Understanding Racism

First of all, Defining Race

The first thing you should know is that race is not a scientific term. It is used in biology, but informally, and there is a lot of debate as to how to define race in the animal kingdom. Some scientists distinguish races based on small differences in chromosomes, or geography, or physiology (what the animals look like). None of this is based on any rigid scientific rules.

So, race is not science, it's a social construct, meaning it's a way for people to categorize things, to make the world simpler and easier to understand. The problem is people don't all fit into neat little categories, and the world isn't simple. So thinking in terms of race is problematic. It can mislead you.

 

Defining Racism

Racism comes in many forms, so it's hard to pin down one definition. And yet, so many people try to do that, demanding that we narrow the debate to one specific form, such as public displays of racism: name-calling, police brutality, church burnings. As soon as we do this, we can wait for stories to go away, and then people can pretend it doesn't exist. Political pundit Ann Coulter even went so far as to claim racism is dead! America has a black president––problem solved!

As soon as you question the definition, people get mad. They'll tell you to open a dictionary, not realizing that dictionaries have multiple definitions of many words, including racism. See for yourself:

 

1. The belief that each race has distinct and intrinsic attributes (This seeing in terms of race is tricky, because it can actually be true in some cases––statistically, blacks are less likely to develop skin cancer. The problem lies not in acknowledging differences, but in assuming them without evidence).

2. The belief that one race or group of races is superior or inferior to another (passive racism).

3. Prejudice or discrimination based upon race (active racism).

 

Prejudice Versus Discrimination

Prejudice is what you think of someone you haven't even met, while discrimination is what you do to this person, based on that prejudice. Prejudice is passive; discrimination is active.

However, prejudice isn't simply about racism, it's about judgement, and, often times, life confronts you with situations where you don't know all the facts, you can't know all the facts, and so you have to judge based on prejudice.

Think of a young woman walking alone at night. She sees a strange person coming toward her. He's dressed poorly, he's walking funny, possibly drunk. He looks dirty, unshaven, crusty. His eyes are bloodshot. Maybe his forehead is bleeding. He's talking to himself, and he laughs a bit like a hyena. Nature and evolution have bred us to notice these cues and make predictions about this man's behaviour and potential threat. This is normal and quite healthy. We know the man could be the sweetest person, respectable even, but it's still wise for the girl to avoid him, unless of course he's in serious need of medical attention, in which case she should call an ambulance, but still avoid him (unless she's bigger and stronger, trained in karate, armed with a gun, a police officer, etc.) But still, you want to avoid confrontation, and be cautious is what I'm saying).

This is the kind of situation we must all judge for ourselves, but we must also realize that our predictions and prejudice may be wrong. And we must consider whether our judgments are affected by race.

Most importantly, we must recognize the difference between this kind of threatening personal situation in which we prejudge one person whom we can see and observe, versus a debate about public policy, where there is no immediate threat, and a speaker chooses to prejudge an entire population that he probably doesn't see because of segregation and gentrification.

 

Different Kinds of Racism

 

Overt

This is loud, public, honest racism. There's nothing hidden here. Examples include hate groups like the Ku Klux Klan dressing in white hoods and burning crosses on black people's lawns. Any time someone shouts the 'N' word, that's overt racism. Any time someone repeats a stereotype or tells a racist joke, that's overt racism.

 

Institutional

This is racism found in large organizations, including governments, businesses, banks, etc. It can be overt or covert. When the American South set up "Jim Crow" laws, segregating towns and public spaces into black and white areas, that was overt institutional racism. Police could arrest black people for entering a "white's only" restaurant, restroom, or shop. It was finally outlawed in 1965.

But, segregation still exists today in America, and you’ll find it at most American neighbourhoods and schools. There's no law enforcing it, but there are institutions, like failing schools, that perpetuate it, creating poor, dangerous ghettos that minorities can’t escape from. They don't have the money to move out, and for many decades, those who did have money were not allowed to move into all-white neighbourhoods. The second minorities did enter a neighbourhood, it would experience "white flight" as white people moved away, lowering the property values.

Now, the opposite situation is occurring. Some businesses are investing in poor, downtown areas of cities, creating new office buildings and businesses that attract wealthier, educated workers. What used to be a ghetto becomes "gentrified." With gentrification, the poor are kicked out. Their homes are renovated, and wealthier people move in, erasing a great deal of the culture and diversity that had been present for generations.

Racial profiling is another overt institutional form of racism that exists today, practiced by police in the US. Under this policy, police may stop and search citizens based on their race, who are not suspects of a crime, and check for weapons and drugs. This is normally illegal in the US because the 4th amendment to the constitution forbids unlawful searches, but some cities have embraced it as a way to lower crime. Some shops even call the police after a minority customer has lawfully purchased an expensive item, to stop the customer in the street, and see if he or she didn’t steal the money used to buy the item.

     Another surprising problem, computers are now contributing to institutional racism. Programmers are now making complex algorithms based on machine learning (the computer learns through repeated trial and error), to try answering questions that are subjective – they have no right answer. This technology, originally used to defeat humans at chess and other games, is now being used to find probabilities, like who would be the best new employee at a company, which criminal is most likely to re-offend, or even which news items will be most interesting to you on your Facebook account. And, although these programs are surprisingly accurate, they have been known to have glitches. One such glitch in a stock market program lost over a trillion dollars in just thirty-six minutes, back in 2010. And they also make ridiculous mistakes from time to time, because they don’t really know what they’re talking about. They don’t understand the world we live in, or who we are. They don’t even know they exist, and now they’re being used to make important ethical decisions.

     Take Facebook for example. It determines which news items are most important based on the number of comments and likes. But, what happens when a serious tragedy happens, and people post about it? No one’s going to like it, most will feel uncomfortable about commenting, so, Facebook’s algorithm thinks it can be ignored. And, it’s tricky to turn off this algorithm and un-filter your page.

     What’s worse, the factors in these programs are not transparent. We don’t know how it works, but we assume it must be fair… But, according to Zeynep Tufekci, a professor of computer science at the University of North Carolina, these programs often have discriminatory outcomes. For one thing, the only way to evaluate people, either for work or punishment, is to data mine their personal histories––their digital footprints. This is highly invasive, and can uncover all kinds of secrets, like your age, sexual orientation, marital fidelity, likelihood of future pregnancy, your political beliefs, your online personality, possible mental problems, and so on. You don’t even have to have a mental problem, like depression. You just need to be at a higher risk for future depression, and the program could weed you out. These are factors that human employers aren’t legally allowed to even ask about.

     And, when machine learning does this, it doesn’t label these factors, so we don’t know what it’s really looking at, or how it makes its decisions. It’s a black box. This allows for all kinds of unethical decisions to take place, and even worse, it allows those in power to ignore them. This is already happening. Google’s search engine uses machine learning to display ads, based on who you are. Tufekci says studies have found that women are less likely to get ads for high paying jobs than men. And, Google searches for African sounding names are more likely to bring up ads for criminal background checks, even for people with no criminal history.

     Even worse, a company in Wisconsin created an algorithm to choose proper punishments for criminals, based on… well, they refuse to say––they put a lot of work into it, and they don’t want their precious program being used by competitors. It’s supposed to predict which defendants are more likely to re-offend. The problem is, it consistently accuses minorities of being more likely than whites to re-offend, at about twice the rate, and it’s consistently been wrong. And yet, people continue to use it, and they’re making money off this system. Prof. Tufekci says the solution is to audit all machine learning programs, so that we know how they work, and how they don’t work.

     Still worse, computers are taking a larger role in choosing and eliminating targets in the US war on terror, through its drone program. Even if these programs are better than humans, who make mistakes as well, there’s a question of responsibility. When a human makes a mistake, he can be blamed and punished for it. But, who do you blame when a computer makes a mistake, and people die?

 

Economic

If you look at about any statistic in the US regarding race, you'll find that black people get paid less for the same work, are promoted less, and are the last hired and first fired. They're less likely to go to college, and much more likely to go to prison. And it's not because blacks commit more crime. Blacks are treated differently. Many urban, poor communities have different attitudes to police in schools and arresting children as if they were adults. Getting a criminal record at an early age for school fights, trying drugs, etc, can ruin a teen's chances for college and a career. According to NPR (2014), it starts as early as 4 years old - 18% of black preschoolers are suspended nearly 50% of the time. While boys are more likely to be suspended than girls, black girls (12%) are twice as likely to be suspended as white boys (6%).

Every so often you'll see on the news, an experiment where real estate agents tour a house and estimate its value. When the homeowners are white (they're really actors) the estimate is always higher than when they are black, even though they pretend to live in the same house, have the same jobs, even the same clothes. And when similar actors go to a bank asking for a loan (presenting the same credentials), who do you think gets the better deal? These tests show that minorities have a harder time earning and gaining wealth.

 

Cultural

In academia, cultural racism is defined as when one culture considers itself superior to various minority groups around it, for example antiziganism against Roma.

But, cultural racism also involves denying minorities a voice. Hollywood is a big example. Minorities are often type cast as criminals and villains, or as a token black friend. When a minority character is portrayed as a hero, he or she is often played by a white actor wearing makeup (this is known as “whitewashing”). And whites win the majority of awards each year. Meanwhile, the US TV news often describes local crimes in detail, emphasizing black suspects.

Native Americans, Africans, and Asians are denied wall space in most museums and galleries, but are often portrayed in "orientalist" art as stereotypes - the noble savage, the slave for sale, the desert nomad. These cultures are portrayed as archaic, weak, traditional, and romantic. The brushwork is realistic, but that's where the realism ends.

Another aspect to cultural racism is in toys, where, for the last century, it's been hard to find many figures, dolls, and characters that represent different races and body types. Just this year, Barbie Dolls have finally been designed to look more realistic, coming in a variety of body types and skin colours, without being exotic princesses from foreign lands.

 

Colour Blindness

This is the belief that racism is no longer a serious issue. It's a popular sentiment that is often argued in the media. Some say the world has progressed a great deal since the 1960's, and so laws like affirmative action or voting rights laws are no longer necessary.
       In 2013, the Supreme Court repealed the Voting Rights Act of 1965, which had ensured the right to vote for all citizens. The court argued it was no longer necessary. Within hours of the decision, several states passed new "voter ID" laws that would make it harder for blacks and other minorities to vote. The idea behind these laws is to demand a photo ID from people who are already registered to vote--they think they've done everything they need to vote, but then they can't. And these laws also make it hard to get a photo ID in time for the election. For example, in Sauk County, Wisconsin, their State Photo ID office is only open 4 days a year.
       And while politicians argue this is to prevent voter fraud, these laws do nothing to prevent vote buying, tampering, and ballot box stuffing. All these do is prevent voter impersonation, which is not a problem. No one wants to stand in line for hours just to vote twice, or three times--it would make no difference in an election. And, several politicians have admitted that the purpose of these laws is to prevent enough minorities from voting so that a Republican candidate can win over a Democrat. So, the idea that America has progressed into a truly colour-blind meritocracy is false.

Aversive Racism

This refers to people who don't think of themselves as racist, but who tend to avoid people of different races, and to avoid questions regarding race. It's like living in a bubble, while ignoring the problems of others. These are people who accept inherently racist arguments, without acknowledging that it's racist - that immigrants are "stealing jobs", that inner cities are full of crime and criminals, that suburbs are "under attack", "Christmas is under attack." Just statements that are either false or misleading. Their reaction to protest movements like Black Lives Matter is to villainize them, claim they've been taken over by communists, etc., rather than to consider grievances and how to correct them.

Affirmative Action
In the 1950's, many schools and colleges in the US refused to accept black applicants. They were white-only schools. The Supreme Court eventually ruled in favour of "affirmative action" requiring a certain percent of minorities to be accepted in every school in the nation each year. These same quotas were then introduced into large businesses and factories to ensure that at least some minorities would be promoted to managerial positions.

Opponents today claim that these practices lead to unqualified and incompetent students and employees, and that only the best candidates should ever be accepted. They say the world today is much more progressive, so minorities will not be rejected merely for their skin colour. They say it's condescending to think that minorities can't get in to university or get a job without lowering their standards.
And yet, there's no evidence that affirmative action leads to lower standards - this is just assumed. And, the fact that minority students are more likely to drop out of university has more to do with the fact that they're poorer, and that the schools accept academically weak students for college athletics (schools make a ton of money from sports like football and basketball).
Opponents argue that university admissions should be meritocratic, while ignoring a host of admissions policies that aren't meritocratic at all. For example, most universities are obligated to accept a certain percentage of in-state applicants, and those students pay a smaller tuition fee. Out-of-state applicants face a smaller chance of acceptance, and have to pay much more. Furthermore, the children of alumni get a bonus to their chance of admission, especially if their parents give the school money on a regular basis. Even if an applicant has no alumni in his family, they can give a large monetary gift and still get the child in.

 

The Psychology of Racism

A good way to think of racism is like a psychological disorder, with a spectrum of different symptoms and manifestations. There are levels of racism, like a sliding scale of evil. People can be racist for different reasons, depending on differing personalities and experiences. Some might seek to avoid speaking with or knowing minorities, while others may actively seek out minorities and persecute them. Some might express fear of minorities because of all those TV reports about black criminals. Some might express anger at affirmative action, blaming it for not getting into the school of their choice, seeing only how it affects them, and not the larger picture. Some might find a different skin colour to be repulsive, refusing to consider dating anyone of that colour or ethnicity. Internet dating networks today show that Asian men and black women are the two least attractive race-and-gender combinations on any network, and have the hardest times finding a partner. And then, there are those who are paranoid enough to believe in conspiracies and doomsday scenarios, and feel the need to band together into hate groups. Some feel so strongly, they are willing to hurt, kill, and burn churches of minorities in order to “keep these people in their place.”

 

Emotional Impact of Racism

Life as a member of the minority is challenging. Fear is ever present. Speaker Clint Smith recalls how his father lectured him, when he was a boy, "You can't act the same as your white friends. You can't pretend to shoot guns. You can't run around in the dark. You can't hide behind anything other than your own teeth." This was after he'd played in a hotel parking lot with squirt guns. In America, all black children grow up in this environment––don’t move too quickly, keep your hands where people can see them, keep your hood down at night. Don't do anything at all to alarm police, or shopkeepers, or teachers, or you might get in trouble. You might get shot.

Comedian DL Hughley recalls the first time he was called the 'N' word. He was about eight years old, on a school field trip, and he wanted to buy some ice cream at a shop in Los Angeles. The shop clerk told him they didn't serve N–––––. Most children remember their birthday or their best Christmas gift, or their first football game. We need to remember that many minority children also remember their first experience with racism, just as vividly, and it creates a scar that people have to carry with them the rest of their lives.

 

White Flight & Whitopia

Whitopia, as defined by journalist Rich Benjamin, is any town or county that is charming, growing in population by more than 6% a year, of which over 90% of that growth is white. These places are the ultimate destination for "white flight," where white people leave ethnically diverse areas in search of some place better, meaning affluent, clean, natural, friendly, and safe. Guns are very popular here, as is church and rebel flags. Not everyone here is a racist, but racist groups such as the Aryan Nation do meet here.

What causes white flight? Benjamin says it's a question of conscious and unconscious bias - pushes and pulls. People don't all go to Whitopia for racist reasons, but it has racist outcomes. "The danger of Whitopia is that, the more segregation we have, the less we can look at and confront conscious and unconscious bias." People don't have to think about racism. It becomes abstract and theoretical, not an every day experience.

Why don't black people go to Whitopia? First of all, most black Americans can't afford it. Second, most don't feel welcome. When you're the only black man in St. George, Utah, or Coeur D'Alene, Idaho, you feel exotic and strange. Rich Benjamin did it, for two years, and was says he was accepted in each and every community. He says, "It's a devastating irony, how we have gone forward as individuals, and backwards as communities." Rich wants us to question and reject that notion that “One black man is a delightful dinner guest, fifty black men is a ghetto.”

 

The Rebel Flag

This was the flag of the Confederate States of America, who fought the United States from 1860-1863 over the right to own slaves. They believed that blacks were inferior to whites and that the mistreatment of blacks was justifiable. Although the Confederacy lost, many southerners have displayed this flag in their homes, on their cars, and in their towns as a form of intimidation of blacks. Starting around 1961, many southern states decided to fly the flag in their capitols as a scare tactic, during the Civil Rights movement. These states argued it was a proud part of their history and heritage, while in reality, it was a reaction to blacks like Martin Luther King Jr. demanding an end to Jim Crow laws. As these flags have finally started coming down from state capitols, comedian Larry Wilmore asks, "If we flew every flag from our past, why aren't we flying the Union Jack at the White House?" Meanwhile, many neo-nazi groups in Europe use the rebel flag in place of the swastika, which is illegal in much of Europe. This issue has been further clouded by use of the flag to symbolize any and all forms of rebellion and southern pride, for example in the TV show Dukes of Hazard, in which two criminal heroes drive a car with a large flag painted on the roof. But Larry Wilmore astutely points out that the meaning of the flag is far too tainted with racism and hate to be able to express anything innocent or friendly.

 

Combating Racism

One thing we all can do is to point out racism when we see it. Don’t keep quiet, because racism thrives in silence. But, remember the difference between what someone says or does, and what they are. You can and should point out when someone says something racist. That's something you can prove logically. What you can't really do is prove that someone's intentions are racist, or that deep down, they're a racist. Hold people accountable for what they do and say, but be ready to explain why what they said was racist, and be prepared to acknowledge that their intentions may have been innocent.

Another thing we can do is to document racism when we see it, with photos, videos, and film. America's recent movement, Black Lives Matter, got going thanks to smart phones that recorded violent acts against blacks.

The US School System - Pros & Cons

Differences between the US and Slovak Systems:

 

1.      The school system in America goes from kindergarten to 12^th grade. When you finish one school and go to another, you go to the next grade. In Slovakia, every time you start a new school, you start counting over again. You could be the 9^th form in základná škola, and then you go to the 1^st form in stredná škola.

2.      In America the grading system is different. An ‘A’ is a ‘1’, a ‘B’ is a ‘2’, a ‘C’ is a ‘3’, a ‘D’ is a ‘4’, and an ‘F’ is a ‘5’.

3.      In Slovakia, every class gets its own room, which they decorate and keep clean, and teachers come for each lesson. In America it’s the same for primary school, but in middle and high school, teachers get their own rooms, which they decorate, and students switch rooms every lesson.

4.      In American schools, high school students are sometimes separated according to ability. The best students get into honors and AP (advanced placement) classes, which learn at a faster pace. For example, 9^th graders may be divided into algebra 1, honors algebra 1, and AP algebra 1. A typical student may take two-three honors classes, and then two-three regular classes, mixed in with weaker students – so, for a smart student, some subjects will be hard, and some will be really easy.

5.      AP courses are standardized nationally, created by a private organization called the College Board, the same one that writes the SAT’s each year. AP courses have standardized exams each semester. Advanced level AP courses, such as calculus, can count as college credit in some universities.

 

US Advantages:

 

1.      Americans believe in a general education for secondary students, with many subject choices. So, no matter which school you go to, you can study many things, for example music, art, drama, history, science, sport, etc. At age 15, you don’t have to start thinking about a future career.

2.     Typically, you study less subjects at once (about five?) and take lessons in them every day. But, this depends on the school. Each one has its own schedule.

3.     Every school in America has to have a nurse, both for emergencies, and to determine if students really are sick, before calling parents to pick them up.

4.     Public schools in America provide free busing, books, and free breakfast and lunch for poor students (funding for these programs can come and go, depending on yearly tax revenue).

5.     Some courses are required, like math, reading, and writing, which are required every year. But you can usually choose when to complete other requirements like science and history.

6.   You usually don’t have to study two or more sciences at once.

 

US Disadvantages:

 

1.      In America, if you want to go to a really good school, you need to find a private one. Catholic schools are some of the best, academically, and not so expensive, but they’re hard to get into, especially if you’re not Catholic. Some private schools are extremely expensive, costing as much as university.

2.      Public schools in America gain funding (money) from local real estate (land) taxes. So, rich towns give higher taxes to their schools, and poor towns get much less. So, a public school in a rich town will look much nicer, and will have more facilities than in a poor town – towns don’t share money equally. That’s true in every state.

3.      In the American public school system, in most towns, there are several primary schools, and only one or two public middle and high schools. And, you don’t get to choose which high school you go to. It’s a question of which neighborhood you live in, and school bus routes. If you don’t like your public school and you want switch schools, you have to move to another part of town – or a completely new town.

Compare that to Slovakia, where the average town has about eight different high schools. If you want to get into the best gymnazium, you have to study hard and get good marks from the beginning. But, in America, your marks don’t really matter until you enter high school, when they start counting towards your GPA (grade point average – a number used to pick best students for awards, etc). So, unless your parents really push you to study, you won’t learn good study habits, and then, by the time you’re in high school, and all your friends start rebelling, doing drugs, and driving, you have to start studying hard for the first time. And there’s no real penalty for failing. Schools can make you repeat a year over and over, but they can’t expel you unless you do something criminal or dangerous.

4.      American high schools are usually very large, with thousands of students. The idea is, if you get all the teenagers together in one school, you can get all the best athletes together on a school team, with enough money to buy state-of-the-art training facilities and a big stadium. But, it’s harder for students to stand out, and to know each other. It’s a different atmosphere from a smaller school, where everyone knows each other. In Slovakia, schools are smaller, and the best athletes from each school combine to form a team that represents the town, instead of the school. I think it’s better.

5.      Higher education in America is ridiculously expensive, and the costs are rising every year. Colleges, which are private, are typically more expensive than universities, but both costs tens of thousands of dollars a year. Most students can only go to college if they earn a scholarship or qualify for a student loan from a bank.

 

Understanding Inflation - Part 2

Think of running a business like it's a video game, like a level in Super Mario World. It's an adventure with many trials and obstacles, and you want to find Princess Profit at the end. I mentioned costs previously.

Variable Costs

Let's start with variable costs. Variable means that these costs go up as you produce more items:

 

 

 

 

 

Fixed Costs

 

Now we get to fixed costs which aren't proportional to output. They may rise or fall from year to year, but hopefully not by much, and these costs are usually predictable, so you can plan for them.

 

 

 

 

Unpredictable Costs

 

As with any project, life is full of surprises. These next costs are sure to come to you eventually, you just don't know when...

 

 

 

 

More Factors That Affect Price:

  

 

 

 

 

 

 

 

 

 

So, in every business, you have all these factors, working and changing at a micro scale and a macro scale, and you think the minimum wage, of all things, is going to affect inflation? I hope you can see now that it's all more complicated, and trying to control inflation is a bit like controlling the weather. Good luck.

Understanding Inflation 1

I remember back in the 90's, when I was a student, hearing on the school news program about Bill Clinton wanting to raise the minimum wage. There was a short discussion about it, and when I supported it, the kid next to me said this:

I noticed two things:

1. This boy was repeating what he'd heard from someone else. He knew nothing about inflation.

2. He was basing his argument on the assumption that all inflation is bad, and raising wages accelerates it recklessly.

This was a popular narrative at the time, based on a flawed understanding of recent statistics. Let us first review the history of America's minimum wages over time. You will note, in recent history, the minimum wage tends to rise under a Democratic president, while stagnating during a Republican administration:

As you can see, Democratic administrations do, for one reason or another, tend to raise the minimum wage more frequently, at least over the past 30 years. If this really did encourage inflation, you would expect a similar graph to correlate. And yet...

the lines don't match, do they? Inflation remained steady all through the 90's, despite raising the minimum wage, and the booming economy. It's also remained steady throughout Bush Jr. and Obama's administration. The only time inflation correlated with a rising minimum wage was during Carter's presidency, which also coincided with two oil crises, caused by Middle East oil embargos. A group of countries decided to stop selling oil, forcing the price up from $3 a barrel to $12. This triggered a global oil crisis and inflation everywhere.

So, what was wrong with my classmate's logic? Well, a lot. Where to begin?

First of all...    Wage Inflation ≠ Price Inflation

Price inflation is when prices go up, and many factors affect it. But, whatever the cause, when prices go up, people grow relatively poorer, unless their wages rise to match it. And that's why wage inflation is so great! When wages rise faster than price inflation, people become richer!

But, wait a minute? Isn't one worker's wage another person's cost? Isn't that a price too? Well, yes, but when talking about wages, this is the price of putting money into consumers' pockets, whereas most prices involve taking money out of them.

But, doesn't wage inflation lead to price inflation? Yes, over time. When people are richer, they can afford more, and so companies raise prices. Inflation is the natural result of a growing economy, and the richer the country, like China, the higher their inflation rate. But, it takes time, and, meanwhile, people increase their purchasing power, gaining wealth, and helping the economy grow.

A second question: how influential is the minimum wage to wage inflation? Well, currently, in America, the labor force consists of 135 million workers. Of these, only 75.3 million earn an hourly wage. The rest receive a fixed salary, with possible bonuses, depending on job performance. Of that 75.3 million, only 1.6 million earn the minimum wage. Oh, and another 2 million earn less. How is that, you might ask? Well, some workers, like waiters and waitresses, earn so much from tipping, they are exempt from minimum wage laws. They live mostly off of their tips, and they're taxed on them too!

So, when 1.6 out of 135 million earn this minimum wage, does raising it a dollar really change things? No, not really. First, you must understand:

Price = Cost + Profit

So, if a cost, like that of labor, goes up, companies have a choice. They could raise prices, or they could simply accept less profit. Depending on competition, it might not be wise to raise prices, so many companies lower their profit instead. And, you'd be surprised how little profit a company needs to stay in business. The best industries in America only earn about 19% profit:

Historically, companies gave workers so little money they could barely survive. Three factors changed this:
1.the rise of unions
2. skilled labor
3. government regulations, including a minimum wage.

And many salaries today are so much higher than the minimum, that nobody would switch to a minimum wage job, despite raising it. There's also a question of status, as many people would be embarrassed to work a minimum wage job, and then there's the question of benefits such as health plans and holidays, of which minimum-wage jobs offer little.

So, there's little evidence of the minimum wage increasing other wages, which is too bad, as it would help the economy.

There's a third misconception - that inflation is bad, it must be stopped at all costs, and it can be. The reality is, in a healthy economy, you can't stop inflation, and you wouldn't want to. A little inflation is actually a good thing for a number of reasons.

1. Inflation means your money is worth less and less over time. So, any smart person would spend it. Buy something, anything, and save your wealth! Buy something collectable, buy a house, buy a flat, buy a garden. Buy baseball cards! When everyone has this attitude, it helps the economy grow. Compare that with deflation, where no one wants to spend money. Everyone thinks, if I wait longer, I can save money on a purchase, and if I buy something expensive, it'll just lose money over time. So, while everyone waits and saves, companies go out of business and lower prices further to attract customers - causing even more deflation.

2. Inflation means you can buy something and sit on it, and get wealthy. The things you buy now (a house, stocks, bonds) can be worth a fortune when you retire, and therefore help you retire.

3. Inflation also makes it easier to pay off loans. As you earn more and more, the debts you made in the past will feel smaller and easier to pay off (so long as the interest rates are low!!!)

So, inflation, at about 2%, is actually a good thing! It's healthy, and it's also pretty much inevitable. Inflation is going to happen no matter what. Raising the minimum wage just helps the poorest workers from feeling the most pain from it. And what other factors cause inflation? See part 2 in this lesson.