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CHRISTOPHER TAYLOR'S BOOKS

Monday, June 09, 2014

UNCOMPREHENDED CONSEQUENCES

"Whether or not what you do has the effect you want, it will have three at least you never expected, and one of those usually unpleasant."

Right now McDonald's is the target of a bold experiment by the SEIU; they want to see if they can get fast food joints to raise their pay.  The long term goal is unionizing these companies, but for the short term, its an exercise in power.
If they can get McDonald's to raise their minimum wage to some ridiculously high amount, then they will have pushed the idea to the front in other businesses and affect change across the economy, in theory.  The fact that none of these paid protesters are getting even minimum wage is a hypocrisy carefully ignored by most.
Backers of this idea believe that if the top CEOs and owners took a small pay cut, then workers could get a raise without needing to raise prices!
Now, this idea is transparently false; it comes from a basic misunderstanding of the number of workers and how expensive labor is.  You can't subtract a number from employers and add it to employees for wages, that's not how it works.  There are a lot of costs to businesses which do not show up on the paycheck for each employee, such as matching tax contributions to social security, etc.
But that's the kind of wishful thinking that often comes with this sort of push.  The idea that its all so simple and if only people did what you wanted, it would work out.  That's why so many folks think their political opponents are not just mistaken but awful, evil people: my idea is so obvious and true that only a monster would disagree!
And when their ideas are attempted, things go terribly wrong.  Here are a couple of examples of how this works.  In Seattle, they had the bright idea of pushing the minimum wage for workers up to fifteen dollars an hour at the beginning of this year.  After all, if people were paid more, they would have a better life, and who could oppose that? Well here's an example of how that played out:
“Are you happy with the $15 wage?” I asked the full-time cleaning lady.

“It sounds good, but it’s not good,” the woman said.

“Why?” I asked.

“I lost my 401k, health insurance, paid holiday, and vacation,” she responded. “No more free food,” she added.

The hotel used to feed her. Now, she has to bring her own food. Also, no overtime, she said. She used to work extra hours and received overtime pay.

What else? I asked.

“I have to pay for parking,” she said.

I then asked the part-time waitress, who was part of the catering staff.

“Yes, I’ve got $15 an hour, but all my tips are now much less,” she said.
She's getting paid more, technically, but the benefits that came along with her former pay have been stripped away.  In the end, she may even be making less now.  And since people have to pay more for their services and goods, they tip less.  Here's another example from someone whose ideas once implemented have not gone the way they had hoped:
"I'm at the breaking point," said Gretchin Gardner, an Austin artist who bought a 1930s bungalow in the Bouldin neighborhood just south of downtown in 1991 and has watched her property tax bill soar to $8500 this year.

"It's not because I don't like paying taxes," said Gardner, who attended both meetings [of "irate homeowners"]. "I have voted for every park, every library, all the school improvements, for light rail, for anything that will make this city better. But now I can't afford to live here anymore."
Both of these people pushed for and got what they wanted, and now that they have it, they don't care for it.  Many call this "the law of unintended consequences" in which events come about from an action that were not desired or planned on, but were a necessary result of that action.  Raising minimum wage means cuts elsewhere.  Raising taxes means your taxes go up.
But this isn't unintended at all.  These were the exact, predictable, and readily warned-about consequences of the actions taken.  The results might have been unintended in the sense that they weren't the desired end result, but they were certainly the obvious and easily predictable results.  Its like complaining that you used up so much gas after driving for hours.  Only an idiot would expect something else.

These aren't unintended consequences, they are the natural and necessary result, they are intended consequences.  People didn't set out to cut their benefits by pushing for higher pay, but that's exactly what anyone could - and did - predict.  People didn't set out to push their taxes through the roof by voting for everything that costs the city more, but that's exactly what anyone could - and did - predict.
The problem is that for too many people, the end goal is seen not through a lens of reasonable cause and effect, economic patterns, and costs, but in terms of positive benefits for themselves.  They're like children who see only tasty candy in the Halloween bucket, not a bellyache after eating 57 candy bars.  They're like a horse that eats until it kills its self, thinking only of hunger and food.
The obvious results of their actions are either ignored, scoffed at, or minimized in the desire to get what they want.  And even the supposedly altruistic Austin girl who voted for all those city improvements did so not from some sense of loving Austin but because she liked them.
She wanted these improvements because she wanted to take advantage of them, to live in a city that had these things so she felt special and part of something wonderful.  These decisions were self-focused and self-interested.  The fact that there's a cost was simply not part of her decision making process.
How do I know this?  Because without any shred of self awareness or comprehension, she complains that the cost of where she lived went up without connecting it in any way to her votes.  I voted for all this neat stuff, that proves I like taxes!  That was her entire argument.  The fact that all this 'neat stuff' costs you money simply slid past her like water around a trout.
This isn't any sort of unintended consequence.  Its an uncomprehended consequence.  These consequences weren't an unexpected addition to the end result, they practically are the end result.  Raise costs for business and they have four choices: cut personnel, cut benefits (if any), raise prices, or close.  Most businesses have very little in the way of cushion to how much they can afford to pay.  People who don't know much about economics or business see some gigantic number by a profit column and think that's plenty to share without realizing what a business needs to pay out to survive.  Restaurants, hotels, most small businesses are barely surviving as is.  Raise their costs and they have no choice but to cut somewhere.
Cities and states in the USA and Europe cannot afford any more spending; in fact they are looking for places to cut back.  Increasing expenses for those areas simply means they have to either cut somewhere else, or raise taxes.  Since governments never cut, that means they raise taxes.  And I mean "never" when I say never.  Never, as in no reduction in spending; if they claim to have cut, they have always reduced the rate of increase.  We were planning to raise the budget by 15% and had to cut that to 12%.  Which is still as 12% increase, not a cut.
For folks like the ones above, they're paying the price for well-meaning, but shallow-thinking people.  They have bright ideas (or, at least they believe these ideas to be bright) which have obvious results that are ignored in the name of the wonderful intention, and when implemented the people who passed them never pay the price.
Governor LePetomaine doesn't face cuts in his benefits because he signed a law raising the minimum wage to 15 bucks an hour.  Senator Harrumph doesn't sweat a raise in taxes, because he's got ten guys on retainer making sure he gets every tax loophole imaginable, and he makes a million a year anyway.  Union Boss Lenina Marxley doesn't sweat any increased costs in her second vacation home because she makes seven figures a year.
Its the people they claim to help that pay the price, every time.  Some are fond of crying about how wars are always started by the people who don't have to fight them.  Fair enough, that's not untrue.  But the same thing is true about all these schemes.  Congress specifically exempted its self from Obamacare, it doesn't matter how awful it is; they won't be affected by it.
And as long as this is the way it works, there's no stopping them from carrying out these idiotic ideas.  There's no cost.  There ought to be, from the voters, but the voters are carefully told that its someone else's fault that things are going so badly.  Its Republicans.  Its corporations.  Its the 1%.  Its white males.  Don't blame me just because I am the one who made this happen.  And if you can get more than half the voters to buy into this transparent lie, then you keep your job and can keep doing it.
Until, as Margaret Thatcher pointed out, you run out of other peoples' money.  And then you just print more money and play games with the federal reserve on paper to hide the damage being done.  And you can rely on a sycophantic and idiotic press to keep it all mum just long enough to get reelected.
Oh, and one more little thing to ponder:

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