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Why Cheap Muslim Refugee Labor has Taken Over Meatpacking Jobs

Editor:  We occasionally post comments or guest posts from readers that are so informative that we don’t want them lost where comments are normally posted.  This is from a reader answering my perennial question about how it came to be that good paying American jobs in the meatpacking industry have now become low paying jobs for immigrants and refugees.

Before you read what Deena has to say, check out a post I wrote in 2008 about how President Bill Clinton brought tens of thousands of mostly Muslim Bosnians in to the US to do meatpacking jobs in Iowa in the mid-1990s (with the help of Lavinia Limon who was Bill Clinton’s director of the Office of Refugee Resettlement). The business model allows BIG MEAT (or LOL! BIG YOGURT) to pay low wages which are then supplemented by welfare that you pay for!

The US State Department is acting as a head-hunter for big business, so forget about the humanitarian mumbo-jumbo they are trying to sell!

From Deena:

You asked if slaughterhouse work used to be a good job. It did; and, in fact, was heavily unionized until sometime in the late 80’s or early 90’s, I believe.

jbs-greeley

Brazilian owned JBS (formerly Swift & Co).

It had its own union (Amalgamated Meat Cutters (AMC)) and the former president of the Iowa AFL-CIO back when I worked for the national AFL-CIO came out of this union. This work was among the best in pay and benefits in the US along with auto work because basically the entire industry was unionized; and like in the UAW, workers spent a lifetime in the trade.

This is a photo I took on my fact-finding mission in the heartland this past summer. Meat giant JBS (formerly Swift & Co) is a Brazilian owned company that encourages Somali refugee labor, and as such it is changing the demographic make-up of Greeley, Colorado.

It ended when the market was flooded by foreign workers – largely illegal. The decent paying companies – and most then fell into this category – were unable to compete with low-paid-unskilled-foreign-worker-filled companies which sprang up. The pay is now about 55% of what it was then. Forget benefits.

The union merged into what is now known as the United Food and Commercial Workers union (UFCW), which largely represents retail workers. The ‘meat cutters’ of today are more likely to cut and package large sections of pre-cut meat into individual packages for purchase by shoppers in local grocery stores like Kroger where I live.

The actual slaughterhouse industry has high turnover – some logging over 100% in a year. The work is hard on the body and dangerous, which is why the wages used to be reasonably high. I’m sure OSHA still requires the posting of health and safety rules but I doubt if most of the workers can even read them, let alone care about them.

Back when Bush was staging company raids, the first things a company would do after losing its illegal workers to a raid were to raise wages to attract legal workers to this hard, dirty work and to offer bonuses to workers who could bring in new workers, proving that this was work that US workers would do, just not for the wages and conditions that prevailed in the plants where illegal workers set the standards. [And where legal refugees are now hired at those low wages—ed]

Construction work has largely followed slaughterhouse work.

The AFL-CIO used to be against massive immigration because of what I just outlined: the law of supply and demand in which large numbers of workers who will work for low wages under bad conditions drive down wages for the remaining ones who stay and force those who can’t or won’t work for these wages out of the field. It changed after Sweeney-Trumka came in 1996, bringing several operatives from the Democratic Party.

screenshot-122

Senator Jeff Sessions (R-AL)

Recently the AFL-CIO has toed the Democratic Party’s line on immigration – more and faster – and has paid the price.

Their idea seems to be that they can organize these low wage workers, but it doesn’t work out that way. The union numbers keep decreasing. SEIU*** has enjoyed some success but they are organizing workers at low wages who can be easily replaced. If necessary, companies like WalMart simply subcontract out work like janitorial work to companies who will hire illegal workers on the cheap.

Construction companies hire subcontractors for wall boarding, painting, and roofing. Young men who would like a start in construction don’t get hired at these entry level jobs and so don’t make their way up the ladder.

The loss of such careers as meatpacking and construction to non-college educated men is a shame and a disaster.

In 2013, Senator Jeff Sessions called out Trumka and the meat packer lobbyists on the Gang of Eight bill, a bill to legalize more cheap laborers. This is why they hate him so much!

The MSM made much of women voting for Trump. I’d be willing to bet that many non-college educated women would be far happier for their husbands still to be able to get those better paying jobs so that they didn’t have to work full-time and could spend more time at home when the kids are small.

***See our post over the weekend where SEIU is attempting to organize Rohingya refugees.

For more comments worth noting and guest posts, click here.

Sessions photo!  please read this!

Senator Jeff Sessions has been a stalwart in fighting for American workers in the US Senate and tomorrow the Left will try to destroy him!

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Don’t miss James Simpson’s prescription for what must be done about the UN/US Refugee Admissions program

Processing country map is instructive: US Dept. of State working hard to clean out UN camps in Kenya

Rochester, NY: Confirmation that the US State Department has packed the pipeline with refugees in advance of Trump

Chicago: Story about Rohingya Muslim airport workers is instructive

Getting new housing in your town? Then you will get refugees!

Sweden took in 162,000 Muslim migrants in 2015 — 494 got jobs

“Fight those who do not believe in Allah nor the Last Day, nor hold that forbidden which has been forbidden by Allah and His Messenger, nor acknowledge the religion of Truth, even if they are of the People of the Book, until they pay the jizya with willing submission, and feel themselves subdued” (Qur’an 9:29).

margaret murders in sweden by a muslim

In lieu of the jizya, there is welfare. It is the duty of the Infidels to pay for the upkeep of Muslims, as that Qur’an verse makes clear. UK jhadist Anjem Choudary said in February 2013:

“We are on Jihad Seekers Allowance, We take the Jizya (protection money paid to Muslims by non-Muslims) which is ours anyway. The normal situation is to take money from the Kafir (non-Muslim), isn’t it? So this is normal situation. They give us the money. You work, give us the money. Allah Akbar, we take the money. Hopefully there is no one from the DSS (Department of Social Security) listening. Ah, but you see people will say you are not working. But the normal situation is for you to take money from the Kuffar (non-Muslim) So we take Jihad Seeker’s Allowance.”

Malmo Refugees Welcome Sweden

“Sweden Took 162k Refugees Last Year, 494 Got Jobs,” by Jacob Bojesson, Daily Caller, June 1, 2016 (thanks to Steve):

Just 494 out of the 162,000 refugees who applied for asylum in Sweden in 2015 have managed to get a job, according to government figures released Tuesday.

Refugees are eligible to work while their applications are pending as long as they can show a valid identification document and haven’t been rejected for asylum in the past. A majority of asylum seekers would qualify for a work permit, but the national migration office was only capable of issuing one to one-third due to the high demand.

“There was an incredible amount of people who applied for asylum in Sweden, and for us to be able to register everyone we had to disregard certain areas, and employment was one of them,” Lisa Bergstrand, officer at the Swedish immigration office, told Swedish public broadcaster SVT. “We do what we’ve been told to do.”

Getting migrants off welfare and into the job market has been a problem for most European countries during the ongoing refugee crisis.

Germany announced reforms to its labor laws in May to make it easier for migrants to enter the job market. Migrants are exempt from minimum wage regulations and thousands of  “one-euro jobs” —  in which refugees can work for low wages of between $1.13 and $2.80 per hour — have been created.

The center-left government in Sweden has proposed a reform to asylum laws to force migrants into the work force. If an applicant can’t support himself after three years in the country, they won’t be eligible for permanent residency if the reforms pass.

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The Cruelty and Carnage of the Minimum Wage: The Case of Tad by Jeffrey Tucker

Not having a job means not participating in the fullness of life.

If your goal is to ruin the lives of young and marginalized population groups, raising the wage floor to $15 an hour is a good plan. Already, much of the current problem with youth unemployment is due to the high minimum wage increases we’ve seen over the last eight years.

After all, the original purpose of the minimum wage was to disemploy undesirables. Not having a job means not participating in the fullness of life. It’s a big deal.

A wage floor of any sort traps people in the economic basement. The higher the floor, the larger the basement. Today, millions are rattling around down there, unable to find their way out. Millions more will find themselves there once all this legislation goes through.

I feel a particular frustration with this issue, and it’s not only because of the economics texts I’ve read.

My first real job was working maintenance at a department store. I was 15 (yes, I lied about my age; you could get away with that back then). My job was to clean toilets, crush boxes, pick pins out of the dressing room closets, wax the floors in the china shop, vacuum the place, and shine the glass.

It was a great job. I mean, truly great. I loved it because it was a hugely important job. If I didn’t clean the bathrooms well and replenish the toilet paper and towels, customers the next day might be grossed out and never come back. I played a big role in ensuring the profitability of this store.

My Coworker Tad

I especially loved my co-worker. His name was Tad. The department store would close, leaving just the two of us to have so much fun doing all this wonderful work. We would sing together, thrill to the danger of the wax machine, gross out at the mucky bathrooms, and just have that wonderful feeling that comes with having a real work partner.

You see, Tad was not a normal kid. He had some physical deformities. His face was oddly shaped and had what looked like a large stain on half of it. He couldn’t move around that well, really. I had to help him and assign tasks carefully. He was also mentally retarded. He spoke in a muffled way, and you had to be very clear about instructions.

But I tell you what, when he was happy, it made me happy. To see that big smile come across his face when I would praise the way he shined up a counter just gave me a huge lift. Every day I would try to find ways for him to be both delighted and productive. We were a wonderful team. I wanted it to stay this way.

One day, a poster appeared in the workroom. It was from the Department of Labor. The minimum wage was going up by 40 cents. Tad pointed the sign out to me. He said, “Look, we are getting a raise!”

I was a bit suspicious. I was pretty sure that the boss was the one who set the wage, not some weird distant government thing. I didn’t quite believe it was true. Still, I was happy that he was happy.

The next day, I showed up at the usual time after school. I was getting the mop ready, running hot water in the pail and prepared to do my thing.

Tad wasn’t there. I asked the boss, “Where’s Tad today?”

Well, he explained that he had hired Tad only because he was a boy he knew from church. He needed work. He knew that he would require a lot of help, which was one reason he was excited that I was able to work with him. In the end, he said, this was charity, because he knew that I could do the job by myself. It worked for us to be together so long as he could afford it. But this new minimum wage changed things. The store’s profit margins were very thin, and the wage requirement applied to the whole staff. So he had to make a hard decision.

The long and short of it: Tad had to be let go.

The Death of Tad

I was devastated. I stared at the Department of Labor sign again. Cursed thing! That sign just ruined a kid’s life. It stopped a great act of charity. And look what it did to me. I now had to work alone.

I suddenly felt guilty about my own job. I kept mine at his expense. And why? It was pure accident of birth.

Management left, the lights dimmed, and I heard the familiar click of the doors leading outside. I would have to clean alone today. I did all the tasks I had to. But there was no more music, no more laughter, no more clowning around, and no more beautiful smiles. Tad was somewhere else, probably at home, confused and sad.

I didn’t call him. I was too embarrassed and I didn’t know what to say. So I let our friendship go.

He died a few years later.

This is what the minimum wage means to me. So you can say that I have a vendetta. When the president announces that he is raising wages to make everyone better off, I can’t help but think of the millions of Tads that will lose that opportunity to do wonderful things in this world and with their lives.

Jeffrey A. TuckerJeffrey A. Tucker

Jeffrey Tucker is Director of Digital Development at FEE and CLO of the startup Liberty.me. Author of five books, and many thousands of articles, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World.  Follow on Twitter and Like on Facebook. Email.

RELATED ARTICLE: The Minimum Wage Should Be Called the Robot Employment Act – Wall Street Journal

It Wasn’t Broke, so they Shouldn’t Have Fixed It

The United States of America used to be a nation where things got done.  No matter what the challenge, everything from natural disasters to overcoming negative civic and political issues, the normal inclination was to start over and get it right.  If something was working just fine, usually common sense dictated it was to be left alone, at least until a superior method of operation was developed.

Take the United States of America for example.  She was founded upon superior values and principles.  Some of which included the supreme right of sovereign individuals to live according to their own God or self-directed path.  For the first time in human history, the United states was comprised of a set of economic principles and personal liberties that obliterated the worldwide concepts of government domination, or an equally abusive caste system.  Those dominated by cradle to grave government or a monarchy simply existed from day to day and were under the strain of not having enough to eat. That was only one of many problems people suffered with no way out.

Venezuela is a nation that at one time was fairly prosperous and the citizenry usually had more than enough to eat.  But in more recent years, cruel communist dictators with no respect toward individual rights have enacted brutal economic, property, religious, healthcare, agricultural, education and media controls brought that onetime prosperous to a screeching halt.  In fact, Venezuela has not only been halted, but in actuality, she is hurtling backwards.  People have been rioting in the streets, seeking the last vestiges of food supplies to raid do to abusive government induced starvation.

Venezuela is a perfect text book case of what the United States should not be doing.

America the beautiful has been generally blessed with a system of market based economic principles that favored equal opportunity for those willing to work for it.  Unfortunately, in more recent decades, the already difficult job of creating opportunities and benefiting for your labor has been hampered by brutal government intrusions via regulations. So now they make it impossible for America to win on the world economic stage.

Either purposely or through sheer ignorance, America’s course of direction has steadily drifted from a free market economy based upon reward for effort, into punishment for trying.  At every turn, small business owners are treated by government like they are criminals for simply attempting to be successful.  Many local and state governments throughout the union are horrendously hard on small business owners.  They often enact unfairly high taxes or fees on everything from waste baskets, to needed equipment.

Even the big boys are being choked out of the American economy.  Eaton Corporation of Cleveland recently announced a world headquarters more to Ireland.  Carrier, the giant air conditioning manufacturer will soon leave business friendly Indiana and move to Mexico.  The reason being, the highest corporate tax rate on earth and regulations that are much to oppressive.

The government goal of forcing equal results through redistribution of wealth and artificial increases in the minimum wage will continue to cause reductions in the number of entry level jobs.  Unfortunately, those are most needed by both teenagers just starting out and lower skilled older adults.  These efforts to fix what was not broken help drastically affected America.  She evolved from being the world’s manufacturing floor and most innovative economy into an increasingly undesirable place to conduct business activities.

As a result of fixing what was not broken, America is now broken financially, morally, economically, militarily, educationally and racially.  She can only be truly repaired now, by a concerted effort reestablish the enormously successful principles the Founding Fathers enacted long ago. They include a firm recognition of the unalienable God given rights of Life, Liberty, and the Pursuit of Happiness and or Property.  There also has to be an immediate working plan to reduce the enormous economic and Constitution violating federal government.

For the good of the future of our republic and to truly fix America, now that she has been broken, the importance of real education must not be overlooked.  What is taught to one generation dictates what direction the nation takes in the next.  Our current broken state can be fixed with a genuine return to high quality education, critical thinking, and true American history.

Last but not least, America’s first president George Washington along with the majority of the Founding Fathers had an unyielding faith in the God who shed his grace upon the United States.  They left warnings of the negative consequences we are witnessing today, if our republic turned away from the ways of God.  However, I firmly believe that if America (We the People) wisely seeks God’s forgiveness and repent of her wayward ways, she will once again be the glorious shining city on a hill nation under God, Indivisible with Liberty and Justice for all.

RELATED ARTICLE: How Washington Politicians Wasted Billions Trying to ‘Invest in Our Future’

“Creating Jobs” Will Hurt the Economy by T. Norman Van Cott

How many jobs would the Keystone Pipeline project create? Political reporter Tom Murse points out that the answer is a matter of dispute. “Supporters argue that the Keystone XL pipeline would create tens of thousands, if not hundreds of thousands, of new jobs.” But critics “claim those numbers are wildly inflated,” Murse writes.

Both sides assume a higher number would make the project better for the economy. Both sides have it backwards.

Home Economics

The value of work is easy to grasp at the most domestic level: your own home.

Being a homeowner isn’t easy. Among other things, you always seem to have more chores to do than time to do them. The chores are not ends in themselves. Rather, they are means to an end — in this case, making a home and yard more livable or aesthetically pleasing.

Opting to do a chore yourself — “insourcing” in current parlance — isn’t costless. You lose the opportunity to enjoy the fruits of your other labors. For example, you could tackle different chores, spend more time with your family, or work extra hours in the marketplace, increasing your income. Hiring someone else to do the chore — that is, “outsourcing” — isn’t costless, either. It means you can’t buy other things. Costs represent sacrificed alternatives.

The rule when it comes to home ownership isn’t rocket science. Tackle those chores whose ends you value more than their cost. If your water softener breaks, and you value having softened water more than what it would cost either you or the plumber to repair it, then hire the plumber if his cost is less than what it costs you to fix it yourself. (Don’t forget to count the work time you’ll be giving up to act as your own plumber.)

By outsourcing the repair work, you will have “lost a job,” but your standard of living will be higher. By how much? The difference between your cost and the plumber’s cost.

Added household chores — that is, “gaining jobs” — are anything but a blessing. Chores represent hurdles between you and that more livable, aesthetically pleasing home and yard. Each job represents something you’re going to have to give up before your house is the way you want it. “Gaining jobs” to achieve a given objective is synonymous with worsening your situation, not improving it.

The Rule Writ Large — The Case of the Keystone Pipeline

What is rocket science for many is the ability to recognize that the rule for individual households extends to the national household, as we can see in the case of the Keystone Pipeline controversy. The project, which has been a political football for several years, would transfer oil from Canada to the Texas Gulf Coast. The project’s desirability is associated with the number of jobs required for the pipeline’s construction and maintenance. The more jobs created, the more desirable the pipeline, it would seem.

All involved in the discussion fail to apply lessons for individual households to the national household. Pipeline jobs are part of the cost of getting oil from Canada to the Texas Gulf Coast. They are not part of the benefits. The fewer jobs created, the better. Indeed, in the best of all worlds, there would bezero jobs required to transfer oil from Canada to the Texas Gulf Coast. That way, we could get the oil transferred without having to give up anything!

Pipeline proponents who note a large number of required jobs are unwittingly arguing against the project, just as opponents who cite a small number of jobs are unwittingly arguing in its favor.

Beyond the Pipeline

This failure to apply the simple rules for individual households is not restricted to the Keystone Pipeline issue. It pervades economic, business, and political discussions. Government programs come packaged with estimates of the number of new jobs the programs will supposedly create. The more jobs, the merrier. That’s the political refrain. Likewise, state and local economic development bureaucrats tout the number of jobs associated with business relocations or expansions.

One has to wonder whether those who peddle this more-jobs nonsense apply it to their own households. I bet not. Fewer chores, not more, make their homes more enjoyable. National households are no different. Or as Adam Smith put it in his classic, The Wealth of Nations, that which “is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom.”

T. Norman Van CottT. Norman Van Cott

T. Norman Van Cott, professor of economics, received his Ph.D. from the University of Washington in 1969. Before joining Ball State in 1977, he taught at University of New Mexico (1968-1972) and West Georgia College (1972-1977). He was the department chairperson from 1985 to 1999. His fields of interest include microeconomic theory, public finance, and international economics. Van Cott’s current research is the economics of constitutions.

Taxpayers Pay through the Nose for the Minimum Wage by Adam Millsap

A Billion Dollar Stool to Reach the Bottom Rung of the Job Ladder.

In February, the Obama administration proposed a “First Job” initiative. The main goal of the aptly titled initiative is to help unemployed young people obtain their first job by spending $5.5 billion on grants, training, and direct wages. Unfortunately – but unsurprisingly – the press release failed to acknowledge the most significant factor impeding employment in this age group: the minimum wage.

Everyone knows that a first job is a vital step in a young person’s development. Research has shown that work experience at a young age teaches positive work habits, time management, perseverance, and improves self-confidence. Increases in teenage employment also reduce the rate of violent crime. Yet despite these well-known benefits, the US maintains a minimum wage policy that makes it very difficult for all but the most productive teenagers to find a job.

When the minimum wage was discussed in the late 19th and early 20th century it was in the context of preventing the least skilled, most “undesirable” workers from finding a job, with the goal of eradicating the unemployable people. For the next 80-plus years it was common knowledge that a minimum wage would reduce employment among the least-skilled workers. The only debate was about whether such a reduction was desirable from society’s perspective, as many of the appalling eugenicists of the time contended.

As late as 1987, the New York Times editorial staff recommended a minimum wage of $0 because of its negative effects on employment. The Times argued that the minimum wage was an ineffective anti-poverty tool whose employment costs outweighed any benefits from higher wages.

Fast forward to the early 1990s, when an economic study purported to show that a slight increase in the minimum wage may not reduce employment after all. Despite the tenuous results of this study, it provided minimum wage supporters with the ammunition they needed to push for increases in the minimum wage at the federal, state, and local level without worrying about declines in employment. This misinformed thinking continues and is the basis for modern calls to raise the federal minimum wage to $10.10 per hour or even $15 per hour, as some cities have already done.

Meanwhile, the labour force participation rate for 16-19 year olds has fallen from over 50% in the early 1990s to 35% in January 2016. Some of this is due to more young people engaging in extra-curricular activities and attending college, but if those were the only causes then the Obama administration would have little reason to be concerned about teenage employment.

Despite the decline of teenagers in the labour market and the numerous recent studies that show that the minimum wage has adverse effects on teenage employment, the minimum wage continues to be viewed by many as an effective anti-poverty tool with little to no adverse effects. It is this line of thinking that has encouraged the newest proposal calling for billions of taxpayer dollars to provide jobs; the labor market, not the government, is the problem and so the government should intervene.

An all too common occurrence in US policy is that government intervention causes a problem that the government then tries to solve with more intervention, completely ignoring the possibility that the initial intervention was the source of the problem. In this case, price controls at the bottom of the labor-market ladder have prevented young people from getting on the first rung, so now the government wants to roll over a $5.5 billion dollar taxpayer-funded stool to give them a boost.

Government programs rarely achieve their goal so there is good reason to be skeptical of this one, especially since it fails to address the root cause of the problem. A better, more effective solution for helping teenagers gain valuable job skills would be to set the minimum wage at the proper level of $0 and let the labour market work.

Cross-posted from Mercatus.org.

Adam Millsap

Adam Millsap is a PhD student in economics and a graduate instructor at Clemson University in South Carolina. His research interests are in urban economics and public choice theory. He is currently working in Washington, D.C. as an economic policy intern at the Reason Foundation.

2016 Is the Year of Inequality – And Prosperity by Chelsea German

This past weekend, the Economist uploaded a short video to its Facebook page called, “The year of the 1 percent.” The video shows a graph superimposed over the Earth seen from space, while a voice narrates, “2016 is set to be a more unequal world than ever before. For the first time, the richest 1 percent of the population will enjoy a greater share of global wealth than the other 99 percent.”

The Economist’s graph reminded me of another graph, which also shows two lines that eventually cross but tells a very different story. Despite population growth, there are fewer people living in extreme poverty today than ever before:

How can both graphs be accurate? Poverty can decline even as inequality rises, as long as the total amount of wealth in the world is growing.

To ignore this is to fall prey to the “fixed pie fallacy.” Throughout most of human history, global wealth hardly changed. But thanks to trade and industrialization, wealth has skyrocketed, especially since the 1900s, and continues to climb.

At the same time, technological advances have also increased human wellbeing in ways not captured by looking at GDP alone.

Because the pie is growing, focusing solely on inequality, like the Economist’s video does, makes little sense. Most of us would rather have a relatively small slice of a gigantic pie than the biggest slice of a microscopic pie.

In other words, most of us would rather be wealthier in absolute terms, regardless of our relative position. This is why many of us, if given the choice, would choose to be an ordinary person today, instead of a member of the upper crust a century ago or a 17th century king.

Cross-posted from HumanProgress.org.

Chelsea GermanChelsea German

Chelsea German works at the Cato Institute as a Researcher and Managing Editor of HumanProgress.org.

Why We Need to Make Mistakes: Innovation Is Better than Efficiency by Sandy Ikeda

“I think it is only because capitalism has proved so enormously more efficient than alternative methods that is has survived at all,” Milton Friedman told economist Randall E. Parker for Parker’s 2002 book, Reflections on the Great Depression.

But I think innovation, not efficiency, is capitalism’s greatest strength. I’m not saying that the free market can’t be both efficient and innovative, but it does offer people a strong incentive to abandon the pursuit of efficiency in favor of innovation.

What Is Efficiency?

In its simplest form, economic efficiency is about given ends and given means. Economic efficiency requires that you know what end, among all possible ends, is the most worthwhile for you to pursue and what means to use, among all available means, to attain that end. You’re being efficient when you’re getting the highest possible benefit from an activity at the lowest possible cost. That’s a pretty heavy requirement.

Being inefficient, then, implies that for a given end, the benefit you get from that end is less than the cost of the means you use to achieve it. Or, as my great professor, Israel Kirzner, puts it, If you want to go uptown, don’t take the downtown train.

What Is Innovation?

Innovation means doing something significantly novel. It could be doing an existing process in a brand new way, such as being the first to use a GPS tracking system in your fleet of taxis. Or, innovation could mean doing something that no one has ever done before, such as using smartphone technology to match car owners with spare time to carless people who need to get somewhere in a hurry, à la Uber.

Innovation, unlike efficiency, entails discovering novel means to achieve a given end, or discovering an entirely new end. And unlike efficiency, in which you already know about all possible ends and means, innovation takes place onlywhen you lack knowledge of all means, all ends, or both.

Sometimes we mistakenly say someone is efficient when she discovers a new way to get from home to work. But that’s not efficiency; that’s innovation. And a person who copies her in order to reduce his commute time is not an innovator — but he is being efficient. The difference hinges on whether you’re creating new knowledge.

Where’s the Conflict?

Starting a business that hasn’t been tried before involves a lot of trial and error. Most of the time the trials, no matter how well thought out, turn out to contain errors. The errors may lie in the means you use or in the particular end you’re pursuing.

In most cases, it takes quite a few trials and many, many errors before you hit on an outcome that has a high enough value and low enough costs to make the enterprise profitable.) Is that process of trial and error, of experimentation, an example of economic efficiency? It is not.

If you begin with an accurate idea both of the value of an end and of all the possible ways of achieving that end, then you don’t need to experiment. Spending resources on trial and error would be wasteful. It’s then a matter of execution, which isn’t easy, but the real heavy lifting in the market process, both from the suppliers’ and the consumers’ sides, is done by trying out new things — and often failing.

Experimentation is messy and apparently wasteful, whether in science or in business. You do it precisely because you’re not sure how to answer a particular question, or because you’re not even sure what the right question is. There are so many failures. But in a world where our knowledge is imperfect, which is the world we actually live in, most of what we have to do in everyday life is to innovate — to discover things we didn’t know we didn’t know — rather than trying to be efficient. Being willing to suffer failure is the only way to make discoveries and to introduce innovations into the world.

Strictly speaking, then, if you want to innovate, being messy is unavoidable, and messiness is not efficient. Yet, if you want to increase efficiency, you can’t be messy. Innovation and efficiency usually trade off for each other because if you’re focused on doing the same thing better and better, you’re taking time and energy away from trying to do something new.

Dynamic Efficiency?

Some have tried to describe this process of innovation as “dynamic efficiency.” It may be quibbling over words, but I think trying to salvage the concept of efficiency in this way confuses more than it clarifies. To combine efficiency and innovation is to misunderstand the essential meanings of those words.

What would it mean to innovate efficiently? I suppose it would mean something like “innovating at least cost.” But how is it possible to know, before you’ve actually created a successful innovation, whether you’ve done it at least cost? You might look back and say, “Gee, I wouldn’t have run experiments A, B, and C if only I’d known that D would give me the answer!” But the only way to know that D is the right answer is to first discover, through experimentation and failure, that A, B, and C are the wrong answers.

Both efficiency and innovation best take place in a free market. But the greatest rewards to buyers and sellers come not from efficiency, but from innovation.

Sandy IkedaSandy Ikeda

Sandy Ikeda is a professor of economics at Purchase College, SUNY, and the author of The Dynamics of the Mixed Economy: Toward a Theory of Interventionism. He is a member of the FEE Faculty Network.

California’s $15 Minimum Wage Is a Terrible, Unethical ‘Experiment’ by David R. Henderson

The law will have devastating consequences, particularly for immigrants, minorities, and the less educated.

In yesterday’s Washington Post, Charles Lane reports on the move, that’s almost a done deal, to raise California’s minimum wage in stages to a whopping $15 an hour by 2022. Lane, or his editors, wisely titled the article, “The risks of California’s minimum-wage increase.”

Lane writes:

By 2022, when fully phased in (small firms with fewer than 25 workers would have until 2023 to comply), the California minimum wage would represent 69 percent of the median hourly wage in the state, assuming 2.2 percent annual growth from the current median of roughly $19 per hour.

That 69 percent ratio would be all but unprecedented, in U.S. terms and internationally. The current California minimum wage represents about half the state’s median hourly wage, just as the federal minimum wage averaged 48 percent of the national median between 1960 and 1979, according to a 2014 Brookings Institution paper by economist Arindrajit Dube. (It is currently 38 percent of the national median.)

Other industrial democracies with statutory minimum wages typically set theirs at half the national median wage, too.

Even Dube recommends a minimum wage equal to half the median wage. One that’s 69 percent of the minimum wage is 38% higher than the level Dube recommends.

So Dube would oppose such an increase, right?

Wrong. Assuming that Lane reported Dube’s response accurately, he favors the increase. Why? Lane writes:

He [Dube] told me by email that California’s experiment is worth running and monitoring.

But these are humans being experimented on. Worth monitoring? Absolutely. Worth running? No damn way.

Economist Jonathan Meer, whose work Lane also cites, writes on Facebook (I am quoting with permission):

Playing with the March CPS [Current Population Survey], I find that a whopping 11% of young high school dropouts in California have a full time job. 85% of all high school dropouts in California are paid $15 an hour or less.

Among young (under 30) high school dropouts, that number is 96%.

Among *all* black and Hispanic respondents under 30 (irrespective of education), 90% are paid $15/hr or less.

This will not be good.

Cross-posted from Econlog.

David R. HendersonDavid R. Henderson

David Henderson is a research fellow with the Hoover Institution and an economics professor at the Graduate School of Business and Public Policy, Naval Postgraduate School, Monterey, California. He is editor of The Concise Encyclopedia of Economics (Liberty Fund) and blogs at econlib.org.

Making Eli’s Chicago Cheesecake — A Job Americans won’t do?

The new UN High Commissioner for Refugees, after visiting Senator John McCain in Washington and signing an agreement to get more money from U.S. taxpayers, visited Eli’s Cheesecake Company in Chicago.

McCain and Grandi

Arizona Senator John McCain [photo right] warmly greets new UN High Commissioner for Refugees as Grandi comes to D.C. for his annual dip into the U.S. Treasury. Grandi is ‘head hunter’ for American big business.

We learn that a federal refugee contractor lines up jobs for refugees with Eli’s!

Contractor RefugeeOne took in $2.1 million from taxpayers in 2014 to act as an employment service for refugees.  It brags that it brought 16,000 refugees to Chicago since 1982!

What! no Americans willing to make cheesecake? Or, is there some special tax incentive for Eli’s to hire foreign labor?

The UN trumpets the news here:

CHICAGO, United States, March 18 (UNHCR) – During a week-long visit to the United States, the head of the United Nations refugee agency welcomed Washington’s longstanding commitment to resettling more refugees than any other country and emphasized that managing the refugee crisis is a global responsibility.

Speaking on a visit to Chicago, where he met with refugees, US lawmakers and resettlement agencies, UN High Commissioner for Refugees Filippo Grandi said: “Resettlement addresses the needs of the most vulnerable and is the safest way to move people from one country to another. Refugees flee terror, they don’t bring terror to countries. Their arrival is very carefully vetted, so there should be no fear.”

[….]

While in the Midwestern city, Grandi visited RefugeeOne, a Chicago area non-profit that works with refugeesfleeing war, persecution and terror, helping them to build new lives of safety, dignity and self-reliance.

Marc_Schulman

Eli’s CEO Marc Schulman

 

Finding employment is a major step for a refugee to become self-reliant and one of the businesses that RefugeeOne has long partnered with is Eli’s Cheesecake Company, which has been employing refugees for over 25 years.

[….]

“It takes UNHCR to protect us, RefugeeOne to place us in jobs and people like Marc to help us become productive,” he added, referring to the President of Eli’s Cheesecake Company.

Eli’s CEO Marc Schulman gets cheap immigrant labor and bakes cakes for Obama!

RefugeeOne is a subcontractor of three BIG contracting agencies of the US State Department:  Church World Service, Episcopal Migration Ministries, and Lutheran Immigration and Refugee Service.

So, no low income Americans want the jobs? Or, it just isn’t cool enough for these Christian charities to help Americans first?

See Leo Hohmann at WND about African Americans being hammered by competition with immigrant labor, here.

Tennessee: Refugee agency places Muslim migrants in jobs Americans would love to have!

And, adding insult to injury, the biggest chunk of their funding comes from you—the taxpayer!

Update!  National layoff numbers skyrocket! Breaking story.

This story from The Tennessean is meant to give the impression that this program of World Relief (National Association of Evangelicals) is doing wonderful humanitarian work by helping immigrants and refugees with advanced degrees find good paying jobs.

But, if you are like me, you reacted to this story by immediately asking these questions:

What about Americans who have advanced degrees and no work?  What about all of our children, recent college graduates (with big student loan debt), who can’t find jobs? Shouldn’t they come first?

Not according to World Relief’s REACH program or The Tennessean.

As is too often the case, one must read through refugee sob stories and eventually the reader learns that there are 10,000 immigrants in Tennessee who need high level jobs—-ahhhhhh!  10,000!  I wonder how many Americans with advanced degrees are competing with them for limited job opportunities?  Of course The Tennessean would never give us that number!

And, the American job seekers don’t have the services your tax dollars provide the immigrants through REACH. Here is what World Relief (a so-called Christian charity) does for the immigrants according to The Tennessean.

REACH, in Nashville, connects immigrants to mentors, who seek to introduce them to local individuals in their field, and coaches them through licensing processes. The organization also offers training on resumes and interviews. Between licenses and networking, it typically takes between nine and 12 months for an individual to move from a survival job to a professional one.

REACH, launched in 2011, has been able to help as many as 100 people a year. Among them are Coptic Christians fleeing Egypt, Kurds from Iraq and those coming from Congo after fleeing ethnic persecution in Rwanda.

Watch an unidentified REACH employee explain how they helped ‘Ahmed’ get a $93,000 a year job!

Here is what a reader said this morning about this story:

I have a very close friend, also an Ivy League masters graduate who is struggling to find a job in the Middle Tennessee job market. In fact, I have several friends, middle-age, well educated, intelligent, hard-working contributors to their communities who live in Middle Tennessee, and who are either unemployed or underemployed.

But the newspaper and the Chamber of Commerce isn’t taking up their cause.

Neil-MacDonald-3112161-220

Neil MacDonald of the Chamber of Commerce told The Tennessean: “If we want to continue to compete on an international basis, it’s essential we continue our growth in diversity.”

Nor do my friends have federal contractor agencies helping them find jobs.

And my friends aren’t wired-in either. They too are struggling.

At least the refugees and their federal contractors can blame the receiving community for not being more “welcoming” and ensuring that new arrivals get the jobs they thought would be waiting for them when they arrived.

According to this article, there are 10,000 refugees in Tennessee who can’t find the jobs they want. Predictably, federal refugee resettlement contractor World Relief and the refugees themselves blame the receiving community as “unwelcoming” because circumstances haven’t unfolded as they had planned.

But, this, of course, doesn’t stop World Relief from keeping their own cash flow going by bringing ever more refugees to the area.

And the Nashville Chamber of Commerce is telling us that businesses here value “diversity” over workers that are raised, educated and have roots in our Tennessee communities.

Speaking of World Relief’s financial position, World Relief Nashville directs people to its national headquarters where we can examine recent financial documents and their Form 990s.

Here we learn that in 2014, World Relief (National Association of Evangelicals) is a $61 million a year operation and that $41 million comes directly from U.S. taxpayers.

They could not supply all of these benefits to job-seeking immigrants if you (or the good-for-nothing Congress!) weren’t willing to pay for it.

Go here to see who else is funding World Relief’s REACH job hunting program.

More on MacDonald, here.

See 83 previous posts on Nashville by clicking here.

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Low-Skilled Workers Flee the Minimum Wage: How State Lawmakers Exile the Needy by Corey Iacono

What happens when, in a country where workers are free to move, a region raises its minimum wage? Do those with the fewest skills seek out the regions with the highest wage floors?

New minimum wage research by economist Joan Monras of the Paris Institute of Political Studies (Sciences Po) attempts to answer that question. Monras theoretically shows that there should be a close relationship between the employment effects of raising the minimum wage and the migration of low-skilled workers.

When the demand for local low-skilled labor is relatively unresponsive (or inelastic) to wage changes, raising the minimum wage should lead to an influx of low-skilled workers from other states in search of better-paying jobs. On the other hand, if the demand for low-skilled labor is relatively responsive (or elastic), raising the minimum wage will lead low-skilled workers to flee to states where they will more easily find employment.

To test the model empirically, Monras examined data from all the changes in effective state minimum wages over the period 1985 to 2012. Looking at time frames of three years before and after each minimum wage increase, Monras found that

  1. As depicted in the graph below on the left, those who kept their jobs earned more under the minimum wage. No surprise there.
  2. As depicted in the graph below on the right, workers with the fewest skills were having an easier time finding full-time employment prior to the minimum wage increase. But this trend completely reversed as soon as the minimum wage was increased.
  3. A control group of high-skilled workers didn’t experience either of these effects. Those affected by the changing laws were the least skilled and the most vulnerable.

These results show that the timing of minimum wage increases is not random.

Instead, policy makers tend to raise minimum wages when low-skilled workers’ real wages are declining and employment is rising. Many studies, misled by the assumption that the timing of minimum wage increases is not influenced by local labor demand, have interpreted the lack of falling low-skilled employment following a minimum wage increase as evidence that minimum wage increases have no effect on employment.

When Monras applied this same false assumption to his model, he got the same result. However, to observe the true effect of minimum wage increases on employment, he assumed a counterfactual scenario where, had the minimum wages not been raised, the trend in low-skilled employment growth would have continued as it was.

By making this comparison, Monras was able to estimate that wages increased considerably following a minimum wage hike, but employment also fell considerably. In fact, employment fell more than wages rose. For every 1 percent increase in wages, the share of a state’s population of low-skilled workers in full-time employment fell by 1.2 percent. (The same empirical approach showed that minimum wage increases had no effect on the wages or employment of a control group of high-skilled workers.)

Monras’s model predicts that if labor demand is sensitive to wage changes, low-skilled workers should leave states that increase their minimum wages — and that’s exactly what his empirical evidence shows.

According to Monras,

A 1 percent reduction in the share of employed low-skilled workers [following a minimum wage increase] reduces the share of low-skilled population by between .5 and .8 percent. It is worth emphasizing that this is a surprising and remarkable result: workers for whom the [minimum wage] policy was designed leave the states where the policy is implemented.

These new and important findings reinforce the view that minimum wage increases come at a cost to the employment rates of low-skilled workers.

They also pose a difficult question for minimum wage proponents: If minimum wage increases benefit low-skilled workers, why do these workers leave the states that raise their minimum wage?

Corey IaconoCorey Iacono

Corey Iacono is a student at the University of Rhode Island majoring in pharmaceutical science and minoring in economics.

What Are Your Odds of Making It to the 1%? by Chelsea German

Your odds of “making it to the top” might be better than you think, although it’s tough to stay on top once you get there.

According to research from Cornell University, over 50 percent of Americans find themselves among the top 10 percent of income-earners for at least one year during their working lives. Over 11 percent of Americans will be counted among the top 1 percent of income-earners (i.e., people making at minimum $332,000) for at least one year.

How is this possible? Simple: the rate of turnover in these groups is extremely high.

Just how high? Some 94 percent of Americans who reach “top 1 percent” income status will enjoy it for only a single year. Approximately 99 percent will lose their “top 1 percent” status within a decade.

Now consider the top 400 U.S. income-earners — a far more exclusive club than the top 1 percent. Between 1992 and 2013, 72 percent of the top 400 retained that title for no more than a year. Over 97 percent retained it for no more than a decade.

HumanProgress.org advisory board member Mark Perry put it well in his recent blog post on this subject:

Whenever we hear commentary about the top or bottom income quintiles, or the top or bottom X% of Americans by income (or the Top 400 taxpayers), a common assumption is that those are static, closed, private clubs with very little dynamic turnover. …

But economic reality is very different — people move up and down the income quintiles and percentile groups throughout their careers and lives.

What if we look at economic mobility in terms of accumulated wealth, instead of just annual income (as the latter tends to fluctuate more)?

The Forbes 400 lists the wealthiest Americans by total estimated net worth, regardless of their income during any given year. Over 71 percent of Forbes 400 listees — and their heirs — lost their top 400 status between 1982 and 2014.

So, the next time you find yourself discussing the very richest Americans, whether by wealth or income, keep in mind the extraordinarily high rate of turnover among them.

And even if you never become one of the 11.1 percent of Americans who fleetingly find themselves in the “top 1 percent” of US income-earners, you’re still quite possibly part of the global top 1 percent.

Cross-posted from HumanProgress.org.

Chelsea German

Chelsea German

Chelsea German works at the Cato Institute as a Researcher and Managing Editor of HumanProgress.org.

Busting Myths about Income Inequality by Chelsea German

Politicians speak often about income inequality. But that doesn’t mean they are well-informed. Indeed, they propagate four myths about the issue.

  1. Most often, those vying for elected office describe income inequality as static — as though the people who make up each income group do not change.
    The “top 1 percent” or the “top 10 percent” of income-earners are portrayed as exclusive clubs that seldom accept new members or see old and current members leave. No fluidity, no change.
  2. Political figures also have a tendency only to blame income inequality on factors like trade, immigration, an insufficiently high minimum wage, inadequate taxes on the wealthy, or the vague concept of “greed.”
  3. They typically ignore the sizeable role of choices under an individual’s control.
  4. They downplay the role of regressive government regulations.

Reality is much more interesting than soundbites.

Americans often move between different income brackets over the course of their lives. Indeed, over 50 percent of Americans find themselves among the top 10 percent of income-earners for at least one year during their working lives, and over 11 percent of Americans will be counted among the top 1 percent of income-earners for at least one year.

Fortunately, a great deal of what explains this income mobility are choices that are largely within an individual’s control. While people tend to earn more in their “prime earning years” than in their youth or old age, other key factors that explain income differences are education level, marital status, and number of earners per household. As AEI’s Mark Perry recently wrote:

The good news is that the key demographic factors that explain differences in household income are not fixed over our lifetimes and are largely under our control (e.g. staying in school and graduating, getting and staying married, etc.), which means that individuals and households are not destined to remain in a single income quintile forever.

According to the U.S. economist Thomas Sowell, whom Perry cites, “Most working Americans, who were initially in the bottom 20 percent of income-earners, rise out of that bottom 20 percent. More of them end up in the top 20 percent than remain in the bottom 20 percent.”

While people move between income groups over their lifetime, many worry that income inequality between different income groups is increasing. The growing income inequality is real, but its causes are more complex than the demagogues make them out to be.

Consider, for example, the effect of “power couples,” or people with high levels of education marrying one another and forming dual-earner households. In a free society, people can marry whoever they want, even if it does contribute to widening income disparities.

Or consider the effects of regressive government regulations on exacerbating income inequality. These include barriers to entry that protect incumbent businesses and stifle competition. To name one extreme example, Louisiana recently required a government-issued license to become a florist. Lifting more of these regressive regulations would aid income mobility and help to reduce income inequality, while also furthering economic growth.

If our elections were more about the substance of serious public policy issues, rather than demagoguery and soundbites, achieving reasonable solutions could move from the land of make-believe to our complex, dynamic reality.

This article first appeared at CapX.

Chelsea GermanChelsea German

Chelsea German works at the Cato Institute as a Researcher and Managing Editor of HumanProgress.org.

The Minimum Wage Hurt the Young and Low-Skilled almost as Much as the Recession by Preston Cooper

Hiking the minimum wage killed almost as many low-end jobs as did the economic collapse.

This is University of California-San Diego Professor Jeffrey Clemens’ conclusion from his just published supplement to his landmark 2014 study. He says that federal minimum wage hikes from 2006 to 2009 accounted for 43 percent of the decline in employment among young, low-skilled workers during the Great Recession.

Young, low-skilled workers — defined as individuals between 16 and 30 without a high school degree — are the most likely to be hurt by minimum wage hikes because they are the least likely to have skills that employers consider valuable. Businesses might be willing to take on these individuals at low wages in order to train them before moving them up to higher-paying work. But when the government sets a high minimum wage, that first step on the career path might disappear.

Clemens’ new study confirms this longstanding theory. Young, low-skilled workers were hit hard by the minimum wage, while most other groups were relatively unaffected.

Several strengths set the Clemens study and its predecessor (coauthored by Michael Wither) apart from a large body of research on the minimum wage. Not least among them is its time frame. The paper covers a seven-year period from 2006 to 2012, unlike other studies such as the oft-cited 1994 paper by David Card and Alan Krueger. That paper, which found no negative effect of the minimum wage, only looked at a period of eleven months.

The time frame is critical because the damaging effects of minimum wage increases are often delayed. Immediately after a wage hike, businesses usually do not wish to significantly alter their business plans. Instead of laying off workers, they might raise prices or cut back on fringe benefits. But after one or two years, fewer businesses will open, existing businesses will close faster, and fewer jobs will be available.

Clemens’ study is unique in that it separates out workers by both age and skill level, to isolate where the worst effects of the minimum wage occur. The finding that young people without a high school degree are hurt the most does not bode well for minority communities: high school graduation rates are lower for black (68 percent) and Hispanic (76 percent) students than for white (85 percent) and Asian (93 percent) students. This may be one of the reasons that the white teen unemployment rate, at 14 percent, is so much lower than the black teen unemployment rate of 24 percent.

Rather than proposing blanket increases in the minimum wage to $10 or even $15 per hour, policymakers should look for ways to ensure that vulnerable individuals are spared. One solution is to allow anyone under 25 to work for a special sub-minimum wage, thus increasing their employment opportunities while still satisfying the political need to maintain higher standard minimum wages.

The new evidence presented in Clemens’ paper is an important reminder that well-intentioned policies such as the minimum wage have costs. The minimum wage tends to benefit older, established workers at the expense of the young and the unskilled. As we move into 2016, policymakers should resolve to find more innovative solutions to poverty than the minimum wage.

This post originally appeared at CapX.

Preston CooperPreston Cooper

Preston Cooper is a Policy Analyst at Economics21.