Category Archives: Economics

Minimum Wage

Every so often Congress and the public begin a debate about raising the Federal Minimum Wage. The arguments in favor of it are based on two ideas. First is the statement, ‘No one can survive on minimum wage”. The second is that there is a great discrepancy between the lowest paid workers and the highest paid workers. Raising the minimum wage is viewed as a way of forcing profits to be shared with the lowest paid employees.
Are these ideas correct and will raising the minimum wage solve them?
First is it true that no one can survive on minimum wage. I would have to say that statement is true. The Federal Minimum Wage is ????. I can’t imagine anyone living or supporting a family on that income, but is that the intent of the minimum wage? Is it intended to be a livable wage or is it intended to be an entry level wage or a supplementary wage?
My youngest son is seeking his first job. He does not need a wage on which he can live independently. He only needs to pay for his schooling, transportation, eating out occasionally and some money for personal purchases and entertainment. That covers a lot of things but there are also a lot of things not covered. It would be nice for him to make even more money but it is not necessary. There is a place for an entry level wage that is not a livable wage.
There is another related question, “What is a livable wage?” I live in the suburbs of Los Angeles. The cost of living here is fairly high but it is not even close to the cost of living in New York City or San Francisco. On the other hand the cost of living in rural Mississippi is fairly low. It is pretty easy to see that a single Federal Minimum Wage cannot be a livable wage for all peoples across all of America. States and Cities corrected for this by establishing their own minimum wages. If various States and Cities need to set their own minimum wages then what is the purpose for a Federal Minimum Wage? I guess it sets a minimum below which no state can go but it has little if any affect on establishing a comprehensive livable wage. A livable wage must be set by each locality.
The second argument for raising the Federal Minimum Wage is a more equitable distribution of wealth. Is this a real problem? I think it is. There is a big problem with greed in America and it seems to be getting worse. People are not rewarded for their work in proportion to their labor, but will raising the minimum wage correct this? I think it will, at least temporarily. The problem is that when the lowest paid workers get a raise it is not long before those directly above them demand the same level of increase. This wave of increases will continue up the ladder until everyone has obtained an increase. But how will the companies pay for the increases? That’s right they will raise the prices for their goods and services. What happens when all of the companies across the nation raise wages and prices? Well we call that inflation.
The end result is that the cost of living has gone up; minimum wage is no longer a livable wage and the talk of raising the minimum wage begins all over again.
This sounds like we are back to square one but there are winners and losers when we have inflation. The winners are a few people who have borrowed large sums of money and been able to profit through the careful use of that money. They got the benefit and will pay back the loan with deflated dollars. The banks will lose on the deal, but the banks make projections for this and adjust their interest rates accordingly. The real losers are retired people who are living off of their savings. They did not get a raise when minimum wage went up. All they received was rising prices that eats up their savings.
Who else loses? There are a few companies that sell goods and services that are very labor intensive but do not have a high profit margin and cannot raise their prices. An example of this would be some recycling companies. The process is labor intensive. The profit is low. In some cases it is almost as cheap to by new paper as it is recycled paper. The new paper is a much more automated process and is not greatly affected by the change in minimum wage. A raise in the minimum wage could drive the recycling company out of business, and waste paper would end up in the landfills because it is not cost effective to recycle. This is just one example but it is a good one. In my area much of the recycling is done by people living below the minimum wage. They are living on the streets and making a living by picking through trash cans. There are many industries that would fall into this category. These industries quietly fold up and go away or they move to another country where wages are lower.
So who profits from raising minimum wage? The politicians do. The politicians are perceived by young workers and the working poor as caring about their plight. They effectively buy votes using other people’s money. They create a perception that the government is the place to turn to have your problems solved. Their power, authority and control grows.
There is another way in which the Government wins. By driving up wages they drive taxpayers into higher tax brackets. The Government gets to collect more taxes. Then they have more money to payout, further increasing people’s dependence on them.
In conclusion, obtaining a livable wage for a greater number of Americans is a worthy goal, as is a more equitable distribution of wealth, but raising the Federal Minimum Wage will do little or nothing to accomplish these goals.

Sabbath Year Two

The Seven Year Itch
In my last article about the Sabbath Year I explained that God has given us cycles of activity and rest: the daily cycle of activity and rest, a weekly cycle with the Sabbath Day, and a seven year cycle of the Sabbath Year. The Sabbath Year is designed to let the land rest, and I talked a lot about what that means.
If you are a farmer and the land is resting then what are you going to do with your time? You can’t plow, plant or harvest so what do you do? As I said before, no one has ever practiced the Sabbath Year so we have no real life examples of what people do with their time, so we can only speculate. Here are some possibilities.
If I were a farmer and I had a year off from farming I would want to spend some time fixing up the farm. I would repair the fences and walls or build a barn. I would do the home improvements that had been piling up over the last six years. I would fix, repair or build new farm equipment.
There would be opportunity for other activities. I could pursue other business interests. Maybe I would open up a shop in town and expand into another business. There would be time for reading and study. We have a term for that. We call it a Sabbatical (based on the idea of the Sabbath).
The Sabbath Year would be a great time for a vacation. Imagine having a whole year to travel. Imagine the effect on the broader world had the Jews traveled the world every Sabbath Year and people throughout the world learned about the God of Israel?
There is one more possibility—get married. The Old Testament taught that when a man would marry that he should take a year off from work and “Cheer up his wife”. I don’t know about you but if I had to take a year off of work I think I would choose the Sabbath Year, I was going to take it off anyway.
What a great idea. The first year of marriage is the most difficult. Couples need to rearrange their lives. They have to adjust to each other. They have to come to an understanding of the unique roles. Not having the pressure of work should make that transition easier. I think marriages would get off to a much better start if the husband had one goal and one goal only, to cheer up his wife.
The interesting thing here is that the next Sabbath Year would fall on their seventh anniversary. Psychologists have found that for some reason, many marriages go through another rough period in about the seventh year. This concept became so well known that it was nicknamed “the seven year itch”. They even made a movie by that name about a man and women being drawn into an affair. Did God know that there would be a seven year itch? Did he design a system where at the seventh year of marriage the financial burdens would be lifted, the work responsibilities would be removed and the couple would spend a year reconnecting? In addition to doing the neglected maintenance on the house the husband would do the neglected maintenance on the home. He would revisit his original task of cheering up his wife.
What a great idea. God is a pretty smart guy. Imagine living is a world the way that God intended. Pretty good huh?

Sabbath Year

The Sabbath year is one of the most interesting and mysterious economic principles in the Bible. The Sabbath Year rests on a more basic principle of Sabbaths. The concept is simple, everyone and everything needs to have a regularly scheduled time of rest and restoration.
We have a regular daily schedule of wakefulness and rest. The Sabbath Day provides a weekly schedule of rest and regeneration. The Sabbath Year is a much more far reaching principle. Scripture says that the Sabbath Year is to let the land rest. The focus is on the land but there are other aspects that are focused on people.
During the Sabbath Year all debts are paid off or canceled. All slaves are set free. Note that most of these slaves are not slaves like we normally think of them. They are people who have been sold into slavery in order to pay their debts. When the debts are canceled the slaves are set free. The same would be true of those who are in debtor’s prison.
The year is kind of a reset button. Things go back to zero and people can start afresh. The Sabbath is a time of rest and restoration and the Sabbath Year accomplishes this on a grand scale. The biggest problem with fully understanding the Sabbath Year is that we have no examples of anyone ever actually following it. It is a sad thing but we can only speculate as to how it would work.
Ponder with me the possibilities. God promised that if the Children of Israel would practice the Sabbath Year that by the sixth year in the cycle they would have accumulated enough stored foods that they would have enough to get them through the Sabbath Year and all the way up to the harvest of the next year.
We know that land that is continually harvested ends up depleting the soil. In America we have dealt with this problem by letting a field lay fallow, or more often by crop rotation. In crop rotation we plant complementary plants that will pull a different set of nutrients from the soil and restore some of the nutrients lost by the previous planting. There is another strategy of companion planting where complimentary plants are planted side by side in neighboring rows.
The biggest mystery here is that we don’t know which works better. We do not have a long term controlled experiment that tests crop rotation against the Sabbath Year model. Such an experiment would need to happen over a very large area and over several cycles of Sabbaths. I would love to see a Christian college and some Christian farmers take up the challenge of such an experiment.
One of the limitations of science is that experiments focus on one variable at a time. It is much harder to identify broader effects. In this example so far we have talked about soil and nutrition, but there are many more aspects. During the Sabbath Year crops are not planted, and they are not harvested, but they are not plowed under either. Crops that sprout up on their own are allowed to grow. They are left for the destitute (widows, fatherless and foreigners) to hand harvest for their daily needs. The rest is left for the wild animals.
Imagine with me what that means. In American farming the focus is on crop production. We seek to eliminate any critters or pests from the equation. To do this we use fences, barriers and pesticides. The Biblical model is much different. It is a much more eco-friendly approach. You see, man is the guardian of all of creation. It is his job to create an environment where all of God’s creatures thrive in balance. God has given him the tools to accomplish this, and one of the big tools is the Sabbath Year.
Those who study agronomy (the study of soils) know that there is much more to healthy soil than basic nutrition. There is also soil texture and organic material content, which affect its ability to maintain a proper water balance and even oxygen and other gasses. They also know that there are intricately balanced interactions between microbes. We are just beginning to understand these balances. Even at that the studies are limited. For the most part we have no idea how these balances change when the activity of larger animals are introduce.
The whole area of organic farming is just now being explored. Could it be that God has given us an outline for a perfectly balanced farming and ecological system and we never tried it out? Imagine the possibilities. Imagine farmers and nature working in cooperation. Imagine producers, environmentalist and conservationist living in harmony. Wow what a concept!
As I said before the sad thing is we have never seen it put into practice. The Children of Israel came into the Promised Land and set up shop. They planted and harvested in continuous production for 490 years. During that time they experienced many droughts and famines. At the end of that period God sent them into Babylonian captivity. Their country was devastated. They remained in captivity for 70 years. God said it was to allow the land to rest. 70 years for the 70 Sabbath Years they had skipped. That was God’s direct intervention to enforce the Sabbath Year.
Have we ever experienced anything similar in the United States of America? I think we have. I was reading recently about the causes of the Great Depression. Most analyst, point to the stock market crash of 1929 as the event that began the downward spiral. They also mention a parallel thing that was happening in the agricultural world. We had been blessed with bumper crops. Because of an oversupply the prices for agricultural goods plummeted. In response, individual farmers increased the production to recoup their losses. This action simply made the problem worse. The result was that many small family farms went bankrupt. On top of this, bad weather conditions dried out the badly depleted soil and the dust bowl ensued. Soil erosion severely damaged farm land in the Midwest. The farms were abandoned and the land rested.
Imagine what would have happened if during the years of bumper crops we had stored it away as God had instructed. The prices would have never fallen. What if the next year the farmers had let the land take a Sabbath Year? The over production would have been sold off and the prices remained stable. Who knows what would have happened with the dust bowl? Would crops have sprung up on their own, and created a barrier against the soil erosion that took place? Maybe the whole dust bowl could have been avoided. At the very least we could have gone without one year of production. Maybe we would have had tons of food stockpiled to feed the unemployed. Maybe the Dust Bowl was God’s judgment. Maybe it was His way of driving the farmers out of the land and allowing the land to finally get its Sabbaths. We will never know for sure but it is interesting to ponder the possibilities.
If we had we followed God’s other financial mandates the Great Depression could have been avoided altogether.