Uber-libertarian billionaire Peter Thiel suggested he may support a spike in the minimum wage to $12 an hour because it could roll back the welfare state.
“I actually think that it’s a very out-of-the-box idea. … It’s something one should consider seriously, given all the other distorted [government-created economic] incentives that exist,” Thiel said in a video interview conducted by the San Francisco Chronicle on Feb. 21.
Thiel is so much of a libertarian, he’s trying to create islands where people can work and live away from national laws. He’s used some of his $2 billion fortune to fund the libertarian Club for Growth PAC and spent almost $4 million to help Texas Republican Rep. Ron Paul campaign for president in 2012.
Thiel’s welfare-and-tax argument echoes the push by another California libertarian entrepreneur, Ron Unz, who says the government is skewing the nation’s economy downwards towards low-tech work by supplementing low-wage workers’ wages with welfare payments. (RELATED: $12 an hour is conservative rocket fuel, says Ron Unz)
The welfare payments are reduced when workers’ raise their skills and their pay, create a disincentive for workers who might seek greater training, and for corporations who might invest in training and machinery, Unz argues.
“Given how low the minimum wage is, and how generous the welfare benefits are, you have a marginal tax rate that’s on the order of 100 percent, and people are actually trapped in this sort of welfare state,” Thiel told the San Francisco Chronicle.
If companies have to pay employees at least $12 per hour, Unz argues, they’ll invest in high-tech machinery, incentivize workers to increase their skills and also reduce employers’ incentive to import low-skill immigrants who won’t earn enough money to support themselves.
In turn, a higher-productivity, higher-wage economy will reduce widespread dependence on big government, increase the number of tax-paying middle-class workers and aid libertarian political candidates on Election Day, Unz argues.
“Politics would be completely different. … What you’re doing is reducing the 47 percent by 10 to 15 points and giving Republicans a chance to make their case about cutting government spending and reducing taxes,” he said.
Unz argues that pay is only a small proportion of most companies’ costs, so a raised minimum-wage won’t greatly boost prices at major firms, such as Wal-Mart.
In Washington, President Barack Obama has made a $10.10 minimum-wage increase the centerpiece of his 2014 campaign to prevent the Senate from going Republican.
GOP legislators are loath to back the popular increase, partly because many legislators oppose federal regulation of business.
Their resistance has been greatly strengthened by a new report from the Congressional Budget Office, which concluded that a $10.10 wage would kill roughly 500,000 mostly low-skill jobs, even as it would also raise wages for more than 20 million people.
In his San Francisco interview, Thiel highlighted the incongruity of libertarian support for mandated wages. “In theory, I’m against it, because people should have the freedom to contract at whatever wage they’d like to have,” he said.
“But in practice, I think the alternative to higher minimum wage is that [working] people simply end up going on welfare,” such as the EITC, he said.
If Thiel does put his reputation and money behind the idea, it will help Unz’s effort to get a $12 minimum wage on the state’s November ballot.
In 1998, Unz won a ballot initiative barring Spanish-language teaching. The goal was to help integrate and educate millions of kids from Latino immigrant families.
If he gets the $12 minimum wage on the November ballot, he expects is to be easily approved by the voters.
His proposal would include some exemptions allowing lower starting pay for new workers, including teenagers and released convicts.
“On economic issues, Peter Thiel is probably the staunchest conservative-libertarian billionaire in America, and certainly one of the most thoughtful,” Unz said in a statement to The Daily Caller. “His serious consideration of a $12 minimum wage demonstrates how powerful the case is from the free market, small government perspective.”
“There’s never been a better way to automatically cut social welfare spending by tens of billions of dollars and transform many millions of tax-eaters into tax-payers,” he added.