Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21
UK Covid-19 Booster Jabs Moderna, Pfizer Are They Worth the Risk of Side effects, Illness? - 22nd Nov 21
US Dollar vs Yields vs Stock Market Trends - 20th Nov 21
Inflation Risk: Milton Friedman Would Buy Gold Right Now - 20th Nov 21
How to Determine if It’s Time for You to Outsource Your Packaging Requirements to a Contract Packer - 20th Nov 21
2 easy ways to play Facebook’s Metaverse Spending Spree - 20th Nov 21
Stock Market Margin Debt WARNING! - 19th Nov 21
Gold Mid-Tier Stocks Q3’21 Fundamentals - 19th Nov 21
Protect Your Wealth From PERMANENT Transitory Inflation - 19th Nov 21
Investors Expect High Inflation. Golden Inquisition Ahead? - 19th Nov 21
Will the Senate Confirm a Marxist to Oversee the U.S. Currency System? - 19th Nov 21
When Even Stock Market Bears Act Bullishly (What It May Mean) - 19th Nov 21
Chinese People do NOT Eat Dogs Newspeak - 18th Nov 21
CHINOBLE! Evergrande Reality Exposes China Fiction! - 18th Nov 21
Kondratieff Full-Season Stock Market Sector Rotation - 18th Nov 21
What Stock Market Trends Will Drive Through To 2022? - 18th Nov 21
How to Jump Start Your Motherboard Without a Power Button With Just a Screwdriver - 18th Nov 21
Bitcoin & Ethereum 2021 Trend - 18th Nov 21
FREE TRADE How to Get 2 FREE SHARES Fractional Investing Platform and ISA Specs - 18th Nov 21
Inflation Ain’t Transitory – But the Fed’s Credibility Is - 18th Nov 21
The real reason Facebook just went “all in” on the metaverse - 18th Nov 21
Biden Signs a Bill to Revive Infrastructure… and Gold! - 18th Nov 21
Silver vs US Dollar - 17th Nov 21
Silver Supply and Demand Balance - 17th Nov 21
Sentiment Speaks: This Stock Market Makes Absolutely No Sense - 17th Nov 21
Biden Spending to Build Back Stagflation - 17th Nov 21
Meshing Cryptocurrency Wealth Generation With Global Fiat Money Demise - 17th Nov 21
Dow Stock Market Trend Forecast Into Mid 2022 - 16th Nov 21
Stock Market Minor Cycle Correcting - 16th Nov 21
The INFLATION MEGA-TREND - Ripples of Deflation on an Ocean of Inflation! - 16th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Extorting Low-Income Individuals to Help "the Poor"

Politics / Social Issues May 14, 2015 - 10:54 AM GMT

By: MISES

Politics

Gary Galles writes: Many policies are supposedly justified because they would “take from the rich and give to the poor.” While that fits with the view that theft “for a good purpose” makes one a philanthropist, from the perspective of self-ownership, it is an assertion that the majority’s might makes their coercion right.


However, advocates of redistribution often ignore the fact that their policies redistribute wealth from many low-income individuals in the name of helping an abstract group known as “the poor.” At the same time, it is also assumed that many poverty relief efforts impose costs on wealthier groups, but in fact, much of the cost is borne by the low-income households themselves.

Even if low-income households did gain current income as a group when measured in statistical studies, only individuals bear actual benefits or costs, and many of those individuals who bear the costs of such programs are low-income.

Wage Controls

Those who support minimum wages assume the poor will gain income as a group. However, as labor economist Mark Wilson put it, “evidence from a large number of academic studies suggests that minimum wage increases don’t reduce poverty levels.”

And how do low-income individuals fare under minimum wage laws? They are often harmed. Some lose jobs and others lose hours. For those who keep their jobs and hours, on-the-job training and fringe benefits will fall, or required effort will rise, to offset hiked wages. And higher current wages are often less valuable than what is given up, particularly on-the-job training, that enables people to learn, and therefore earn, their way out of poverty. That is why labor force participation rates fall and quit rates rise when the minimum wage rises. This is the opposite of what would happen if all workers who kept their jobs benefited.

In addition, higher minimum wages also force the least skilled to compete with more skilled labor at mandated higher wages. They will suffer from its undermining of their one big competitive advantage — a lower price. Those with the fewest skills, least education and job experience face the greatest employment losses. The effect is magnified by the fact that employers pay far more than the minimum wage to those workers, through added costs for the employer half of Social Security taxes, unemployment insurance taxes, worker’s compensation premiums, etc.

With the minimum wage, some of those low-income workers lucky enough to already have job experience and a work history will keep their jobs. Many others will simply find themselves to be unemployable.

Rent Control

Supporters of rent control often assume they are Robin Hood-like policies that transfer money from “wealthy” landlords to beleaguered renters. In fact, the poor are among the greatest losers from rent control.

Rent control takes a large portion of the value of residential rental properties from landlords to coercively transfer wealth to current tenants (which is why those who live in strict rent controlled units almost never leave).

But that does not mean most of the poor benefit. Since landlords are unable to capture the value of their buildings, existing housing deteriorates in quantity and quality, and new construction of affected rental units becomes paralyzed. The result is a progressive reduction in the supply of rental housing.

In the end, rent control does little for the poor beyond a few lucky individuals. Those who were “there first” capture virtually all the gains, and the rest are left with a smaller and more dilapidated housing supply.

What do poor people seeking rental housing find after strict rent control is imposed? Mainly, they find “no vacancy” signs. Lowered rents increase the amount of housing renters would like, but reduces the housing available. That reduction in housing availability directly harms the numerous low-income individuals, even if policy makers are able to produce reports showing that some low-income households have benefited — at the expense of other low-income households.

Meanwhile, those with higher incomes, better connections, etc., can better maneuver around the restrictions (e.g., through under the table payments, condo conversions, etc.). The consequence is that those of limited means may populate the rhetoric of rent control, but far less of the housing available under it. Rent controlled areas are instead often increasingly populated by higher income tenants with few children.

Good Intentions Are Not Enough

Labor and housing market interventions do not exhaust the range of counterproductive government “social welfare” policies for the poor. But they illustrate an important, undiscussed form of redistribution. Attention is focused on Robin-Hood redistribution, supported with Swiss-cheese arguments for why it is acceptable to impose the costs on particular individuals who in no way caused the problem at hand, so long as the poor gain in the aggregate. But those policies also greatly harm many members of the groups whose welfare is supposedly being advanced. And harming large numbers of individuals who are poor cannot be justified by simply claiming that the intent is to help the poor.

Gary M. Galles is a professor of economics at Pepperdine University. Send him mail. See Gary Galles's article archives.

You can subscribe to future articles by Gary Galles via this RSS feed.

© 2015 Copyright Gary Galles - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in