Poverty is more common than you think.
According to a recent study, around 40 million Americans are currently living in poverty.
Since poverty is such a widespread issue, poor people are, quite frankly, political targets. Politicians all across the world are given a political incentive (votes) to prey on impoverished people and use them as pawns for the consolidation of more power.
And that temptation of usury might simply be too much for many politicians to handle.
Some politicians break and start building up support for themselves by offering “solutions” that may sound good to the average voter, but in practice would lead to economic disaster.
For a perfect example, just look at minimum wage hikes.
Minimum Wage Hikes
Many Democrat leaders today have been campaigning recently for something called a “minimum wage hike”.
Politicians like Bernie Sanders, Elizabeth Warren, and Alexandria Ocasio-Cortez all claim the best way to eradicate poverty is to force businesses to pay their employees more money.
According to them:
If companies would just pay their employees more money at random, then poverty would magically vanish.
While this plan might sound like a good idea in theory, research shows that in practice increasing the minimum wage actually ends up hurting everyone — especially the poor.
How Wage Hikes Really Work
When you force companies to artificially pay their employees more money, bad things begin to happen:
- Prices go up. Since it now costs more to run business as usual, companies have to make up for their new losses. This leads to price increases, which ultimately hurts the poor.
- Unemployment goes up. Instead of erring on the side of having more employees, companies will choose to hire fewer employees because they’re too expensive. This means it will be harder for poor people with fewer options to get a job they desperately need.
- Employees get replaced with technology. As hiring employees becomes more expensive, it starts making more sense for companies to invest in high-end technology to replace laborers whenever possible. Again, this is something that will be especially devastating to poor people — since they rely on those kinds of jobs the most.
- Businesses disappear. Businesses will either pack up and go somewhere where labor is cheap (overseas) or they’ll just shut down completely. And the economy will keep spiraling.
Seattle, Washington: A Case Study
The idea of increasing wages to help the poor is not a new idea by any means. It’s been tried before — And the results were terrible.
In 2017, the University of Washington conducted a study to see whether Seattle, Washington’s minimum wage increase from $9.47 to $11 in 2015 negatively impacted its local economy.
SPOILER – It did.
Researchers found that:
“The minimum wage ordinance lowered low-wage employees’ earnings by an average of $125 per month in 2016.”
Poor people took a big financial hit. This is especially devastating when you realize that a quarter of taxpayers in Seattle earn less than $25,000 a year.
Yet these examples are often swept under the rug by politicians and the media. For them, it’s not about understanding the nuances of economics — it’s about pushing their agenda.
Summary
Don’t blindly follow the popular or trendy economic opinions of the day. They’re probably wrong.
When the politicians and the media get together and say that something is the solution, you should be skeptical.
Do that, and everything else falls into place.
