Where Have All the Wages Gone?

TND Guest Contributor:  Charles Horton 

A few weeks ago I wrote on the folly of the minimum wage. As I continued to listen to discussion on the subject, I had another epiphany regarding minimum wage. What effects have the actions of the Federal Reserve had on the purchasing power of labor, that may have made it seem as though a minimum wage was necessary?

As I recalled my own personal work history, I realized that the impact was much greater than I would have imagined. I earn more money now because I am more productive, but what if I had become stuck producing the same stuff I was producing as a young man working in the fruit orchards of Southern Oregon?

As a youth I had my first employment thinning pear trees of the excessive pears on tree limbs, as without this treatment the individual pears will not be as large as they will be without so much competition for nutrients from the tree. It also helps to keep branches from breaking due to the added weight as the pears ripen. The job was and still is a minimum wage job. My pay in 1967 was $1.00/hour. To put this in perspective for you, gasoline was $0.25/gallon. My car was a VW with a 10 gallon tank. To fill this car up with gasoline cost me 2 1/2 hours of my labor. While silver coins were no longer being minted, there we’re still plenty in circulation and it would have been possible to be paid for my labor with 25 silver dimes.

Now lets fast forward to the present. Silver dimes now sell for $1.55 (melt value). My 25 dimes bring $38.75 if I sell them for melt down. Additionally these 25 silver dimes can now purchase 11.8 gallons of gasoline, which means that the price of gasoline relative to silver dimes has gone down, which is the expected result due to advances in productivity over time. This is despite more expensive drilling methods that have to be employed in today’s world. The easy oil has all but been taken.

But this isn’t the shocking revelation. If I were to convert my 25 dimes to cash, I would have made $15.50/hour. If we had kept money tied to precious metals, the wages of working men in America at $1.00 would have provided the equivalent in today’s dollars of a $32,240 yearly income. When we compare that to a full time minimum wage worker, even at the $10.00/hour proposed by the president, we get a yearly income of $20,800. This represents an $11,440/year theft of the value of labor of the minimum wage worker.

But who gets this $11,440 that is stolen every year? It is none other than the counterfeiting Federal Reserve. By creating money without creating wealth, the Federal Reserve receives the value that used to go to all those working in production oriented jobs. And, due to the same improvements in productivity, not only has the purchasing power of these workers been stolen, but the additional purchasing power that they would have shared with their employers has also been stolen from them and their employers as well.

How has this happened? Could it be because basic economics is not a part of education in America? Could it be that when economics is taught, failed theories such as those put forward by John Maynard Keynes are poured into the skulls full of mush?

I guess it is unproductive to curse the darkness, so I will attempt to light a candle instead. All of the damage that has been done by the fiat currency supplied by the Federal Reserve can be reversed. First, Federal spending must be drastically cut back. Cuts need to be targeted to where they will produce the greatest benefit to our economy. My suggestions would be to end the current wars, eliminate all regulatory agencies, and eliminate the Department of Homeland Security and the NSA. Second the integrity of the money supply must be restored. The Federal Reserve’s monopoly on money should end as we return to Constitutional money, and free banking should be restored to our economy allowing for free markets in banking that have not been present in our nation since 1913. Third, as the debt is reduced, I would reduce tax rates, while increasing the threshold for taxable income. Eventually I would wish that all income taxes would be ended, but until this debt is retired we will have to settle with small reductions that bring us closer to this goal. This will be painful, but not as painful as allowing the destruction of economy to continue. We still have resources, an infrastructure in place and a relatively well educated workforce, these resources are vanishing as our economy is being destroyed by the current governmental policies. We can’t wait until the whole country looks like Detroit.

We have to act now!