical repercussions and moral posture of an increase in the Minimum Wage. It is possible that in the noise some perspectives have been ignored. (One which the writer believes can be ignored is the effect or lack thereof on income equality from such an increase, since to this individual it seems clear that any effect would be de minimis.)

In analyzing the questions we should first consider: Who is the Minimum Wage intended to benefit? It would seem a fair conclusion that it is those who are only marginally skilled, either by being new to the work force or by not having had the opportunity or inclination to develop any skills other than the rudimentary. Thus, it would seem that most persons would or ought to be relegated to this category only for a relatively-brief duration. (For those who do not have the capability to develop these skills, due to various physical, mental or psychological deficiencies, there should be provided some type of permanent financial support; since this, hopefully, will only be a small segment, its effect on diminishing overall resources should not be controversial.)

Now, would an increase in the Minimum Wage have the intended effect and the desired efficacy? It may well be doubtful since, by definition, it would only benefit those with marginal skills. The basic and introductory premise, it would seem, is that those with these marginal skills have the least job security since they would most easily be able to be eliminated and replaced, and would only be supplying a limited benefit to the employer. Can we now, from this perspective, further analyze these questions?

This limited benefit to their employer necessitates a conclusion that these employees are of marginal value to the employer. As the differential between the value and the cost to the employer is thus narrow, any magnification of the cost will be material. And if the cost is increased too much so that the cost exceeds the value, the employer may decide termination of these employees, and the investigation of alternatives, is required.

Even if the differential is only narrowed — with the value of the employee still exceeding the cost it is likely the same result will be yielded. For marginally-skilled employees, because of their minimal level of abilities and consequent similarity between equivalent employees, are relatively fungible. Now, even if the differential in value is somewhat diminished, the employer may still continue the relationship out of convenience, habit or tradition. But if the differential between value and cost narrows too much, an exchange for an employee who may be more compatible with the position and of more value may be more easily justified. Thus, the inherent dubious tenure of these employees will be threatened even more under such a regime, viz, where the Minimum Wage is significantly increased.

The above examination of course has proceeded from the position and perspective of the absolute and relative attributes of the employees. It should be at least equally pertinent to consider the position and perspective of the financial status and considerations of the employers.

To this writer it would seem the type of employer who might most often utilize the marginally skilled are also those who experience only marginal profitability. For more skilled employees are of course capable of performing more efficiently and at a higher level of quality. If a person is operating at sufficient profitability, it would normally then be expected they might seek the more qualified (as long as they are not overqualified) employees. If the employer utilizes instead the marginally skilled, it is likely due to it being unable to afford higher-value employees due to their own marginal profitability. Now, if the cost to them of these employees increases, they may be faced with the prospect of becoming unprofitable, resulting in either elimination of some of their current employees or termination of their operations. In either event, the already-questionable tenure of this class of employees becomes even more tenuous.

Thus, it is doubtful that an increase in Minimum Wage levels would in fact attain its objective. Nevertheless, I perceive there being a sound policy that would support and induce such a change. And this would be the pressure it might exert to eliminate or at least reduce so-called Economic Stimulus programs.

A switch of activities or programs to attain this objective from the governmental sector to the structures within society already would be salutary indeed. If this were to result in private, rather than public, organizations being the ones to help others up by their bootstraps, then such a change in policy certainly would be most beneficial.

Now, one could attempt to condition a Minimum Wage increase on an offsetting reduction in appropriations for Economic Stimulus programs. However, it may be sufficient simply to induce a change in the mentality of recourse to resources looking first to and relying upon the private sector by resort to employers rather than government agencies for magnification of disposable income. Thus, even if their is no immediate reduction in governmental expenditures, adoption of such a change in attitude ought to justify obstruction of or even reduction in later expenditures for, much less enhancement of, these programs since the objective thereof ought already to have been attained by the greater disposable income flowing from the private sector. I consequently would think such a Minimum Wage increase should be supported for the above reasons; the conclusion that the purported income inequality reduction argument is merely a phantasmal exercise without weight or logic should not be deemed a reason to refrain from pursuing a policy that has its own good and sufficient rationale.

WAYNE A. SMITH
Forester Twp, Michigan USA
3 March 2014