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Riddle Us These?

I’ve been met by two common complaints lately. First that the rich have undue political power in America. Second, that the poor have too little labor market power. Both may be true. I don’t know. But then riddle me these:

(1) If the rich have so much influence, then how come the vast majority of taxes are paid by them? And how come (excepting the big elephant of the payroll tax and hidden regulatory fees and costs) the BOTTOM half of wage earners do not pay income taxes? The “rich” must not be very good at what they do.

(2) If employers have so much bargaining power, then how come well less than 4% of the workforce earns the minimum wage? What is going on with the other 96%? Or how come the average production worker on a manufacturing line makes just about $20 per hour?

7 Responses to “Riddle Us These?”

  1. Alex says:

    Doesn’t seem hard to explain.
    (1) With taxes: they may, as a group pay the majority of taxes, but individually the burden may not be so high. Certainly that’s the complaint I here the most. Also, just because one has *undue* political power doesn’t mean they can use that to change any policy they’d like. Even having *a lot* of political power can’t always do that. So maybe you’re right: “the “rich” must not be very good at what they do.” Or maybe they don’t care enough to (try to) do anything about it.

    (2) With bargaining power: the poor may still have “too little”, such that 0% earn the minimum. Implying if they had more power, even fewer would earn the minimum. I bet such complainers believe nobody should be earning $7.50/hr.

    In both cases, having undue or more power doesn’t mean you can do anything you want. So you definitely ask the right questions. What is going on?

  2. wintercow20 says:

    I like, very much, the last sentence in Alex’s point 1.

    • Harry says:

      Glad Alex is back. This was the guy who was supposed to be the sub impresario of TUW, to relieve WC, a busy man, of keeping up a blog followed by many.

      In this post, WC riddles us again by posting a commentary on Alex’s last sentence, giving me pause about jumping all over Alex, and potentially discouraging him from running WC’s blog when WC is running up steep hills to shoot good pictures.

      You broke the code, Alex. We do not have undue power to compel anybody to work for us. We pay what we can afford, which is in nearly every case is above minimum wage (California mandates excepted) for work that is worth it.

      Indeed, Congress has carved out a special exception for yard kids where, if I do not pay them too much, I can pay them $10 dollars an hour to pull weeds, sit on a riding mower, or shovel dirt, as long as they make less than $2000 a year, and not have to file Form 940, withhold FICA, state and federal unemployment taxes, pay for workers’ comp, etc., and spend more time in the office than if I did the whole job myself. And then I could not afford to pay and train a kid to mow the lawn, clean out the barn, or pick up whiskey bottles and menthol cigarette packs from the side of the road.

      We are not the rich, Alex. But we did save for the future, and did employ others so they could do the same.

      I personally in business never liked ever paying for anything more than what was needed, but if you are going to be in business, being cheap and undercapitalized is a sure road to failure, and I have learned that lesson the hard way. Meanwhile, being in business for a long time, I never once researched whether or not I was conforming to Federal Minimum Wage Guidelines.

      I had a labor union as a client in the investment business, and I understood their thinking about the minimum wage, how it was tied to their contract, and how it affected them personally. It was in their interest to have as high a Federal minimum wage as possible. We never argued about this.

      But one time, when I presented the state of affairs of their health and welfare fund, which we had grown and shepherded well, a person in the group questioned their holding of as I remember 100M WalMart bonds. I tried to explain that WalMart owed THEM, and that the bonds were AAA, but I said, if you need to pay your Blue Cross bill by selling them, let’s do it. We will keep the Exxon Pipeline bonds and the Southern Railway equipment trust certificates.

  3. Jon says:

    I think Director’s law has much to say about riddle #1.

    • Harry says:

      Jon,

      Directors Law, as I understand it, says that laws get passed to benefit the “middle class” and get financed by the vast coffers of the rich AND from taxes on the poor.

      I thought about the poor not paying taxes, and it would be wrong to say that, because they do pay some taxes. That said, we have 45 million people on food stamp snap cards, living on welfare, and net it is hard to argue that they are supporting anybody. Thus the first half of Director’s law does not hold up.

      Being part of the middle class, I have never voted for anybody in the hope that they will take someone else’s money and give it to me, not do I know anybody who wishes that, even Socialist friends, who want to take money from rich people in a few states removed and redistribute that money to people in, say, California, who need it, and if they live in California, they probably do. But where are these benefits? That’s the second half of Director’s law that does not hold up.

      James Madison warned us of factions that in pure democracy would seek to take property from the less powerful, whoever they might be, and that is the reason for the equal protection clause and the Fifth Amendment in the US Constitution.

      I do not assume, Jon, that you have not thought of these ideas, nor do I want not to invite further argument that I am all wet.

  4. Harry says:

    It looks like the data do not include fringe benefits, WC. That’s OK, but if it does (I assume compensation is W-2 money) then the figures exclude fringe benefits which often included a $25,000 health insurance policy that paid for the kids’ braces.

    The irony is that ObamaCare has enabled companies to eliminate spousal coverage and to throw many into the loving arms of the government approved so-called exchanges, and to begin to tax the excess coverage of Cadillac health insurance packages. A lot of s*** is about to hit the fan, or has already hit, darkening the sky over offices and manufacturing plants.

    So does really big money have undue political influence? We are in the midst of an example, where big groups get the day of reckoning postponed, other groups get qualified for subsidies, and the minority gets screwed, being denied equal protection under the law. This is the Mussolini or Putin System, not my country’s.

    The solution to this is not another round of McCain-Feingold, or restrictions on lobbying. (I am hesitant to proclaim MY solution.)

    As WC has often observed, we enjoy a standard of living unimaginable by our grandparents, and for folks who are grandparents born after Jimmy Carter, then their parents’ grandparents. The more liberty, the better the world is, a simple empirical fact. That is the good news.

  5. Michael says:

    I really have no idea who people are talking about with the labels “rich” and “poor”, which is why I presume you also have them in quotations. Are we talking income or wealth? What about social mobility (I may make a mint one year, but loose money the next)?
    I also think it’s worth highlighting that the real minimum wage is, and always has been, and will be $0. To that extent, there are quite a few “workers” unable to get hired, so that could be considered little labor market power; but I wouldn’t put the majority of the blame the employers.

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