The Economy

A couple of you asked that I talk about the squeezing of the middle class. When the left first began screaming about increasing the minimum wage back in 2013, I explained that employers would respond by compressing pay, because economics forces them to.

Employers can respond to wages that are rising through one of two means. The most obvious way is by increasing prices. The problem with increasing prices is that there is a limit to how much that can happen. Let’s say that the minimum wage is increased to $26 as the left is now requesting, or even the $33 an hour that New York City is looking for. McDonald’s will just increase the price of hamburgers, right? That works, but only to a point before people shop elsewhere for their burgers. Still, the left will argue that, since EVERYONE will get this new wage, all of the restaurants will increase, and people will have no choice. The people who say this forget that McDonald’s isn’t just competing with Burger King and Wendy’s; they are also competing with people simply brown-bagging their lunch to save money. There is a price point where people simply stop eating out. This greatly reduces economic activity and creates things like stagflation. Soon, it is only the upper half of the income scale that can afford to eat out.

The second way that businesses fight rising minimum wages is through pay compression. The business only raises wages for those whom they are legally required to increase. This causes the skilled laborer to make the same money as an unskilled one, thus removing the incentive for skilled labor. This incentive for people to remain unskilled soon squeezes some from the median of the middle class towards the bottom.

So how do we fight this? We can’t keep thinking that we can vote or legislate ourselves out of this. Instead, we need to be ready for the future. How do you prepare for the things that are coming? We aren’t going to see some Mad Max type of nationwide collapse. That just doesn’t happen when a country’s government collapses. What happens is that governments get replaced with something else, and building wealth is usually going to do more for you than wasting your time complaining about how rich white guy boomers are stealing the jobs from you that you weren’t qualified to have in the first place.

You need to recognize the trend. Look at the facts: right around 4 million teens graduate from high school each year, with half of them directly entering the work force. If all you have is a high school diploma, what are you doing to make yourself more employable than they are? What makes you special?

To make that even worse, there are currently about 10,000 illegal immigrants entering the country every day. A good portion of them have skills like construction and landscaping, and let’s be honest, are willing to work for less than minimum wage.

Your labor is a product being sold on the free market, so what makes your application look better than the next guy’s? It’s even harder if you are not one of the special class of people that the FedGov is telling employers that they must favor. That doesn’t mean you need to go to college, it means that you need to have job skills that will make you more employable, and you need to make sure that those jobs skills are in a field that will land you at the median income to start, and will allow you to make more money as time goes on.

In some cases, that means college. Not any college degree will do- you need a degree in something that is actually useful. STEM fields are good choices, so is a degree in human resources, but the field there is crowded, so be careful. Firefighting was a good career for me, but that depends on where you live. You could learn a trade. The Mike Rowe Works Foundation is a great place to start.

Mike Rowe says, and I agree with him, that we in this country have a problem: We have made work the enemy. It takes hard work and self control to become financially successful.

When I was a teacher, I would try to give my students this talk. I would ask them what they wanted to do, and I would get replies like

• video game designer
• Social Media Influencer or Youtuber
• Professional Athlete
• Doctor

I would then ask them how they were going to achieve that:

• Have you designed any simple ones yet? Like perhaps an app?
• How many videos have you made already? How many have gone viral? Do you already have more than 100,000 followers?
• How many hours do you practice your sport each day?
• How are you going to become a doctor if you can’t even manage a grade higher than a C in high school biology?

The answers were predictably disappointing. There was nothing for the game designer except the love of playing video games. The Youtube and social media fans hadn’t made any videos yet, or if they had, those videos had less than 1,000 views. The athletes didn’t practice outside of what the high school required for their sport. Everyone wants to be rich and successful, but far too many people aren’t willing to go the extra 5 miles that it takes to truly get there.

The point here is that you should treat yourself and the labor you produce as a product. Make your labor something that you can sell for a good price. Don’t sit on your ass waiting for someone to knock on your door and offer you big money to play video games and write crappy leftist poetry. There aren’t enough of those jobs for everyone. If you want to make more than average, you and the product you are producing have to be more valuable than average.

I can’t tell you what job you should be doing, or how you should do it. I am just telling you what you have to do- you have to put in the effort, work hard, and be patient. It takes decades to become financially wealthy.

• Your 20s are going to be a struggle. You are learning skills, or should be. Don’t be paying for $2,000 in tattoo work when you could be investing that money in your future. Education, financial investments, and other things that pay off later. Not useless baubles that will not do a thing for you. Most people don’t have an earning problem, they have a spending problem. Control spending and invest.
• Your 30s will be a bit better, but you have to resist the temptation to spend your money and take out loans against your future earnings to buy things that will be gone in a year or two, or in buying useless items like a Rolex or flashy clothes.
• Your 40s is where you really begin to build wealth. You can relax a bit on buying things for yourself, but you still need to keep the useless spending under control.
• The 50’s is where you hit the peak of building wealth. By age 50, less than half of Americans have a net worth of more than $315,000. Try to be one of them.
• The median wealth of a 60 year old in the US is $500,000. The mean net worth of a 60 year old is $1.6 million. You can get there, but it requires that you be smarter, work harder, and avoid useless spending when you are young.

Above all, don’t waste your time bitching about what others have. The fact that others are richer than you isn’t hurting you at all. One man being rich isn’t preventing you from being rich as well. Instead, you should be asking yourself why you aren’t doing better. Are you wasting your time instead of working to make more money? If you have 10 hours a week to play video games or surf the web, perhaps you could put away the child’s toys and take some classes.

Or is it that you are wasting your money on $5 Starbucks coffee, a $400 tattoo, or designer clothing? How is buying things that make you poorer going to help you become financially richer?

Be honest with yourself. Don’t fall into the trap of making excuses for your lack of work and thrift. The only person who will be harmed by those behaviors is you.