They took the shock therapy advice of the IMF and are still experiencing economic and political chaos. Imagine three countries in the world, each of which produces all its GNP by digging holes in the ground. In the first, the workers dig with backhoes, in the second with spades, in the third with sticks. I would ask in which country will the workers have the highest wages. Obviously, the difference is capital.
Capital makes the difference.
Secretary Reich can train all our young men to work backhoes, but if all that is available are sticks, the market will pay them the minimum wage. This, though, is why I would happily support an agreement with the President, to raise the minimum wage at the same time we index and reduce the capital gains tax. Real wages would rise without an increase in the minimum, but if the administration insists on the tradeoff, I would see almost no harm in it. The only serious damage would occur in Puerto Rico, which has its own tax structure, but which is obliged to meet the mandates of our minimum wage law. This could be resolved by suggesting to Puerto Rico that it match our adjustments in capital gains taxation, something I have been trying to get them to do anyway.