The Trump Effect:Wages

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A lot of people will question why I even make this article as they already assume Trump will be a disaster for wages. Let me be clear though. If you want your wages to go up Trump is the best candidate to pick for president. You may remember that Sanders wants a 15 dollar federal minimum wage and that Trump said that he would not increase or maybe even lower it. That is true. Trump will be the best candidate for wages to go up. Not for the federal minimum wage.

I do not believe that America can support a 15 dollar federal minimum wage. If you are reading this article from Los Angeles or New York you are thinking that I am crazy and that 15 dollars does not even make ends meet for you. If however you are reading this article from Iowa or Colorado you may be wondering how employers can afford the 15$ minimum. In fact if you are reading this in another part of the country you may just be thinking that you want a job 15$ or not. Therein lies the problem. Trump has to be the president of the entire country, not just New York or California. Something that makes perfect sense in the these states may be disastrous in others. Individual state increases can and should be considered but an across the board increase would be hard.

The next thing that people will bring up is that the European countries which Sanders bases his economic models on all have high minimum wages and are doing well. First off these countries are very small. They do not have the income disparity that the US has. If you look at their economic diversity New York who has one of the highest GDP’s in the work may well look like it comes from another country as opposed to Virginia or Michigan. Second according to this link http://www.investopedia.com/articles/investing/080515/5-developed-countries-without-minimum-wages.asp Switzerland , Denmark, Sweden, and Norway do not even have minimum wages. They have employee organizations that negotiate wages with each industry as they recognize that each industry can only support a certain level of minimum wage. Replace the word industry with state. Does it sound like they solved the very problem I was discussing?

How do we get a wage increase then? You can legislate whatever minimum wage you want. Just like wishing for a waifu doesn’t make Miku real, it doesn’t mean that conditions for the minimum wage exist.You cannot just say minimum wage is 50 dollars then set up all the precursor conditions for wage to be lowered. That just makes companies leave. The best thing to do would be to set up conditions for wages to increase and watch it rise. There are two main factors that affect wage, availability of labor and scarcity of jobs. If you reduce the first and increase the second the bargaining power of labor will go up and they get higher wages. If you do the opposite then wages go down.

AVAILABILITY OF LABOR

This one seems fairly obvious. From the beginning of his campaign Trump has said that he would do something about illegal immigration. I would even give him credit for illegal immigration being one of the main concerns and discussed topics this electoral cycle. Clearly republicans as a political class didn’t think it would be which is why most of the other major candidates supported amnesty. Removing illegal immigrants from the labor pool reduces the amount of competition that citizens have. The main argument against this is that illegal immigrants do the jobs americans wont. That is an incomplete thought though. Illegal immigrants do the jobs americans wont at the prices offered by companies. If the compensation was high enough. Say a living wage then the job would get done.

Over and above the straightforward economic issues illegals present a special problem to any federal or state mandated minimum wage. They form a special protected class in the country that is immune to the wage which makes it harder for laws to have their desired effect. Consider for instance if the government were to put a 20$ minimum wage in place and a company in response to that let people go and hired illegals instead at the old wage. It defeats the purpose of the law and currently while laws have been in place to prevent this they are not enforced.

SCARCITY OF JOBS : PUBLIC

There are two components to Trump’s plan for this public, meaning a government labor program and private meaning encouraging businesses to grow. Let me discuss the public first.

I can already see the mouths of conservatives frothing at the thought of a public works program and Trump being labelled another big government liberal. Remember though that we are ok with the government funding the military and other agencies for our defense so there is precedent to say that if it’s for national defense, one of the main duties of the government according to the constitution, then public spending is ok. The wall is one such measure. Whether you consider it an emplacement for actual military defense (it is a wall) or one to defend the national borders and control illegal immigration. The wall carries with it jobs for actual building the wall, supplying the laborers who work on it, labor to pave the roads to the wall, and I can come up with many others. It does build an entire industry around it increasing the availability of jobs.

A component of public spending as well is rebuilding the military. It may seem like we already have too much of a military but that is not the point. There are plenty of small towns and cities in the country who are dependent on their local bases to survive, military spending must be kept up so that they can continue with their jobs. Releasing them into the labor pool at this critical juncture is just not an option. Trump is also the most averse to international conflict. If you look at his statements it is consistent. Dont get involved until you have too, aka let Putin handle ISIS, and if you do have to get involved get in and out as fast as possible using any means necessary. This is the place where the killing of families or carpet bombing comes from. Trump is very afraid of another quagmire and all of his plans do everything possible to avoid that. This is economically significant because instead of spending the money abroad the military units would be spending their money here. For instance if a marine division were stationed in Iraq then they would buy some supplies from the local people pumping money into that economy. If they were stationed instead in Detroit for example they would buy supplies from the local people pumping money in that economy. That increases the demand for goods and services prompting more businesses to open up and cater to them.

SCARCITY OF JOBS: PRIVATE

Any discussion on private jobs has to begin with the tax plan. Trump proposes lowering the corporate tax to 25% from the high of 35% that we have now and then closing all loopholes. It has been stated that this plan dramatically reduces the amount of tax Trump has to pay for his own companies. Anyone who says that is so misinformed you should not pay attention to anything else they say. On paper the USA has a tax rate of 35% however once you take advantage of all the loopholes built into the system the effective tax rate is 15% and indeed some companies pay nothing. A 25% rate means that all companies pay the same. This makes small businesses who are paying at 35% because they cannot afford the army of lawyers to get the rate down to 15% more competitive with the corporations encouraging more of them to open.

It also needs to be said that all the public spending on the wall and the military at home means that more private companies have to open to support the demand. Trump has also shown that he has a very belligerent attitude to companies that outsource. Calling them out and even calling for boycotts on some. Even if no legislation gets passed having a president willing to do that already sends a chilling effect to avoid outsourcing. While it is true Trump has engaged heavily in outsourcing himself we have to understand that is exactly how our leaders have set up the American system. If you don’t outsource and use every single advantage in the tax code then your competitors will beat you. We need that system to change and who better than someone willing to call out companies for not acting in America’s best interest. Trump has also called for retaliatory tariffs and measures to request companies to shift their jobs back onshore. This also helps increase the number of jobs available.

TRUMP EFFECT

Other candidates promise to legislate higher wages as if waving a magic wand will make anime real, all the while creating conditions such as welcoming all illegal aliens and in some cases tripling the corporate tax rate to make wages go down. If you look at everything in an economic sense, Trump is the only one who proposes creating the conditions for wages of American citizens to go up.

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