An Economist’s 10 Objections to the Minimum Wage by Mark J. Perry

One of the biggest political issues right now nationwide, and one that will likely be an important issue in next year’s presidential election is the minimum wage.

Economists are generally in agreement that increases in the minimum wage, especially large increases to $15 an hour like in Seattle, will reduce employment opportunities for unskilled workers.

Despite the inevitable negative outcomes that will surely result from a $15 minimum wage — we’ve already seen negative effects in Seattle’s restaurant industry — politicians and unions seem intent on engaging in an activity that could be described as an “economic death wish.”

Proponents of a higher minimum wage point to the obvious and visible benefits to some workers — those who may find a job at the higher wage or keep their existing job and get a higher wage.

But that is only part of the story — there are many less obvious downsides to an artificially high minimum wages that take longer to recognize, and it’s those inevitable negative effects that lead economists to generally oppose minimum wage laws.

What are the specific objections of economists to the minimum wage and why do they generally favor market wages instead? Here are ten reasons in favor of market wages over a government-mandated minimum wage:

  1. Proposed minimum wages are almost always arbitrary and never based on sound economic analysis. Why $10.10 an hour and not $9.10? Why $15 an hour and not $16 an hour?
  1. A uniform federal minimum wage may be sub-optimal for many states, and uniform state minimum wages may be sub-optimal for many cities. A one-size-fits-all approach to the minimum wage is really a “one-size-fits-none.”
  1. Minimum wage laws require costly taxpayer-funded monitoring and enforcement mechanisms, whereas market wages don’t.
  1. Minimum wage laws discriminate against unskilled workers in favor of skilled workers, and the greatest amount of discrimination takes place against minority groups, like blacks.
  1. Adjustments to total compensation following minimum wage laws will disadvantage workers in the form of reduced hours, reduced fringe benefits, and reduced on-the-job training.
  1. Many unskilled workers will be unable to find work and will be denied valuable on-the-job training and the opportunity to acquire experience and skills.
  1. Minimum wage laws prevent mutually advantageous, voluntary labor agreements between employers and employees from taking place.
  1. To the extent that higher minimum wages result in lower firm profits and higher retail prices, that’s a form of legal plunder by workers from employers and consumers that is objectionable.
  1. Market-determined wages are efficient, whereas government-mandated wages create distortions in the labor markets that prevent labor markets from clearing.
  1. Like all government price controls, minimum wage laws are distortionary. If you trust government officials and politicians to legislate and enforce a minimum wage for unskilled workers, you should logically trust those same bureaucrats to set all prices, wages and interest rates in the economy. Realistically, if you agree that those economy-wide price controls would be undesirable, then you should also agree that the minimum wage law is also undesirable.

In summary, economists are not unconcerned about unskilled workers, we are actually very concerned about those workers. And it is because of that concern to maximize employment opportunities that economists oppose the minimum wage.

Simply put, we would rather see unskilled workers employed at a market wage — even if that wage is only $5, $6 an hour — that allows them to gain valuable work experience and on-the-job training, than to be unemployed at $0.00 an hour. And unfortunately, a $15 minimum wage maximizes the probability that an unskilled worker will be unemployed at $0.00 an hour instead of being gainfully employed.

This post first appeared at InsideSources. Reprinted with permission.

Mark J. PerryMark J. Perry

Mark J. Perry is a scholar at the American Enterprise Institute and a professor of economics and finance at the University of Michigan’s Flint campus.

What would I ask Republican Presidential candidates tonight?

Someone asked me to prepare a list of questions I might ask Republican candidates tonight in Milwaukee.  So I wrote up a quick list and thought I would share them with you.  Now mind you, there is no way that anyone would ever ask the candidates if they would scratch the whole darn Refugee Admissions Program, so that is not one of my questions.

  1. The Obama Administration has said recently that it will admit 10,000 Syrians in the fiscal year 2016 resettlement of 85,000 third world refugees to American towns and cities in 48 states, yet the Director of the FBI James Comey recently told Congress that the Syrians, coming from a failed state, could not be properly screened. In this battle between the U.S. State Department (that wants many more than 10,000), and the FBI (Homeland Security concerned with the possible infiltration of ISIS in the refugee population), how would you bring your cabinet together on this critical issue?
  2. The Center for Immigration Studies recently released a new study which finds that a Syrian family of four resettled in America will cost U.S. taxpayers over a quarter of a million dollars over five years. Would that factor figure into your decision on how many refugees America can afford because it is the President who has almost exclusive power for determining refugee numbers and makes that determination every September?
  3. Recently Senator Jeff Sessions office released data on welfare use of refugees in America and found that 90% of Middle Eastern refugees were using some form of social services—food stamps, cash assistance, Medicaid and so forth—and that rate was higher for that group than refugees from elsewhere in the world. There are also reports of widespread fraud in the welfare application process. What would you do to discourage fraud and limit welfare for all classes of immigrant?
  4. The United Nations is choosing most refugees admitted to the U.S. (over 20,000 Syrians have been referred by the UN) and 97% of the Syrians chosen thus far have been Muslims who are presently housed in UN camps. Would you go against the UN and seek out Christian and other religious minorities in need of resettlement as a first priority?
  5. In 2014, the U.S. admitted 67% of the refugees that were resettled anywhere, the next highest country was Canada with 9%. If you were President would you urge a more equitable distribution to first world countries?
  6. The world is watching in horror as Europe is being inundated with tens of thousands of migrants. Approximately 8,000 are arriving in Germany each day (originally welcomed by the government). Only about half are Syrians and the largest percentage are economic migrants, not legitimate refugees. If you, as President, had a private meeting with Chancellor Angela Merkel, what would you say to her?
  7. The refugees being housed presently in Turkey, Lebanon and Jordan will be there temporarily, perhaps years, but they will not be given citizenship rights. Those resettled to the U.S. and other western countries are permanent residents on a track to citizenship. What alternative would you suggest for managing, especially the Syrian flow, short of making tens of thousands of them U.S. citizens?
  8. Our present system of resettling refugees is virtually controlled by the UN, the U.S. State Department and nine federal contractors which monopolize the resettlement of refugees and even choose the towns and cities where they will go. In a ______ Administration would you seek to reform this out-of-control resettlement program and give some authority to state and local elected officials which virtually have none right now? Would your administration propose or support existing reform legislation?
  9. Non-profit organizations affiliated with some religious denominatons are being paid millions of tax dollars each year to bring refugee families to cities of their choosing and in three to six months that family is expected to be on its own and the non-profit then brings in the next group incentivized by a federal payment that is calculated by the head (per refugee). Would you pledge to reform the program to put more responsibility back on to private charity as the original act of 1980 invisioned?
  10. There have been many reports recently of school systems overloaded with needy immigrant students who require extra help with learning English and to deal with mental traumas, would your administration seek a moratorium on resettlement until officials in overloaded cities and local and state taxpayers could catch their breath?

Don’t hold your breath!  I would be blown away if there is any question relating to refugees tonight in Milwaukee, even though, as I said in my previous post this morning—immigration is THE issue for 2016!

RELATED ARTICLES:

Note to Antonio Guterres! Terrorists do use refugees as cover to get into Europe

Another South Carolina County Council says no to refugee resettlement

Obama plan to use executive amnesty for a half a million illegal aliens, blocked in 5th Circuit Appeals Court decision

In Government, Nobody Quits – And You Can’t Get Fired by Daniel Bier

Government work is pretty sweet, if you can get it. If you have to pay for it… not so much.

The government has one of the highest paid workforces in the country. Federal bureaucrats make 78% more in total compensation than people in the private sector. State and local employees make on average 25% more.

Combined with laws that make it extremely difficult to fire public employees, even for explicit or criminal misconduct, it’s no wonder that hardly anyone leaves.

A CBS News investigation found,

At the Environmental Protection Agency (EPA), red tape is preventing the removal of a top level employee accused of viewing porn two to six hours a day while at work, since 2010. Even though investigators found 7,000 pornographic files on his computer and even caught him watching porn, he remains on the payroll. …

The administrative process meant to prevent against politically motivated firings is the civil servant protection system. The rules give employees the right to appeal a termination, a process that can take up two years. … [CEO Max Stier] said those rules make it nearly impossible to fire poor performers or problematic employees, even when they’ve committed egregious violations. …

A CBS News analysis of cases under review by the Merit System Protection Board (MSPB), an appeals board for federal workers, found other instances of employees who had committed seemingly fireable offenses who were later reinstated to their jobs, often with back pay and interest. …

Five years ago, the General Services Administration (GSA) spent more than $800,000 on a lavish conference in Las Vegas. They were served 1,000 sushi rolls costing $7 each and a clown and mind reader were hired for entertainment. Two managers were initially fired but got their jobs back after the MSPB reversed the decision. …

Firing belligerent or hostile workers is difficult, too. One former manager told CBS News he tried for more than a year to fire an employee who was intimidating co-workers and superiors, at one point even chasing a manager down the hall.

Upset about being reprimanded, the employee sent him numerous menacing emails, including one that read: “I can stand over you to [sic]. I am 6 foot 3 inches and I weigh 265, and I am not backing down. … And by the way, I do know where you live.”

The federal government is not unique in this. Rules vary across cities and states, but thanks to union contracts and special “law enforcement bill of rights,” it’s almost impossible to fire a cop, even for obvious criminal misconduct, let alone ordinary incompetence.

The same is often true for teachers. Thank to tenure, union rules, and other political privileges, firing a bad teacher is really hard. New York City alone spends $22 million a year to keep problem teachers in “rubber rooms,” away from kids, as they bounce around the arbitration process while the city tries to fire them.

Lest you think this is just anecdotal, look at the data on job separations. The turnover rate in government is a third of that in private industry.

Why is that? Because, to a close approximation, nobody quits. The quit rate of government employees is 70% lower than the private sector. (This also rebuts the claim that we should pay public employees so much because they have such hard jobs… that they almost never want to leave.)

And, to a close approximation, nobody gets fired, either. The rate of firing and layoffs for public employees is 71% lower than in the private economy (except for once in the summer of 2010, when states had such massive revenue shortfalls they literally did not have the money to pay them).

If you want, you can choose to believe that government employees are somehow three times more competent, honest, and productive than private employees, but that doesn’t seem very probable. What seems more likely is that government officials are just like the rest of us, but the political system protects their jobs and pays them substantially more than their services would be worth in the private sector.

In general, it’s a sweetheart deal for public employees: make a bunch more money, don’t worry about getting fired or laid off, retire and collect a pension (or two, or three). That doesn’t make them bad people (although it should concern all of us that bad apples are very hard to remove from government).

But neither does that make it a good deal for the people they are ostensibly working for and who are forced through taxes to pay their salary (and pay the costs whenever one of them gets sued for hurting someone).

The fact that public employees never leave is both a cause and a symptom of the problem with government. It makes public services — from police to education to the DMV — less efficient, less productive, and more expensive than they ought to be. But more fundamentally, it exposes the danger of having a government so big that public sector unions can dictate terms to the elected officials who are supposed to represent the taxpayers and the general public.

Daniel BierDaniel Bier

Daniel Bier is the editor of Anything Peaceful. He writes on issues relating to science, civil liberties, and economic freedom.

Is Trump Right that NAFTA Was a “Disaster”? by Donald J. Boudreaux

Assessing the consequences of NAFTA, Mark Thoma says, “For the U.S. – where the Bill Clinton administration sold the agreement as a job-creating policy because U.S. exports would grow by more than its imports – the agreement has not lived up to its promise” (“Is Donald Trump right to call NAFTA a ‘disaster’?” Oct. 5).

Disappointingly, Prof. Thoma writes as if he were a politician rather than the economist that he is. Politicians routinely sell freer trade as a source of net job and export creation. Yet economists since Adam Smith — and ranging across the ideological spectrum from Milton Friedman to Paul Krugman — have consistently rejected such claims as justifications for free trade.

Economists understand that freer trade neither increases nor decreases the total number of jobs in an economy. Instead, freer trade changes the kinds of jobs performed in an economy by shifting jobs from industries that are comparatively inefficient to industries that are comparatively efficient.

Likewise, the correct case for freer trade does not depend upon exports growing by more than imports. First, there’s no reason to expect freer trade to result in such an outcome. Second, such an outcome, should it occur, might well be lamentable for it could reveal that investment opportunities at home are consistently less attractive than are investment opportunities abroad.

Cross-posted from Cafe Hayek.

Donald J. Boudreaux

Donald J. Boudreaux

Donald Boudreaux is a professor of economics at George Mason University, a former FEE president, and the author of Hypocrites and Half-Wits.

Florida: Teacher Uprising against Principal at Miami-Dade Special Education Center?

RoosThere seems to be growing discontent amongst faculty and staff against principal Dr. Tracy Roos (pictured right) at Neva King Cooper Educational Center, a Special Education Center within the Miami-Dade County Public Schools system.

Last week, every teacher received a letter that was mailed to their home purportedly from a Tallahassee-based group, Ethical Educators of America, which was highly critical of Dr. Roos.

The turmoil at the school seems to stem from the removal of the previous principal, Dr. Albert T. Fernandez, and assistant principal, Henny Cristobal, which was determined to be retaliatory by the Florida Department of Education and DOAH Judge Edward T. Bauar.

The decision ended up costing Miami-Dade and Florida taxpayers over $260,000 in legal fees and back pay to Dr. Fernandez.

There is disagreement over some of the content of the letter by teachers speaking on an anonymous basis for fear of retaliation and retribution, but agreement over how Dr. Roos treats her employees.

According to a legal complaint filed recently in state court in Miami-Dade, on April 9, 2013, Principal Roos delivered her sheep’s clothing address to her employees at a staff meeting:

And damn it!  When you see something wrong, speak up!  And I’m pissed, instead of hiding behind your, your little sheep clothing . . .

Could this incident be the “meltdown before the faculty” mentioned in the first page of the letter?

The legal complaint also details how teachers were threatened and/or intimidated and how one teacher was wrongfully terminated and then reinstated by a DOAH judge last May.

Teachers speaking on anonymity disagree on a number of points and offer the following corrections to the letter: that the Region Office did not established the curriculum, it was the District Special Education Office; Dr. Roos was not appointed by the Region but by the School Board; concerning the first paragraph on the second page, it is not true- however, District personnel, not Region, assisted in Dr. Fernandez’s removal; they would have lost over $3 million in funding, the letter states $1 million; the last sentence of the third paragraph on the second page is not true; and it was not a “totally worthless program,” and the program did enhance the students’ lives academically and personally.

Moreover, all parts of the letter which states policy came from the Region Office actually came from the District and/or District’s Special Education Office according to the teachers.

Media inquiries were made to the Florida Department of Education and to Dr. Roos.

So far, no one has commented.

We take no position if the letter is true in whole or in part, that is up to you the reader.

We report, you decide.

RELATED ARTICLE: Miami-Dade Night School Principal arrested for Kickbacks, Bribery

A Higher Minimum Wage Will Make Us Meaner by Scott Sumner

In a recent post, I argued that government monopolies often offered worse service to customers than competitive private firms. In this post (which will have something to offend both progressives and conservatives), I’ll look at a different but related problem.

A few days ago there was a big debate about a New York Times expose on working conditions at Amazon.com. (By the way, it would have been useful for the NYT to compare labor practices at the Seattle company to working conditions at firms operating in the Amazon region of Brazil.)

Many liberals were appalled, while conservatives often wondered why, if working conditions were so bad at Amazon, people didn’t simply “get another job.” I have sympathy for both sides, but probably a bit more for the conservative side.

One liberal objection might be that it’s not easy to get another job. (And perhaps that’s because monetary policy since 2008 has been too contractionary. And perhaps that’s because conservatives have complained about the Fed’s QE/low interest rate policies, which has made the Fed reluctant to do more.)

Regardless of how you feel about monetary policy, it’s clear that if employers feel they have a “captive audience” of workers, who are terrified of losing their jobs, it would be easier for the employer to crack the whip and drive the employees to work extremely hard. One advantage of a healthy job market is that workers have more power to negotiate pleasant working conditions.

But progressives also have some major weaknesses in this area. They tend to favor policies such as New York City’s rent controls, and the new $15 minimum wage being gradually phased in in some western cities.

I like to think of these policies as engines of meanness. They are constructed in such a way that they almost guarantee that Americans will become less polite to each other.

In New York City, landlords with rent controlled units know that the rent is being artificially held far below market, and thus that they would have no trouble finding new tenants if the existing tenant is unhappy. So then have no incentive to upgrade the quality of the apartment, or to quickly fix problems. They do have an incentive to discriminate against minorities that, on average, are more likely to become unemployed, and hence unable to pay the rent. Or young people, who might damage the unit with wild parties.

Wage floors present the same sort of problem as rent ceilings, except that now it’s the demanders who become meaner, not the supplier. Firms that demand labor in Los Angeles in the year 2020 will be able to treat their employees very poorly, and still find lots of people willing to work for $15/hour.

Even worse, this regulation will interact with the migrant flow from Latin America, to produce another set of unanticipated side effects. In some developing countries there is a huge army of unemployed who go to the cities, hoping to get one of the few high wage jobs available in the “formal” sector of the economy. With a $15 minimum wage, migrants will come from Mexico until the disutility of waiting for a good job just balances the expected utility of landing one of those good jobs. You’ll have lots more angry, frustrated, young Mexican illegal immigrants with lots of time on their hands. What could go wrong?

One reason that I am what Miles Kimball calls a “supply-side liberal” is that I believe my preferred policy mix (NGDP targeting, plus free markets) is most likely to produce the sort of “nice” society I grew up with (in Madison, Wisconsin).

This post first appeared at Econlog. ©

Scott Sumner
Scott Sumner

Scott B. Sumner is the director of the Program on Monetary Policy at the Mercatus Center and a professor at Bentley University. He blogs at the Money Illusion and Econlog.

Obama Administration Declares War on Franchisors and Subcontractors by Walter Olson

In a series of unilateral moves, the Obama administration has been introducing an entirely new regime of labor law without benefit of legislation, upending decades’ worth of precedent so as to herd as many workers into unions as possible.

The newest, yesterday, from the National Labor Relations Board, is also probably the most drastic yet: in a case against waste hauler Browning-Ferris Industries, the Board declared that from now on, franchisors and companies that employ subcontractors and temporary staffing agencies will often be treated as if they were really direct employers of those other firms’ workforces: they will be held liable for alleged labor law violations at the other workplaces, and will be under legal compulsion to bargain with unions deemed to represent their staff.

The new test, one of “industrial realities,” will ask whether the remote company has the power, even the potential power, to significantly influence working conditions or wages at the subcontractor or franchisee; a previous test sought to determine whether the remote company exercised “ ‘direct and immediate impact’ on the worker’s terms and conditions — say, if that second company is involved in hiring and determining pay levels.”

This is a really big deal; as our friend Iain Murray puts it at CEI, it has the potential to “set back the clock 40 years, to an era of corporate giants when few people had the option of being their own bosses while pursuing innovative employment arrangements.”

  • A tech start-up currently contracts out for janitorial, cafeteria, and landscaping services. It will now be at legal risk should its hired contractors be later found to have violated labor law in some way, as by improperly resisting unionization. If it wants to avoid this danger of vicarious liability, it may have to fire the outside firms and directly hire workers of its own.
  • A national fast-food chain currently employs only headquarters staff, with franchisees employing all the staff at local restaurants. Union organizers can now insist that it bargain centrally with local organizers, at risk for alleged infractions by the franchisees. To escape, it can either try to replace its franchise model with company-owned outlets — so that it can directly control compliance — or at least try to exert more control over franchisees, twisting their arms to recognize unions or requiring that an agent of the franchiser be on site at all times to monitor labor law compliance.

Writes management-side labor lawyer Jon Hyman:

If staffing agencies and franchisors are now equal under the National Labor Relations Act with their customers and franchisees, then we will see the end of staffing agencies and franchises as viable business models.

Moreover, do not think for a second that this expansion of joint-employer liability will stop at the NLRB. The Department of Labor recently announced that it is exploring a similar expansion of liability for OSHA violations. And the EEOC is similarly exploring the issue for discrimination liability.

And Beth Milito, senior legal counsel at the National Federation of Independent Business, quoted at The Hill: “It will make it much harder for self-employed subcontractors to get jobs.”

What will happen to the thriving white-van culture of small skilled contractors that now provides upward mobility to so many tradespeople? Trade it in for a company van, start punching someone’s clock, and just forget about building a business of your own.

What do advocates of these changes intend to accomplish by destroying the economics of business relationships under which millions of Americans are presently employed? For many, the aim is to force much more of the economy into the mold of large-payroll, unionized employers, a system for which the 1950s are often (wrongly) idealized.

One wonders whether many of the smart New Economy people who bought into the Obama administration’s promises really knew what they were buying.

This post first appeared at Cato.org.

Walter Olson
Walter Olson

Walter Olson is a senior fellow at the Cato Institute’s Center for Constitutional Studies.

New York’s Taxi Cartel Is Collapsing — Now They Want a Bailout! by Jeffrey A. Tucker

An age-old rap against free markets is that they give rise to monopolies that use their power to exploit consumers, crush upstarts, and stifle innovation. It was this perception that led to “trust busting” a century ago, and continues to drive the monopoly-hunting policy at the Federal Trade Commission and the Justice Department.

But if you look around at the real world, you find something different. The actually existing monopolies that do these bad things are created not by markets but by government policy. Think of sectors like education, mail, courts, money, or municipal taxis, and you find a reality that is the opposite of the caricature: public policy creates monopolies while markets bust them.

For generations, economists and some political figures have been trying to bring competition to these sectors, but with limited success. The case of taxis makes the point. There is no way to justify the policies that keep these cartels protected. And yet they persist — or, at least, they have persisted until very recently.

In New York, we are seeing a collapse as inexorable as the fall of the Soviet Union itself. The app economy introduced competition in a surreptitious way. It invited people to sign up to drive people here and there and get paid for it. No more standing in lines on corners or being forced to split fares. You can stay in the coffee shop until you are notified that your car is there.

In less than one year, we’ve seen the astonishing effects. Not only has the price of taxi medallions fallen dramatically from a peak of $1 million, it’s not even clear that there is a market remaining at all for these permits. There hasn’t been a single medallion sale in four months. They are on the verge of becoming scrap metal or collector’s items destined for eBay.

What economists, politicians, lobbyists, writers, and agitators failed to accomplished for many decades, a clever innovation has achieved in just a few years of pushing. No one on the planet could have predicted this collapse just five years ago. Now it is a living fact.

Reason TV does a fantastic job and covering what’s going on with taxis in New York. Now if this model can be applied to all other government-created monopolies, we might see genuine progress toward a truly competitive economy. After all, it turns out that the free market is the best anti-monopoly weapon ever developed.

Jeffrey A. Tucker
Jeffrey A. Tucker

Jeffrey Tucker is Director of Digital Development at FEE, CLO of the startup Liberty.me, and editor at Laissez Faire Books. Author of five books, 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.

UTD President Fed Ingram (and Superintendent Carvalho) stick it to Miami-Dade Teachers on the Way Out to FEA

Fed and AC

UTD President Fed Ingram (left) and Miami-Dade Superintendent Alberto Carvalho.

As previously reported in another article in January, United Teachers of Dade (UTD) President Fed Ingram is seeking higher office within the Florida Education Association at their annual Delegate Assembly in October.

To assist in this effort, and to apparently put M-DCPS Superintendent Alberto Carvalho in a good light and short change the teachers in the process, UTD negotiated a very bad deal Friday night in which teachers will not be given a step at all over the next two years.

Teachers will be given a definite “salary adjustment” on their current step for this year and a vague, uncertain salary adjustment for the next school year.

Obviously, teachers want their steps as they are four steps down and want to see progression and to truly advance.

Union members received an email Friday night complete with scare tactics of the consequences of voting against it.

“Teachers voted down a bad proposal in the recent past and got a better deal,” says Trevor Colestock, citizen journalist and litigant against M-DCPS. “They are obviously scaring the membership into voting yes by offering two years of security in supposed salary adjustments and minimal healthcare benefits in exchange for giving up their steps which is a raw and very bad deal.  No wonder UTD membership is dwindling and declining. This is just one bad deal following two previous bad ones. It just gets worse and worse.”

FEDruns4FEA-225x300Mr. Colestock goes on to make a very interesting point: “If Fed and UTD could not and would not protect and stand up for me, a decorated and accomplished steward that was correct about the test cheating at Miami Norland Senior High School as outlined in the Final Miami-Dade OIG Report, and stayed silent as I was displaced and currently undergoing litigation while a fellow union member (Emmanuel Fleurantin) was fired and another cheater who was a non-union member (Brenda Muchnick) is still at Norland to this day while teachers who did the very same thing are in jail in Atlanta, how can Fed and UTD stand up and look out for you at the bargaining table?”

“Obviously, given this deal that benefits the District, they did not and cannot, and I am voting no.”

To read the terms of the Tentative Agreement and the scare tactics, click here.

Shawn Beightol pointed out in his recent article that through three straight years of property tax collection surpluses the property tax revenue is available to fund a better deal and to offer a step.

Therefore, why cannot the teachers have a salary adjustment (cost of living) and a step (raise)?

Mr. Carvalho does well for himself as he makes about $318,000; most district administrators make between $150,000-$200,000 a year; and most principals make about $100,000 or more a year.

Miami-Dade teachers are asking: Why cannot the teachers who work the hardest and face the most accountability share in the financial success that the higher ups enjoy?

Mr. Carvalho used to be Fed’s chemistry teacher; apparently, he is still taking Fed to school and both appear to have a low opinion of teachers and their intelligence given this deal according to some.

Teachers may vote no in solidarity and get something better.

EDITORS NOTE: The featured image of UTD President Ingram is from Twitter.

Will Robots Put Everyone Out of Work? by Sandy Ikeda

Will workplace automation make the rich richer and doom the poor?

That could happen soon, warns Paul Solman, economics correspondent for PBS NewsHour. He’s talking to Jerry Kaplan, author of a new book that seems to combine Luddism with fears about inequality.

PAUL SOLMAN: And the age-old fear of displaced workers, says Kaplan, is finally, irrevocably upon us.

JERRY KAPLAN: What happens to people who simply can’t acquire or don’t have the skills that are going to be needed in the new economy?

PAUL SOLMAN: Well, what is going to happen to them?

JERRY KAPLAN: We’re going to see much worse income inequality. And unless we take some humanitarian actions, the truth is, they’re going to starve and live in poverty and then die.

PAUL SOLMAN: Kaplan offers that grim prognosis in a new book, Humans Need Not Apply. He knows, of course, that automation has been replacing labor for 200 years or more, for decades, eliminating relatively high-paying factory jobs in America, and that new jobs have more than kept pace, but not anymore, he says.

I haven’t read Kaplan’s book, but you can get a sense of the issue from this video.

The  fear is that, unlike the past when displaced workers could learn new skills for a different industry, advanced “thinking machines” will soon fill even highly skilled positions, making it that much harder to find a job that pays a decent wage. And while the Luddite argument assumes that the number of jobs in an economy is fixed, the fear now is that whatever jobs may be created will simply be filled by even smarter machines.

This new spin sounds different, but it’s essentially the same old Luddite fallacy on two levels. First, while it’s true that machinery frequently substitutes for labor in the short term, automation tends to complement labor in the long term; and, second, the primary purpose of markets is not to create jobs per se, it is to create successful ventures by satisfying human wants and needs.

While I understand that Kaplan offers some market-oriented solutions, the mainstream media has emphasized the more alarmist aspects of his thesis. The Solmans of the world would like the government to respond with regulations to slow or prevent the introduction of artificial intelligence — or to at least subsidize the kind of major labor-force adjustments that such changes appear to demand.

Short-Term Substitutes, Long-Term Complements

Fortunately, Henry Hazlitt long ago worked out in a clear, careful, and sympathetic way the consequences of innovations on employment in his classic book, Economics in One Lesson. Here’s a brief outline of the chapter relevant to our discussion, “The Curse of Machinery”:

(As Hazlitt notes, not all innovations are “labor-saving.” Many simply improve the quality of output, but let’s put that to one side. Let’s also put aside the very real problem that raising the minimum wage will artificially accelerate the trend toward automation.)

Suppose a person who owns a coat-making business invests in a new machine that makes the same number of coats with half the workers. (Assume for now that all employees work eight-hour days and earn the going wage.) What’s easy to see is that, say, 50 people are laid off; what’s harder to see is that other people will be hired to build that new machine. If the new machine does reduce the business’s cost, however, then presumably it takes fewer than 50 people to build it. If it takes, say, 30 people, there still appears to be a net loss of 20 jobs overall.

But the story doesn’t end there. Assuming the owner doesn’t lower her price for the coats she sells, Hazlitt notes that there are three things she can do with the resulting profit. She can use it to invest in her own business, to invest in some other business, or to spend on consumption goods for herself and others. Whichever she does means more production and thus more employment elsewhere.

Moreover, competition in the coat industry will likely lead her rivals to adopt the labor-saving machinery and to produce more coats. Buying more machines means more employment in the machine-making industry, and producing more coats will, other things equal, lower the price of coats.

Now, buying more machines will probably mean she has to hire more workers to operate or maintain them, and lower coat prices mean that consumers will have more disposable income to spend on goods in general, including coats.

The overall effect is to increase the demand for labor and the number of jobs, which conforms to our historical experience in many industries. So, if all you see are the 50 people initially laid off, well, you’ve missed most of the story.

Despite claims to the contrary, it’s really no different in the case of artificial intelligence.

Machines might substitute for labor in the short term, but in the long term they complement labor and increase its productivity. Yes, new machines used in production will be more sophisticated and do more things than the old ones, but that shouldn’t be surprising; that’s what new machines have done throughout history.

And as I’ve written before in “The Breezes of Creative Destruction,” it usually takes several years for an innovation — even something as currently ubiquitous as smartphones — to permeate an economy. (I would guess that we each could name several people who don’t own one.) This gives people time to adjust by moving, learning new skills, and making new connections. Hazlitt recognizes that not everyone will adjust fully to the new situation, perhaps because of age or disability. He responds,

It is altogether proper — it is, in fact, essential to a full understanding of the problem — that the plight of these groups be recognized, that they be dealt with sympathetically, and that we try to see whether some of the gains from this specialized progress cannot be used to help the victims find a productive role elsewhere.

I’m pretty sure Hazlitt means that voluntary, noncoercive actions and organizations should take the lead in filling this compassionate role.

In any case, what works at the level of a single industry also works across all industries. The same processes that Hazlitt describes will operate as long as markets are left free to adjust. Using government intervention to deliberately stifle change may save the jobs we see, but it will destroy the many more jobs that we don’t see — and worse.

More Jobs, Less Work, Greater Well-Being

Being able to contribute to making one’s own living is probably essential to human happiness. And economic development has indeed meant that we’ve been spending less time working.

Although it’s hard to calculate accurately how many hours per week our ancestors worked — and some claim that people in preindustrial society had more leisure time than industrial workers — the best estimate is that the work week in the United States fell from about 70 hours in 1850 to about 40 hours today. Has this been a bad thing? Has working less led to human misery? Given the track record of relatively free markets, that’s a strange question to ask.

Take, for example, this video by Swedish doctor Hans Rosling about his mother’s washing machine. It’s a wonderful explanation of how this particular machine, sophisticated for its day, enabled his mother to read to him, which helped him to then become a successful scientist.

I had lunch with someone who was recently laid off and whose husband has a fulfilling but low-paying job. Despite this relatively low family income, she was able to fly to New York for a weekend to attend a U2 concert, take a class at an upscale yoga studio in Manhattan, and share a vegan lunch with an old friend. Our grandparents would have been dumbfounded!

As British journalist Matt Ridley puts it in his book The Rational Optimist,

Innovation changes the world but only because it aids the elaboration of the division of labor and encourages the division of time. Forget wars, religions, famines and poems for the moment. This is history’s greatest theme: the metastasis of exchange, specialization and the invention it has called forth, the “creation” of time.

The great accomplishment of the free market is not that it creates jobs (which it does) but that it gives us the time to promote our well-being and to accomplish things no one thought possible.

If using robots raises the productivity of labor, increases output, and expands the amount, quality, and variety of goods each of us can consume — and also lowers the hours we have to work — what’s wrong with that? What’s wrong with working less and having the time to promote the well-being of ourselves and of others?

In a system where people are free to innovate and to adjust to innovation, there will always be enough jobs for whoever wants one; we just won’t need to work as hard in them.

Sandy Ikeda
Sandy 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.

Labor Unions Create Unemployment: It’s a Feature, Not a Bug by Sarah Skwire

Did the labor unions goof, or did they get exactly what they want?

Los Angeles has approved a minimum wage hike to $15 an hour. Some of the biggest supporters of that increase were the labor unions. But now that the increase has been approved, the unions are fighting to exempt union labor from that wage hike.

Over at Anything Peaceful, Dan Bier has nicely explained why the unions would do something that seems, at first glance, so nonsensical. But what I want to point out is that this kind of hijinks is not a new invention of 21st century organized labor. Instead, it’s pretty much what labor was organized to do. It’s a feature, not a bug.

Part of the early reasoning for the minimum wage — which originated as a “family wage” or “living wage” — was its intent to allow a worker to “keep his wife and children out of competition with himself” and presumably to keep all other women out of the workforce as well.

Similarly, the labor movement, from the very beginning, meant to protect organized white male labor from competition against black labor, immigrant labor, female labor, and nonunion labor. There are subtleties to this generalization, of course, and labor historian Ruth Milkman identifies four historical waves of the labor movement that have differing commitments (and a lack thereof) to a more diverse vision of labor rights. But unions — like so many other institutions — work on the “get up and bar the door” principle. Get up as high as you can, and then bar the door behind you against any further entrants who might cut into the goodies you have grabbed for yourself.

Labor union expert Charles Baird notes,

Unions depend on capture. They try to capture employers by cutting them off from alternative sources of labor; they try to capture workers by eliminating union-free employment alternatives; and they try to capture customers by eliminating union-free producers. Successful capture generates monopoly gains for unions.

Protection is the name of the game.

Unsurprisingly, the unions made sure to be involved when, about 50 years before the 1970s push for an equal rights amendment, there was another push for an ERA in the United States. Written by suffragist leader Alice Paul, the amendment was an attempt to leverage the newly recognized voting power of women into a policy that guaranteed men and women shall have equal rights throughout the United States and every place under its jurisdiction.” This amendment would have prevented various gender-based inequities that the courts supported at the time — like hugely different hourly wages for male and female workers, limits on the number of hours women could work, limits on when women could work (night shifts were seen as particularly dangerous for women’s health and welfare), and limits on the kinds of work women could do.

Reporting on the debates over the ERA in 1924, Doris Stevens noted three main objections to the amendment:

First, there was the familiar plea for gradual, rather than sweeping change.

Second, there were concerns over lost pensions for widows and mothers.

And in Stevens’s words,

The final objection says: Grant political, social, and civil equality to women, but do not give equality to women in industry.… Here lies the heart of the whole controversy. It is not astonishing, but very intelligent indeed, that the battle should center on the point of woman’s right to sell her labor on the same terms as man. For unless she is able equally to compete, to earn, to control, and to invest her money, unless in short woman’s economic position is made more secure, certainly she cannot establish equality in fact. She will have won merely the shadow of power without essential and authentic substance.

Suffragist Rheta Childe Dorr (in Good Housekeeping, of all places. How the mighty have fallen!) pointed out again the logic behind labor’s opposition to the equal rights amendment:

The labor unions are most opposed to this law, for few unions want women to advance in skilled trades. The Women’s Trade Union League, controlled and to a large extent supported by the men’s unions, opposes it. Of course, the welfare organizations oppose it, for it frees women wage earners from the police power of the old laws. But I pray that public opinion, especially that of the club women, will support it. It’s the first law yet proposed that gives working women a man’s chance industrially. “No men’s labor unions, no leisure class women, no uniformed legislators have a right to govern our lives without our consent,” the women declare, and I think they are dead right about it.

Organized labor — founded to ensure the collective right to contract — refused to stand up for the right of individual women to contract. From their point of view, it was only sensible. And, perhaps most importantly, women in organized labor refused to stand up for the women outside the unions.

Organized male and female labor’s fight against the ERA was at least as much about protectionism as it was about sexism. Maybe more. Women’s rights and union activist Ethel M. Smith attended the debates on the ERA to report on it for the Life and Labor Bulletin, and found that union workers did not even attempt to gloss over their protectionist agenda:

Miss Mary Goff of the International Ladies’ Garment Workers Union, emphasized the seriousness of the effect upon organized establishments were legal restrictions upon hours of labor removed from the unorganized. “The organized women workers,” she said, “need the labor laws to protect them from the competition of the unorganized. Where my union, for instance, may have secured for me a 44-hour week, how long could they maintain it if there were unlimited hours for other workers? Unfortunately, there are hundreds of thousands of unorganized working women in New York who would undoubtedly be working 10 hours a day but for the 9-hour law of New York.”

So labor unions excluded women as long as they could, then let in a privileged few and barred the doors behind them. And they continue to use the same tactics today in LA and elsewhere.

How long can they keep it up?


Sarah Skwire

Sarah Skwire is a senior fellow at Liberty Fund, Inc. She is a poet and author of the writing textbook Writing with a Thesis.

Los Angeles Shows Us the Real Reason Why Unions are Pushing for Minimum Wage Increases

Unions like the SEIU have spent millions funding “worker centers” that stage “grassroots,” “Fight for $15” minimum wage protests.

In Los Angeles, they scored a win. However, unions want to be exempted from the wage hike:

Labor leaders, who were among the strongest supporters of the citywide minimum wage increase approved last week by the Los Angeles City Council, are advocating last-minute changes to the law that could create an exemption for companies with unionized workforces.

The push to include an exception to the mandated wage increase for companies that let their employees collectively bargain was the latest unexpected detour as the city nears approval of its landmark legislation to raise the minimum wage to $15 an hour by 2020.

For much of the past eight months, labor activists have argued against special considerations for business owners, such as restaurateurs, who said they would have trouble complying with the mandated pay increase.

But Rusty Hicks, who heads the county Federation of Labor and helps lead the Raise the Wage coalition, said Tuesday night that companies with workers represented by unions should have leeway to negotiate a wage below that mandated by the law.

On the surface it seems odd that labor unions being big proponents of raising the minimum wage would want an exemption.

But it’s not when you understand the push isn’t about raising workers’ wages; it’s about boosting union membership, as Diana Furchtgott-Roth of the Manhattan Institute explains:

Although the union-funded Raise the Wage campaigned so vociferously in favor of a $15.25 minimum wage, unions are seeking exemptions from the higher wages for their members. The exemption, or escape clause, would allow them greater strength in organizing workplaces.  Unions can tell fast food chains, hotels, and hospitals that if they agree to union representation, their wage bill will be substantially lower.  That will persuade employers to allow the unions to move in.

There’s a reason minimum wage protesters often use the phrase, “Fight for $15 and a union!”

With more union members will come more union dues and bigger budgets, Furchtgott-Roth writes:

Once the higher minimum wage bill is signed into law, with the exemption for unions, then organizing becomes a win-win for employers and unions. Unions get initiation fees of about $50 per worker and a stream of dues totaling 2 percent to 4 percent of the workers’ paychecks.

As a minimum wage increase in the Bay Area has shown, there will be pain. Businesses there have had to cut workers’ hours or close because of the additional labor costs.

Unions haven’t found a way to reverse the decades-long trend of declining membership. So instead of finding new ways of convincing workers to join unions, they come up with scheme to raise the minimum wage then demanding carve outs for themselves.

It’s blatantly obvious these minimum wage campaigns are cynical efforts for expanding union rolls.

Meet Sean Hackbarth  @seanhackbarth Follow @uschamber

RELATED ARTICLES:

Who’s Hurt Most by Los Angeles’ $15 Minimum Wage

The SEIU’s Latest Plot to Destroy the Franchise Business Model

EDITORS NOTE: The featured image is of protesters holding signs at a rally in support of minimum wage increase in New York City. Photo credit: Victor J. Blue/Bloomberg.

LA Unions Demand Exemption from $15 Minimum Wage They Created by Daniel Bier

If there was ever any doubt that LA’s minimum wage hike was meant to help the labor unions at the expense of everyone else, I hope we can now put that idea to bed.

The LA Times reports,

Labor leaders, who were among the strongest supporters of the citywide minimum wage increase approved last week by the Los Angeles City Council, are advocating last-minute changes to the law that could create an exemption for companies with unionized workforces. . . .

Rusty Hicks, who heads the county Federation of Labor and helps lead the Raise the Wage coalition, said Tuesday night that companies with workers represented by unions should have leeway to negotiate a wage below that mandated by the law.

“With a collective bargaining agreement, a business owner and the employees negotiate an agreement that works for them both. The agreement allows each party to prioritize what is important to them,” Hicks said in a statement. “This provision gives the parties the option, the freedom, to negotiate that agreement. And that is a good thing.”

Unions want to give workers and business the option — the freedom! — to prioritize what’s important to them and negotiate their own pay! Isn’t that nice. But only if those workers are paying union dues, and only if those businesses are using union labor.

The minimum wage hike was always meant to make independent workers more expensive and make unions look better by comparison. But it’s a bold move for the unions to simply say, in one breath, “Everyone deserves a living wage! It’ll be good for everyone! Except us, thank you. We’ll set our own pay — and also, give a break to any businesses who agree to go back to union labor.”

More on this transparently corrupt policy of the minimum wage by FEE’s Jeffrey Tucker.


Daniel Bier

Daniel Bier is the editor of Anything Peaceful. He writes on issues relating to science, civil liberties, and economic freedom.

A Simple Question for Minimum Wage Advocates by Donald J. Boudreaux

I will return in a later post to the topic of my previous post, namely, the validity or (as I see it) invalidity of the argument that proposes a tolerance of locally set minimum-wage rates if not of nationally or super-nationally set rates.

I state, however, here and again my conclusion: Legislating minimum wages – that is, enacting a policy of caging people who insist on entering voluntarily into employment contracts on terms that political elites find objectionable – is no more attractive or justified or likely to succeed at helping low-skilled workers if the particular caging policy in question is enacted locally than if it is enacted nationally or globally.

In this short post, I ask a simple question of all advocates of minimum wages:

If enforcement of minimum-wage policies were carried out in practice by policing low-skilled workers rather than employers – if these policies were enforced by police officers monitoring workers and fining those workers who agreed to work at hourly wages below the legislated minimum – would you still support minimum wages?

Would you be good with police officers arresting those workers who, preferring to remain employed at sub-minimum wages rather than risk losing their current jobs (or risking having do endure worsened employment conditions), refuse to abide by the wage terms dictated by the legislature?

Would you think it an acceptable price to pay for your minimum-wage policy that armed police officers confine in cages low-skilled workers whose only offense is their persistence at taking jobs at wages below those dictated by the government?

If a minimum-wage policy is both economically justified and morally acceptable, you should have no problem with this manner of enforcement.

(You might still prefer, for obviously aesthetic reasons, enforcement leveled mainly at employers. But if the policy is to unleash government force to raise wages above those that would be otherwise agreed to on the market voluntarily between employers and workers, then you should agree that, if for some reason enforcement aimed at employers were impossible or too costly, enforcement aimed at workers is morally and economically acceptable.)

If, however, you do have a problem with minimum-wage regulations being enforced by targeting workers who violate the legislature’s dictated wage terms, then you might wish to think a bit more realistically and deeply about just what it is you advocate in the name of economic improvement or “social justice.”

This post first appeared at Cafe Hayek, where Don Boudreaux blogs with Russ Roberts.

Donald Boudreaux

Donald Boudreaux is a professor of economics at George Mason University, a former FEE president, and the author of Hypocrites and Half-Wits.

Los Angeles Pummels the Poor: A $15 an hour wage floor is a cruel and stupid policy by JEFFREY A. TUCKER

Does anyone on the Los Angeles City Council have a clue about what they have just done? It really is unclear whether reality matters in this legislative body. Rarely have we seen such jaw-dropping display of economic fallacy enacted into law.

The law under consideration here is a new wage floor of $15, phased in over five years. Why phased in? Why not do it now? Why not $30 or $150? Perhaps the implied reticence here illustrates just a bit of caution. Somewhere in the recesses of the councilors’ minds, they might have a lurking sense that there will be a price to pay for this.

Such doubt is wholly justified. Recall that the minimum wage was initially conceived as a method to exclude undesirables from the workforce. The hope, back in the time when eugenics was the rage, was that a wage floor would cause the “unemployable” to stop reproducing and die out in one generation.

Racism drove the policy, but it was hardly limited to that. The exterminationist ambition applied to anyone deemed unworthy of remunerative work.

“We have not reached the stage where we can proceed to chloroform them once and for all,” lamented the progressive economist Frank Taussig in his 1911 bookPrinciples of Economics. “What are the possibilities of employing at the prescribed wages all the healthy able-bodied who apply? The persons affected by such legislation would be those in the lowest economic and social group.”

Professor Taussig spoke for a generation of ruling-class intellectuals that had egregiously immoral visions of how to use government policy. But for all their evil intentions, at least they understood the basic economics of what they were doing. They knew what a wage floor excludes marginal workers, effectively dooming them to poverty — that’s precisely why they favored them.

Today, our situation seems reversed: an abundance of good intentions and a dearth of basic economic literacy. The mayor of LA, Eric Garcetti, was elated at the decision: “We’re leading the country; we’re not going to wait for Washington to lift Americans out of poverty.”

Leading the country, maybe, but where is another question. This is a policy that will, over time, lock millions out of the workforce and forces many businesses to cut their payrolls. Machines to replace workers will come at a premium. The remaining workers will be expected to become much more productive. Potential new business will face a higher bar than ever. Many enterprises will close or move.

As for the existing unemployed, they can forget it. Seriously. In fact, it is rather interesting that in all the hooplah about this change, there’s not been one word about the existing unemployed (officially, 7.5% of the city’s workforce). It’s as if everyone intuitively knows the truth here: this law will not help them at all, at least not if they want to work in the legal economy.

The underground economy, which is already massive in Los Angeles, will grow larger. New informal enterprises will pop up everywhere, doing a cash-only business. The long, brawny arm of the state will not be powerful enough to stop it. Sneaking around and hiding from the law is already a way of life for millions. Look for this tendency to become the dominant way of work for millions more.

All of this will happen, and yet the proponents of the minimum wage will still be in denial, for their commitment to the belief that laws can make wealth is doctrinal and essentially unfalsifiable.

As for those who know better, business owners all over the city pleaded for the Council not to do this. But their pleas fell on deaf ears. The Council had already been bought and paid for by the labor unions and interests that represent the already employed in Los Angeles. Such union rolls do not include the poor, the unemployed, or even many of the 50% of workers in the city who work for less than $15. They represent the working-class bourgeoisie: people rich enough to devote themselves to politics but do not actually own or run businesses.

Will such unions be helped by this law? Perhaps, a bit — but at whose expense? Those who work outside union protection.

This is a revealing insight into why unions have been so passionate about pushing for the minimum wage at all levels. Here is the truth you won’t read in the papers: a higher wage floor helps cartelize the labor market in their favor.

You can understand this by reflecting on your own employment. Let’s say that you earn $50,000 for a task that could possibly done by others for $25,000, and those people are submitting resumes. This is your situation, and it potentially applies to a dozen people in your workplace.

Let’s say you have the opportunity to enact a new policy for the firm: no one can be hired for less than $50,000 a year. Would this policy be good for you? In a perverse way, it would. Suddenly, nobody else, no matter how deserving, could underbid you or threaten your job. It’s a cruel way to go about padding your wallet, but it might work for a time.

Now imagine pushing this policy out to an entire city or an entire country. This would create an economic structure that (however temporarily) serves the interests of the politically connected at the expense of everyone else.

It certainly would not create wealth. It would not help the poor as a whole. And it would do nothing to create a dynamic and competitive marketplace. It would institutionalize stasis and cause innovation to stall and die.

The terrible effects are many and cascading, and much of the damage will be unseen in the form of business not formed, laborers not hired, efficiencies not realized. This is what the government of Los Angeles has done. It is a self-inflicted wound, performed in the name of health and well-being.

The City Council is cheering. So are the unions. So are the ghosts of the eugenists of the past who first fantasized about a labor force populated only by the kinds of people they approved.

As for everyone else, they will face a tougher road than ever.


Jeffrey A. Tucker

Jeffrey Tucker is Director of Digital Development at FEE, CLO of the startup Liberty.me, and editor at Laissez Faire Books. Author of five books, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World.