5 Priceless Tips I Gave My Uber Driver

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Big ideas most people don’t understand about the economy. by Richard Lorenc:

I was in an Uber car the other day, returning from a conference. I love Uber and used it for years in Chicago before returning to my hometown, Atlanta. There are a lot of amusing exposés out there contending that the majority of Uber drivers hate their jobs and feel enslaved by corporate overlords.

Virtually every driver I encounter tells me they love working with Uber; an off-duty Uber driver once overheard me saying something about the company over lunch, and he volunteered enthusiastically that he loves his job. There was no driver rating at stake in that exchange.

I’ve had interesting discussions in Uber cars. One driver told me he had walked a young woman into the ER minutes before picking me up (he thought she had overdosed). Another driver explained how he had escaped New Orleans just hours before Katrina hit, only to return to complete destruction. And there have been quite a few who’ve told me they drive to earn money to build other businesses. Uber drivers are by definition entrepreneurs. And many see driving as a stepping-stone to something bigger.

Occasionally, Uber drivers will volunteer economic views as they relate to their business. My driver the other day — his name was Chris —  even identified himself as a “free-market guy” while talking about Uber.

Naturally, this got my attention, but I decided not to spill the beans until he asked what my colleague and I do. I explained that we work for an organization called the Foundation for Economic Education, which teaches young people about the free market.

Chris is a big guy, and on hearing my words, he shook the car with laughter as we drove on the interstate.

Then he asked for tips.

“Stock tips?” I asked.

“No, big ideas that most people don’t get about the economy.”

I gave him those tips. I thought I would share them with you, too.

Big idea 1: Trade is win-win.

My colleagues and I teach our students that trade is win-win by saying, “Trade is made of win.”

I asked Chris to imagine being a customer at Starbucks. He wants a venti café au lait so much that he’s willing to part with $5 to get it. For the customer, the coffee is worth more than the money; why else would he surrender his cash at the register? The opposite is true for the seller: $5 is worth more than the coffee. The buyer and seller exchange property rights, and each says, “thank you.” (This is sometimes called the “double-thank-you phenomenon.”) The transaction makes them both better off — they have created value for each other through trade.

Big idea 2: Entrepreneurs create value.

Entrepreneurs create massively greater value for society generally than they create in profits for themselves.

An estimated 98 percent of the innovators profits generated by nonfarm businesses in the United States between 1948 and 2001 were never captured directly by the individual innovators or firms. Innovators profits — or “Schumpeterian profits” —vary by industry. Apple did not fully capture the Schumpeterian profits generated by the debut of the iPhone, for example. Instead, the iPhone created entirely new business categories and lowered the consumer price of supercomputers that fit into your pocket. But Apple captured enough of its innovators profits that it has an incentive to continue to innovate — and potential competitors had an incentive to enter the market. Competition lowers prices, benefitting consumers.

Big idea 3: Everything has a cost.

This idea is the lynchpin of what we call economic thinking: that is, the application of economic concepts to help explain why people and groups make the choices they do.

Normally, we introduce this concept by calling it an opportunity cost. If all of us understood clearly how the choices we make today necessarily limit the choices available to us tomorrow, we would solve 95 percent of the problems caused by economic illiteracy.

At FEE’s seminars, many students are deciding whether to go to college. Not only is there a direct cost to college, but there is also the opportunity cost of spending time cloistered in academia when you could be launching the next Facebook. In many cases, college is worth the cost, but not in every instance.

We take pains at FEE to practice what we preach. We’ve gotten away from advertising that our seminars are free to attend and offer free accommodations and meals. Instead, we say they are offered at “no charge.”

After all, TANSTAAFS — there ain’t no such thing as a free seminar. You have to sit and take it for three whole days. And that carries a cost.

Big idea 4: Emergent order rules.

The world we live in is the product of countless interactions among individuals, not the result of some master plan. Even if there is a plan, the traditions, mores, and informal institutions that guide behavior dominate. F.A. Hayek named this phenomenon spontaneous order, but I prefer contemporary economist Russ Roberts’s term emergent order. The concept goes back to Scotland, to Adam Ferguson, and later to Adam Smith’s invisible hand metaphor.

The invisible hand, by the way, is probably one of the most misunderstood concepts in economics. It’s as if those who mock it as some sort of supernatural occurrence have never heard of a metaphor, which depicts how individuals working in their own interest also create value for others.

The idea boils down to this: The world we live in is the product of human action, not human design.

Big idea 5: Markets are moral.

Finally, we have what is perhaps the most important tip of all when talking to young people: commerce makes us better people.

It civilizes us. It permits us opportunities to practice politeness with strangers. FEE’s founder, Leonard Read, captured this concept in his famous essay “I, Pencil,” and Milton Friedman popularized it in the Free to Choose TV series.

The market is a process of ever-growing interconnectedness. As the market grows, our individual opportunities for specialization grow with it, and we each become wealthier through our access to goods and services we could never fathom creating ourselves. By creating value for others, we tend to become less concerned with the nationalities or races or religions or sexual orientations of those who bring to market the goods we depend on. A deal is a deal, and the more we become acclimated to making deals with those who are different from us, the closer we grow as human beings.

This last concept is vital, because students today are looking for ways to explain the world and their places in it through dimensions beyond material efficiency. Certainly, the coordination of market activities through the information conveyed by prices is superior to the commissar’s desk-bound decision-making, but advocates of economic freedom must first listen to the concerns of those undiscovered libertarians who are fundamentally idealistic and decent people, and whose only hang-up with the free market is that it sometimes appears irrational.

Why, for instance, would GM, a hallmark of American ingenuity and industry, be more valuable if it were closed? Why can’t the government just give spoons to all of the unemployed so they can stay busy constructing roads? Why shouldn’t fast food workers make $15 per hour? Why can’t everyone have inexpensive health care?

Appealing to personal values is the gateway to economic thinking that helps to explain our complex world.

Uber redux

The Uber phenomenon represents something important happening now in the human consciousness, and millennials (people born between 1980 and 2000, roughly) may be noticing it the most.

Individuals are now free to exchange goods and services with each other around the world. They are able to take innovations such as the concept of ride sharing and the proliferation of apps to use otherwise unproductive capital — their cars — to serve others.

This is great news for our world as millennials begin to assume positions of influence and leadership and are now beginning to see a real choice between the philosophy of control versus the philosophy of freedom.

This article is excerpted from a speech the author made to The Discussion Club, a Bastiat Society affiliate, in St. Louis, Missouri.

ABOUT RICHARD LORENC

Richard Lorenc is the director of programs at FEE.

Is the Job Market Sexist?

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Or do wages reflect the choices we make? by Corey Lacono:

Is it an embarrassment that women are paid so much less than men? That’s what the president says. Over and over.

“Today, the average full-time working woman earns just 77 cents for every dollar a man earns,” President Obama reported in a speech back in April. “In 2014, that’s an embarrassment. It is wrong.”

But what’s wrong is the claim itself — or at least what Obama and his fellow Democrats regularly imply that the numbers mean. What we are supposed to be embarrassed about is the way the market discriminates against half the population. Isn’t it unfair that women make so much less than men do, and for the same work?

Behind the differences in pay are a number of straightforward reasons that we should understand before attributing the problem to sexist employers.

While the 77-cent figure is technically true, the statistic does not account for occupations held, hours worked, length of tenure, or marital status, which are all factors that influence the wage an individual earns. Indeed, given the differences in the occupational choices of men and women, there is good reason to expect men to earn more on average. According to the Federal Reserve Bank of St. Louis,

Men are more likely to be lawyers, doctors and business executives, while women are more likely to be teachers, nurses and office clerks. This gender occupational segregation might be a primary factor behind the [gender] wage gap.

Other choices also affect the numbers. “Indeed,” writes Glenn Kessler in his Fact Checker blog for the Washington Post, data from the Labor Department’s Bureau of Labor Statistics “show that women who do not get married have virtually no wage gap; they earn 96 cents for every dollar a man makes.”

Using data from a sample size of over 74,000 men and over 72,000 women in dozens of industries and in nearly two dozen occupations, and after accounting for many of the aforementioned wage determinants, a study by CONSAD Research Corporation found that the gender wage gap narrowed to 5–7 percent. However, even this remaining wage gap is not in itself evidence of systematic discrimination. The authors only examined wages and not overall worker compensation  — a combination of wages and benefits — and they make an important note: “Research indicates that women may value non-wage benefits more than men do, and as a result prefer to take a greater portion of their compensation in the form of health insurance and other fringe benefits.”

In other words, there is evidence that women prefer benefits to cash, which the gender wage gap completely ignores. The authors also state that they did not account for work experience or job tenure, and that these factors likely explain the remainder of the gap:

This study leads to the unambiguous conclusion that the differences in the compensation of men and women are the result of a multitude of factors and that the raw wage gap should not be used as the basis to justify corrective action. Indeed, there may be nothing to correct. The differences in raw wages may be almost entirely the result of the individual choices being made by both male and female workers. [Emphasis added.]

Proponents of the belief that a wage gap does exist often counter this research with other studies that insist that a large wage gap does exist, even after accounting for other explanatory variables. However, none of these studies has been as comprehensive as the CONSAD study and, more importantly, almost all of them fail to examine nonwage earnings like employer-provided health insurance. In fact, the Federal Reserve Bank of St. Louis has noted,

Some researchers believe that it is not enough to compare wages of similar men and women. They argue that total compensation (wages together with benefits) must be compared. Women of child-bearing age may prefer jobs with a lower wage but with employer-paid parental leave, sick leave and child care to jobs with a higher wage but without such benefits.… Economists Eric Solberg and Teresa Laughlin applied an index of total compensation, which accounts for both wages and benefits, to analyze how these benefits would affect the gender gap. They found a gender gap in wages of approximately 13 percent. But when they considered total compensation, the gender gap dropped to 3.6 percent.”

According to the study cited by the Federal Reserve economists, “any measure of earnings that excludes fringe benefits may produce misleading results as to the existence, magnitude, consequence, and source of market discrimination.”

Beyond the above considerations, there is reason to doubt that the remainder of the wage gap is due to discrimination. According to a recent study published in the American Economic Review by Harvard economist Claudia Goldin, the gender wage gap exists because of the differences in the particular hours men and women choose to work. According to Goldin,

The gap exists because hours of work in many occupations are worth more when given at particular moments and when the hours are more continuous. That is, in many occupations earnings have a nonlinear relationship with respect to hours. A flexible schedule often comes at a high price, particularly in the corporate, financial, and legal worlds.…

The gender gap in pay would be considerably reduced and might even vanish if firms did not have an incentive to disproportionately reward individuals who worked long hours and who worked particular hours.

While discrimination against women (or men) may exist in particular circumstances, the bad news for advocates of greater government intervention in the workplace is that there doesn’t appear to be any solid evidence of a meaningfully large gender pay gap. Indeed, what’s left of the gender wage gap that isn’t explained by common wage determinants is likely a result of factors that simply haven’t been accounted for.

The good news for the interventionists is that few will look too deeply into what is behind the numbers. Nor will they question the government’s role in engineering a rigid equality to replace the market’s flexible response to diverse individual preferences in balancing work and home life.

ABOUT COREY IACONO

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

The Bright Side to Amnesty

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To many, the above title may seem much like speaking of the bright side to malignant cancer. And did it really come out of this writer’s pen? Long a staunch immigration critic, I’ve written many articles on the subject; Pat Buchanan used one of my lines in his book Death of the West; and Congressman John Conyers quoted me in the House on May 16, 2007, saying, “[C]onservative commentator Selwyn Duke just yesterday inveighed against any immigration (legal or not). He warned, ‘[R]eplace our population with a Mexican or Moslem one and you no longer have a Western civilization, you no longer have America. You have Mexico North or Iran West.’” (Conyers wasn’t exactly in agreement.) And, no, it’s not that a pod from outer space has taken over my body or, worse yet, that I’ve become a liberal. I inveigh against all immigration still. I still oppose amnesty in all forms and under all guises. Nonetheless, the latter would have, perhaps, a small bright side.

This cannot be understood without grasping that illegal migration is not the problem.

It is an exacerbation of the problem.

What does this mean? Aren’t the only problems posed by migration ones unique to the illegal variety, such as an uncontrolled entry into our country that can allow diseases, terrorists and WMDs to cross our borders?

The real problem — the only one that really matters over the long term — is that we are importing socialist-oriented voters with mindsets contrary to Western ideals. This is because of the Immigration and Nationality Act of 1965 (INA65), which created a situation wherein 85 percent of our new immigrants hail from the Third World and Asia. Moreover, the legislation has led to an increase in overall immigration from a historic average of 250,000 a year to approximately 1,000,000.

If you’re Obama and his fellow travelers and believe in “fundamentally” changing America, you love this because, upon being naturalized, approximately 80 percent of these newcomers will vote for you. You know Republicans get close to 90 percent of their votes from whites, so the formula for ideological conquest is simple: reduce the percentage of whites in America as much and as fast as possible. And INA65 certainly fits that bill. Non-Hispanic whites were close to 90 percent of the population in 1965.

Now they’re just under 63 percent.

And California is the model for the leftist hegemony in question. Once a solidly Republican state that launched Ronald Reagan to national prominence, it would not be carried by him in a presidential election today. The last time the state went Republican was 1988, when George H.W. Bush edged Michael Dukakis by four points. Since then no Democrat has carried the state by less than a double-digit margin; the best showing the GOP had was when it held Lurch-like John Kerry to 10 points. Obama won the state by 24 points in 2008 and 23 points in ’12. And in this year’s Republican wave election, it was considered an accomplishment that the GOP denied the Democrats supermajorities in CA’s legislative chambers.

Oh, did I mention that whites in CA are no longer even a plurality?

And here’s the reality:

Once the rest of the country looks like CA demographically, it will look like it politically.

This isn’t to say Republicans would disappear. They’d reinvent themselves as parties and politicians do, winning some elections by moving, to use our provisional terminology, “left.” It also must be mentioned that immigration isn’t the only factor in our decline; the media, academia and entertainment arena do a superb job fashioning leftist foot soldiers. And we should also note that with a world generally to the “left” of the US, it’s hard to imagine where we could find traditionalist immigrants; importing socialist Swedes, Germans and French is problematic as well. (A notable difference, however, is that while the latter assimilate into our more conservative white population, Hispanics often operate within America’s Hispanic milieu, which reinforces their socialist beliefs.)

Yet this is simply another reason why I adamantly oppose all (im)migration. When Ben Franklin famously answered the question of whether the 1787 Constitutional Convention had given us a republic or a monarchy by saying “A republic, if you can keep it,” there would have been no “ifs” about it if our nation had comprised mainly monarchical Englishmen. So the message here is simply a statement of the obvious: foreigners cannot be relied upon to preserve authentic Americanism because they’re not American. Full stop.

This is especially true when they harbor deep-seated un-American ideologies, hail from non-Western cultures and enter a multiculturalism-infected land that tells them “When in Rome…feel free to do as Ostrogoths would do.”

Despite this, most conservatives don’t get it. Imbued with what I’ve termed “immigrationism” and Proposition Nation pap, they’re very diligent about conserving the Immigration and Nationality Act status quo. An example that will shock many is Senator Ted Cruz, who last year proposed not only increasing the number of “high-skilled temporary workers fivefold” — as if there aren’t high-skilled Americans looking for jobs — but, unbelievably, also the doubling of legal immigration (the relevant portion of the video starts at 3:27):

Given that Cruz seems like a good man, I’ll just assume he’s out to lunch (in Tijuana) on this issue. But let’s be clear: if you had to pick your poison and choose just one culture-rending policy, a giant amnesty one year would be preferable to a giant legal-immigration increase applicable every year.

So what’s the bright side to amnesty?

The well-known metaphor about a frog in a frying pan of water tells us that since frogs can’t sense incremental temperature changes, a very low flame under that pan may mean the creature will remain fixed in his position until he boils to death. In contrast, turn the burner up high enough and he’ll jump out and save himself.

Along with our many other problems, “Americans” (insofar as they still exist) are enduring the slow boil of cultural and demographic genocide. And executive amnesty, as with other kinds of leftist overreach, just may serve to turn that flame up high and rouse people from their torpor.

Yet this is the dimmest of bright sides, a 1-in-50 shot whose mention is mainly valuable in service to a larger point: we do need fundamental change. We need a revolution of mind, heart and spirit in which we return to our Christian foundation and dispense with moral relativism and all its corollaries — of which cultural relativism is one. Related to this, John Jay wrote in Federalist No. 2:

Providence has been pleased to give this one connected country to one united people — a people descended from the same ancestors, speaking the same language, professing the same religion, attached to the same principles of government, very similar in their manners and customs….

The “American experiment” was never meant to be one in which we could learn if, for the first time in history, a nation could intensely balkanize itself and — by rebranding it “diversity” — survive.

I do not believe the U.S. will survive long in its present form. And when chroniclers finally write The Rise and Fall of the American Republic, they may record that the Immigration and Nationality Act of 1965 was the most destructive legislation in her history, a turning point from which there was no turning back.

Contact Selwyn Duke, follow him on Twitter or log on to SelwynDuke.com

RELATED ARTICLE: Obama’s Unilateral Amnesty Really Will Be Unprecedented—and Unconstitutional

The Four Core Beliefs of Enterprise by Lawrence W. Reed & Wayne Olson [+Video]

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How to solve complex business problems.

The term tunnel vision carries such a negative connotation that no one ever really wants it, even if they’re traveling through a tunnel. We say we want to be conscious of as much of our surroundings as possible, not simply a narrow sliver. We want to perceive all the relevant factors and remain aware of new things that might improve our situation.

Alas, that’s almost always easier said than done.

Just ask Bartley J. Madden, author of a new, 122-page book, Reconstructing Your Worldview. Better yet, if you’re an aspiring entrepreneur, read the book and visit his website LearningWhatWorks.com, or watch this insightful video:

Madden has spent decades trying to understand the business world during his career in money management, investment research, and university teaching. His longtime fascination with methods of solving complex business problems led him to realize that the way we say we want to see the world and the way we actually do are two very different things. It takes a conscious, thoughtful effort to open wide our mind’s eye, so to speak. If you learn to do it systematically, the result can be a new worldview that will reshape how you notice opportunities and capitalize on them.

Nearly 40 years ago, we heard Austrian economist Israel Kirzner lecture on his specialty, entrepreneurship. He employed an analogy we’ll never forget. He asked his audience to imagine a free, dynamic economy as a place where a quiet blizzard of 10-dollar bills is raging just overhead. Most people never notice it, but one very special kind of person does: the entrepreneur. He sees the bills and musters the courage to reach up and grab one. In other words, he deploys his “entrepreneurial alertness” to seize an opportunity: to buy low and sell high, to assemble factors of production to make a product or service worth more than its input costs, or to move a good from one place to another where it’s more desired. Perhaps an even more apt analogy would be a blizzard in which most of the flying bills are fake and worthless, and only a few are “winners.” But in any event, it’s the entrepreneur whose powers of observation are great enough to see any of them at all.

Entrepreneurial alertness is essentially what Madden implores us to cultivate. We must start by recognizing what he calls “the four core beliefs” we need to solve problems in business:

  1. Past experiences shape our current assumptions.
  2. Language is perception’s silent partner.
  3. Improving any system’s performance requires that we identify and fix its key constraints.
  4. Human behavior is purposeful; we act not simply in response to stimuli (much as a ball rolls in the direction in which it’s pushed) but in a conscious, living fashion. We compare our actual experiences to our preferred experiences and then act to create new experiences that come as close to the preferred ones as possible.

These four core beliefs are more profound than Madden believes we commonly assume.

Each teaches a vital lesson. On a whole, their underlying message for economics concerns how innovation develops when the market is open to new entrants. Established businesses get caught up in the same old ways of looking at the world and the opportunities for value creation. So do government bureaucracies, but the difference is that government bureaucracies tend to institutionalize the conventional ways of looking at the world and create barriers to anyone trying to change them; private industries who fail to change will be swept away.

The book is thoroughly researched and rich with citations that allow the reader to pursue the subject in depth. Madden even delves into how people form beliefs and act on them, using the latest findings.

He beautifully illustrates the first two of the four core beliefs with a Kmart-versus-Walmart example. Kmart’s management had in their minds the word “store” and defined it in ways they’d always seen a “store” behaving and delivering profitable results for them: freestanding and run independently by its own manager. So they stuck to that business model, namely: put a big box in a big town and assume that is necessary for generating the desired economies of scale. In contrast, as Madden explains, “in Sam Walton’s worldview, each store was an integrated part of a networked system” that could create value in the wide-open small-town markets.

A “worldview” is not about one innovative idea that turns out well, but about openness to experimentation and knowledge building. Madden continues, “Walmart’s networked system of stores and distribution centers resulted in fast-paced learning and high efficiencies.… Over time, Walmart greatly expanded and improved its business processes at a far more rapid pace than did Kmart,” eventually leaving Kmart in the dust, even in the larger towns.

The third core belief is that in order to make a complex process create more value, it’s not enough to pick individual components and improve them; you have to identify where the constraints are in the process. If the bottleneck is at process B in the production line, improving the efficiency of process A will merely increase the size of the problem at process B. The problem is that the managers of process A in centralized operation have every incentive to propose “improvements” that actually create no value.

Madden follows this thought to an in-depth discussion of the merits of distributed systems over centrally planned systems, including “lean thinking” concepts, where he makes this key point: “A lean culture has a horizontal orientation in order to better coordinate work and reduce waste along the entire value streams that end with the customers.… In contrast, a command-and-control orientation is composed of vertical silos with incentives to improve local efficiencies.”

Placing this belief in a much broader context, he observes that “nature has a propensity for distributed solutions” and, echoing Hayek, “when a society’s institutions evolve through a naturally “evolutionary” process, rather than one of an imposed human design, the result tends to reflect decentralization and a selection of whatever works best.”

The fourth core belief should appeal to all those who have read Ludwig von Mises’s magnum opus, Human Action or are even moderately familiar with the central insights of the Austrian school that Mises represents. When you’re dealing with people, you’re dealing with independent actors who will respond to stimuli according to their own “control systems,” which Madden likens to a thermostat. Their reaction to something depends on whether it will move them closer to a desired state that represents their goals. So you can’t ignore the incentives — you can’t move people around like pieces on a chessboard, as Adam Smith’s central-planning “man of system” tries to do.

This is where government programs almost always fall down, but Madden makes it clear that private businesses can easily fall into the same trap if they’re not mindful — in which case, the market gives them the feedback that they’ve made a mistake, something that rarely if ever happens to the people running government programs.

In the summary video above, Madden offers an example in Michelin run-flat tires. Company managers got trapped in their historical line of thinking and their accustomed vocabulary: engineering breakthrough in tire technology leads to enormous profits. They fell in love with the run-flat technology, and so, apparently, did a bunch of industry observers. You could dispense with spare tires forever! How cool is that? Michelin failed, however, to see the total value stream ending with the customer; in particular, the company failed to take into account how the customer was supposed to get a tire repaired once he experienced a flat. Repair shops have their own control systems around whether they want to invest in the physical and human capital that would be required to handle this new product. And in the end, repair shops decided not to, so the product was dead on arrival.

One outstanding example of a dysfunctional interruption in the value stream from manufacturers to customers is the approvals process for new pharmaceuticals at the Food and Drug Administration (FDA). Madden has fully discussed this problem and a practical means to overcome some of the worst effects in his earlier book (see Reed’s review of Free to Choose Medicine). And in the final chapter of his current book, he demonstrates that the situation at the FDA is an excellent case study in the violation of the principles underlying the four core beliefs.

If you take Madden’s advice and reconstruct your worldview through the prism of his four core beliefs, you’re likely to think and behave more like a seasoned entrepreneur. Success becomes more probable, though never assured in an uncertain world. In an age in which changes happen fast, labor and capital are more mobile than ever, and technology opens doors widest to those who grasp it first, every little bit helps.

larry reed new thumbABOUT LAWRENCE W. REED

Lawrence W. (“Larry”) Reed became president of FEE in 2008 after serving as chairman of its board of trustees in the 1990s and both writing and speaking for FEE since the late 1970s. Prior to becoming FEE’s president, he served for 20 years as president of the Mackinac Center for Public Policy in Midland, Michigan. He also taught economics full-time from 1977 to 1984 at Northwood University in Michigan and chaired its department of economics from 1982 to 1984.

ABOUT WAYNE OLSON

Wayne is FEE’s Executive Director.

EDITORS NOTE: The featured image is courtesy of FEE and Shutterstock.

CLICHÉS OF PROGRESSIVISM #31 – “Labor Unions Raise Wages and the Standard of Living” by Hans F. Sennholz

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To believe that labor unions actually improve the lot of working people is to suggest that the capitalist economy fails to provide fair wages and decent working conditions. It is to imply that a free economy does not work satisfactorily unless it is “fortified” by union activity and government intervention.

The truth is that the unhampered market society allocates to every member the undiminished fruits of his labor. It does so in all ages and societies where individual freedom and private property are safeguarded. (The process works faster and more efficiently in our high-tech, information age with a labor force more mobile than ever before but it worked in previous times too, so long as individuals were free to accept or reject the offers of employers, or to leave one employer and work either for another or for himself–Editor.)

The reason your great-grandfather earned $5 a week for 60 hours of labor must be sought in his low productivity, not in the absence of labor unions. The $5 he earned constituted full and fair payment for his productive efforts—a voluntary contract he likely entered into because it represented his best opportunity. The economic principles of the free market, the competition among employers, a man’s mobility and freedom of choice, assured him full wages under the given production conditions.

Wages were low and working conditions primitive because labor productivity was low, machines and tools were relatively primitive, technology and production methods were crude when compared with today’s. If, for any reason, our productivity were to sink back to that of our forebears, our wages, too, would decline to their levels and our work week would lengthen again no matter what the activities of labor unions or the decrees of government.

In a free market economy, labor productivity determines wage rates. As it is the undeniable policy of labor unions to reduce this productivity (as measured per man-hour) by forcing compensation up or spreading out the work with restrictive work rules, they have in fact reduced the wages of the masses of people although some privileged members have benefited temporarily at the expense of others. This is true especially today when the unions enjoy many legal immunities and considerable political powers. And it also was true during the nineteenth century when our ancestors labored from dawn to dusk for low wages.

Through a variety of coercive measures, labor unions merely impose higher labor costs on employers. The higher costs reduce the returns on capital and curtail production, which curbs the opportunities for employment. This is why our centers of unionism are also our centers of highest unemployment; they are also the industries that have seen the most dramatic declines in numbers of existing jobs, because like anything else, the higher the price, the less will be purchased. (It’s also why compulsory unionism states for years have shown lower rates of both employment growth and wage rates than so-called “right-to-work” states. See http://www.mackinac.org/4290  – Editor.)

True enough, the senior union members who happen to keep their jobs do enjoy higher wages. But those who can no longer find jobs in unionized industries then seek employment in nonunionized activity. This influx and absorption of excess labor tends to reduce their wages. The resulting difference between union and nonunion wages rates gives rise to the notion that labor unions must indeed benefit workers. In reality, the presence of the nonunionized sectors of the labor market hides the disastrous consequences of union policy by preventing mass unemployment. (Nonetheless, with 94% of today’s private sector workers being completely non-union, and many of them enjoying very high wage rates, it’s increasingly difficult for unions to argue that workers without unions are exploited and unprotected. – Editor.)

Summary

  • Wages can only be paid out of what is produced (no production, no wages), therefore greater productivity is the key to higher wages.
  • Unions typically hamper production. Union activity may result in some people getting more but without an increase in productivity, that simply means that some other people must get less. Either you bake a bigger pie for everybody or you just slice the pie up differently.
  • It looks sometimes like unions have actually forced wages higher because of the lower wages in non-unionized businesses. But the latter are caused in part by the outflow of labor from unionized sectors to non-unionized ones. Unionized auto-workers today, for example, may make a little more per hour than their nonunionized counterparts but there are a lot fewer of them too!

For further information, see:

“Why Wages Rise—Part I” by F. A. Harper

“Why Wages Rise—Part II” by F. A. Harper

“Can Labor Unions Really Raise Wages?” by Henry Hazlitt

ABOUT HANS F. SENNHOLZ

Editor’s Note: This essay, with minor updates, was first published in the 1962 book, “Cliches of Socialism.” Prior to serving as president of the Foundation for Economic Education from 1992 to 1997, the late Hans F. Sennholz was chairman of the department of economics at Grove City College in Pennsylvania from 1956 to 1992. A noted economist and teacher of the “Austrian” school, he earned his PhD under the tutelage of Ludwig von Mises. Read more about him here. The featured image is courtesy of FEE and Shutterstock. 

FL, GA Education Ethics Differ on Sexual Harassment?

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Based on primary source documents and information from the Education Practices Commission of the State of Florida and the Georgia Professional Standards Commission, the penalty for a specific sexual harassment case seems to vary greatly with a wide range of extremes between the two states.

Former Miami-Dade County Public Schools assistant principal at Miami Central Senior High School and current principal/director with Clayton County (GA) County Public Schools Melvin K. Blocker received two vastly different outcomes stemming from a case of alleged sexual harassment from the 2007-2008 and 2008-2009 school years.

According to the Florida EPC’s Final Order:

“During the 2007-2008 and 2008-2009 school years, Respondent served as a principal of a public school in the state of Georgia. During this time, Respondent sexually harassed a teacher. Respondent’s conduct included, but was not limited to, stating that the teacher “was the kind of girl [he] and [his] friends would have run a train on in college,” or words to that effect.

Respondent retaliated against the teacher for seeking conciliation of her grievances. Respondent stated, “teachers who went to [Georgia Association of Educators] about issues no longer work at [Respondent’s] school,” or words to that effect.

As a result of this conduct, Case PSC 09-7-11 was opened, and the Georgia Professional Standards Commission found probable cause against Respondent.

The Georgia Professional Standards Commission and Respondent entered into an agreement with respect to Case PSC 09-7-11. On or about June 30,2010, the Georgia Professional Standards Commission issued a Consent Order suspending Respondent’s educator’s certificate for five days, from June 8, 2009 through June 12, 2009.”

The Georgia Professional Standards Commission did indeed suspend his certificate for five days, which seems to many like a slap on the wrist.

To Florida’s credit, the Education Practices Commission permanently revoked his Florida Educator’s Certificate on October 15, 2014.

Why the stark difference?

According to the Georgia Professional Standards Commission, Mr. Blocker may indeed be in trouble given the teacher certification rules, which state:

“The Clearance certificate is issued at the request of a the employing Georgia local unit of administration (LUA) to educators who satisfactorily complete fingerprint and background check requirements and do not have a certificate that is currently revoked or suspended in Georgia or any other state. All educators employed by a Georgia LUA must hold a Clearance certificate. There are no academic requirements necessary to qualify for this certificate. All holders of this certificate are subject to the Georgia Code of Ethics for Educators.”

Strangely enough, the Florida EPC Final Order states copies were furnished to other related Florida Department of Education entities but not to the Georgia Professional Standards Commission- unless a separate communiqué was sent and not mentioned.

It will be interesting to see what course of action the Georgia Professional Standards Commission decides to take.

A reasonable person may conclude that they would not want a female relative or significant other in Mr. Blocker’s employ or purview.

Though these incidents have occurred 5-7 years ago, has Mr. Blocker truly learned the error of his ways or have other incidents occurred and were covered up and/or repressed afterwards?

Time, and a thorough investigation, will tell.

Sarasota School District Scandal: Board members, former superintendent, staff, teachers, union implicated in improper use of email system for political purposes

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As a result of information uncovered by Citizens for Sarasota Schools, multiple emails demonstrate the politicization of the Sarasota County School Board, the Administration, and the school district down to lower level employees. Numerous Sarasota County School District employees and administrators ignore the law and have used public property for political purposes to fund raise, recruit volunteers, campaign and promote the candidacy of one of their own bureaucrats, Ken Marsh, during school hours.

The Sarasota County Schools Information Technology Guidelines and Procedures, page 28, under the heading “Appropriate Use of E-mail” states the following:

Sarasota County Schools guidelines prohibit certain types of e-mail. These include mail that may be perceived as harassment, political campaigning, or commercial solicitation. Chain mail is also prohibited. Violators will be subject to loss of computer access privileges, as well as additional disciplinary action as determined by the Sarasota County Schools disciplinary procedures. Certain types of e-mail, including but not limited to harassing e-mail, may also subject the sender to civil or criminal penalties. [Emphasis added]

Copies of emails obtained by Citizens for Sarasota Schools show Sarasota County School Board members Shirley Brown and Caroline Zucker violated school board policy on use of the email system. Also implicated is former district superintendent Wilma Hamilton. District Director Gary Letterman was implicated in violating the policy by drafting and editing a fundraising letter for the Ken Marsh campaign. Multiple employees of the school system, some union representatives, have repeatedly violated school board policy.

The following are some examples of the improper use of the Sarasota County School District resources for political purposes:

September 9, 2014

Gary Leatherman, the Director of Communications and Community Relations for the Sarasota County School District uses the Sarasota County School District Email System to confirm a commitment to submit a political donation to the Ken Marsh Campaign, as well as to assist in the drafting and editing of a fundraising letter for the Ken Marsh Campaign. Email sent during school hours. (Page 294-302)

September 9, 2014

Gary Leatherman, the Director of Communications and Community Relations for the Sarasota County School District uses the Sarasota County School District Email System, during business hours, to work directly with the Ken Marsh for School Board Campaign to draft and edit a fundraising letter and suggest attacks on School Board Member Bridget Ziegler. His official title & government position appears in the email.
(Page 105-108)

September 10, 2014

Gary Leatherman, the Director of Communications and Community Relations for the Sarasota County School District uses the Sarasota County School District Email System to communicate directly with School Board Candidate Ken Marsh, Ann Hankinson (who appears to be a Ken Marsh campaign volunteer & school district employee) & Gabriel Hament (who we believe is acting as Ken Marsh’s campaign manager & has hosted a fundraising for Ken Marsh). Sent during school hours. (Page 131-133)

September 10, 2014

Gary Leatherman, the Director of Communications and Community Relations for the Sarasota County School District uses the Sarasota County School District Email System, during business hours, to work directly with the Ken Marsh Campaign to draft and edit a fundraising letter and suggest attacks on School Board Member Bridget Ziegler. In the email, he states “Good Job”. His official title & government position appears in the email. (Page 136)

September 21, 2014

Gary Leatherman, the Director of Communications and Community Relations for the Sarasota County School District uses the Sarasota County School District Email System to directly receive a campaign update from the Ken Marsh Campaign. Continues to show pattern of coordination between Gary Leatherman, in his official capacity, working with the Ken Marsh Campaign. (Page 172-173).

Additional abuses (there are numerous other examples).

August 13, 2014

Lisa Saul uses the Sarasota County School District Email System to forward endorsements and attacks on the Tea Party and various candidates. Sent during school hours. (Document 1 Page 76-78)

September 11, 2014

Shari Dembinski (looks to be Union Rep) uses the Sarasota County School District Email System to forward an attack on Bridget Ziegler and a list of contributors to Bridget Ziegler’s campaign. Recipients are encouraging to share with non-union members. (We suspect this is what caused an organized effort to threaten the boycott of businesses supporting the Bridget Ziegler for School Board campaign. Numerous businesses reported receiving countless calls threatening a boycott of their establishment if they did not stop donating and/or displaying a Bridget Ziegler campaign sign. (Document 1 Page 81-82)

September 12, 2014

Shannon Wynne, a School District Employee, uses the Sarasota County School District Email System to falsely attack Bridget Ziegler and one of her contributors. Sent during school hours. (Document 1 Page 98-99)

September 12, 2014

Joette Riggs, a school district employee, uses the Sarasota County School District Email System to attack Bridget Ziegler and a contributor to the Bridget Ziegler Campaign. Sent during school hours. (Document 1 Page 112-114)

And why not? The politics and illegal misuse of taxpayer funded public resources starts at the top.

August 27, 2014

Wilma Hamilton, former Superintendent of the Sarasota County District, uses the Sarasota County School District Email System to book a hotel room for Ken Marsh & his wife Tanice Knopp. Why is she booking them a room? Was this disclosed on his campaign finance report? (Page 47-49)

August 21, 2014

Sarasota County School Board Member Shirley Brown uses the Sarasota County School District Email System in her official capacity as a School Board Member to endorse three Sarasota County School Board Candidates. (Page 56-57)

August 23, 2014

Sarasota County School Board Member Shirley Brown uses the Sarasota County School District Email System in her official capacity as a School Board Member to notify Marie Baia, a School District Employee, about political endorsements received by Ken Marsh, School Board Member Jane Goodwin and herself. (Page 248-249)

August 21, 2014

Sarasota County School Board Member Caroline Zucker uses the Sarasota County School District Email System, in her official capacity as a School Board Member, to endorse political candidate for office.

October 3, 2014

SB Member Caroline Zucker sharing who she voted for in the SB race Goodwin-Brown-Marsh when asked for recommendations (Page 297 – Document 3)

The Sarasota School System has far too long gone unexamined and been poorly managed. This has created a culture where the School Administration and School Board believe it is unaccountable.

For example, the Board regularly takes workshop meetings off video recording, decamps to another building, settles into a much smaller conference room, and in this “shade” conducts public meetings.

The Sarasota School Board does not post and stream complete workshops and Board Meetings — which is regularly done by other government bodies. And yet, they self-congratulate themselves even when close to 22% of students fail to graduate. This is only 3% better than the rest of Florida.

Perhaps it is time they stop politicking and start educating.

EDITORS NOTE: To read the full list of emails click here, here and here.

PUBLISHERS NOTE: I, Dr. Rich Swier, regret having used the term “illegal” in this and any other article to describe actions by Ms. Pat Gardner and the SC/TA.

Raise the Minimum Wage? A Socratic Dialogue by Lawrence W. Reed

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The ancient sage Socrates, a giant in the foundation of Western philosophy, was known for a teaching style by which he aggressively questioned his students. He employed his Socratic method as a way to stimulate logical, analytical thought in place of emotive or superficial pronouncement. Rather than lecture or pontificate, he would essentially interrogate. The result was to force his Greek pupils to see the full implications of their conclusions or to realize that what they had accepted as solid was nothing more than the intellectual equivalent of crumbled feta.

In his January 28 State of the Union speech, President Obama called upon the U.S. Congress to enact a hike in the hourly minimum wage from $7.25 to $10.10. (The dime may have been added because a nice round number without a decimal would sound unscientific.) Economists have long argued that raising thecost of labor, especially for small and start-up businesses, reduces the demand for labor (as with anything else). But Congress may do it anyway—with the usual, oversized measure of self-righteous breast-beating about helping workers. Maybe what members of Congress need is not another lecture on the minimum wage from an economist, but rather an old-fashioned Socratic inquisition. If the old man himself were with us, here’s how I imagine one such dialogue might go:

Socrates: So you want to raise the minimum wage. Why?

Congressman: Because as President Obama says, minimum wage workers haven’t had a raise in five years.

Socrates: Can you name one single worker who was making $7.25 five years ago who is still making $7.25 today? And if you can’t, then please tell me what caused their wage to rise if Congress didn’t do it. Come on, can you name just one?

Congressman: I don’t happen to have a name on me, but they must be out there somewhere.

Socrates: Well, we’ve just been through a deep recession because successive administrations from both parties, plus you lawmakers and your friends at the Fed, created a massive bubble and jawboned banks to extend easy credit. The bust forced many businesses to cut back or close. Now we have the weakest recovery in decades as ever-higher taxes, regulations, and Obamacare stifle growth. No wonder people are hurting! Do you take any responsibility for that, or do you just issue decrees that salve your guilty conscience?

Congressman: That’s water over the dam. I’m looking to the future.

Socrates: But how can you see even six months into a murky future when you refuse to look into the much clearer and more recent past? You guys think the world starts when a problem arises, as if you’re incapable of analyzing the problem’s origin. Maybe that’s why you rarely solve a problem; you just set everybody up to repeat it. If you really look to the future, then why didn’t you see this situation coming?

Congressman: Look, in any event, $7.25 just isn’t enough for anybody to live on. Workers must have more to meet their basic needs.

Socrates: An employer doesn’t have anything to pay an employee except what he first gets from paying customers. I wonder, whose “needs” do you consider when you decide to buy or not to buy: the workers’ or your own? Have you ever offered to pay more than the asking price just to help out the guy who made the product? And if customers like you won’t do that, where do you expect the employer to get the money?

Congressman: That’s not a fair question. My intent here is purely to help.

Socrates: Sounds to me like the answer is “no,” but let’s move on. Why do you assume your intentions mean more to a worker than those of his employer? It’s the employer who’s taking the risk to offer him a job, not you. You’re only making speeches about it. Don’t you see a little hypocrisy here—you, who are personally offering no one a job, self-righteously criticizing others who are actually creating jobs and paying wages even if they’re not all at a wage you like?

Congressman: Employers are interested only in profits.

Socrates: Are you saying employees are not? Are they more interested in working for companies that lose money, and if so, then why don’t they all line up for government jobs?

Congressman: Well, we lose money here in government every year and there are plenty of people who are happy to work for us.

Socrates: You have a printing press. You also have a legal monopoly on force. When you borrow in the capital markets, you shove yourself to the head of the line at everybody else’s expense. Are you saying these are good things and that we’d be better off if the private sector could do these things too? Try to keep up with me here.

Congressman: I repeat, employers are interested only in profits. People before profits, I say! I even have a bumper sticker on my car that says that.

Socrates: So are you saying that employers would be better people if, instead of seeking profits, they tried to break even or run at a loss? How does that add value to the economy or encourage risk-takers to start a business in the first place?

Congressman: You’re trying to belittle me but I went to a state university. All of my sociology, political science and gender studies professors told us that raising the minimum wage is good.

Socrates: Were any of those tenured, insulated, and government-funded pontificators actual job-creating, payroll tax-paying entrepreneurs themselves, ever?

Congressman: That’s beside the point.

Socrates: (Sigh.) Figures.

Congressman: Look, $10.10 isn’t much. I think you must be mean-spirited and greedy if you don’t want people to be paid at least $10.10.

Socrates: Yeah, like you guys in government check your personal ambitions at the door when you take office. I’d like to know how you arrived at that number. Was it some sophisticated equation, divine revelation or toss of the dice? Why didn’t you choose $20.00, which is not only a nice round number but also a lot more generous?

Congressman: Well, $20.00 would be too high, for sure. Too much of a jump at once.

Socrates: It sounds like you think the cost of labor might indeed affect the demand for it. Good! That’s progress. You’re not as oblivious about market forces as I thought. What I want to know is why you apparently don’t think higher labor costs matter when you raise the minimum wage from $7.25 to $10.10. Do you think everyone, regardless of skill level or experience, is automatically worth what Congress decrees? Do you believe in magic, too? How about tooth fairies?

Congressman: Now hold on a minute. I’m for the worker here.

Socrates: Then why on earth would you favor a law that says if a worker can’t find a job that pays at least $10.10 per hour, he’s not allowed to work?

Congressman: I’m not saying he can’t work! I’m saying he can’t be paid less than $10.10!

Socrates: I thought we were making progress, but perhaps not. Can you tell me, if your scheme becomes law, what happens to a worker whose labor is worth only, say, $8.10 because of his low skills, lack of education, scant experience, or a low demand for the work itself? Will employers happily employ him anyway and take a $2.00 loss for every hour he’s on the job?

Congressman: Businesses need workers and $2.00 isn’t much, so common sense and decency would suggest that of course they would.

Socrates: So employers who employ people are too greedy to pay $10.10 unless they’re ordered to, but then when Congress acts, they suddenly become generous enough to hire people at a loss. Who was your logic instructor?

Congressman: Can we hurry this up? I’ve got other plans for other people I have to think about.

Socrates: I give up. You congressmen are incorrigible. You’re the only people on whom my teaching method has no discernible impact.

Congressman: You ask too many questions.

At this point, in utter frustration, Socrates drinks the hemlock. The congressman votes to price many of the nation’s most vulnerable employees out of work and gets reelected.

Whoever warned us to beware of Greeks bearing gifts apparently never met a congressman.

larry reed new thumbABOUT LAWRENCE W. REED

Lawrence W. (“Larry”) Reed became president of FEE in 2008 after serving as chairman of its board of trustees in the 1990s and both writing and speaking for FEE since the late 1970s. Prior to becoming FEE’s president, he served for 20 years as president of the Mackinac Center for Public Policy in Midland, Michigan. He also taught economics full-time from 1977 to 1984 at Northwood University in Michigan and chaired its department of economics from 1982 to 1984.

EDITORS NOTE: The featured image is courtesy of FEE and Shutterstock.

Equal Work? Government Has No Idea What That is

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“Equal pay for equal work!” the mantra goes. “Women get only 73 cents on a man’s dollar!” These are oft-heard slogans, and we may well hear them again during the fall campaign with the War on Women afoot. Now, going beyond the rhetoric, it’s not widely known but nonetheless true that the intersex pay gap is attributable to different career choices men and women make: women tend to choose less lucrative fields (e.g., soft sciences instead of hard ones), work shorter hours even when “full time,” are more likely to value personal fulfillment and job flexibility over money, are more inclined to take time off, generally have less job tenure and more often decline promotions. But while I’ve examined these factors at length in the past, the topic today is something more fundamental. This is that there would be a problem with even a well-intended equal-pay-for-equal-work scheme:

Hardly anyone knows what equal work is.

And the government hasn’t the foggiest idea.

Recently I mentioned how women tennis players now receive the same prize money as the men at Grand Slam events (Wimbledon; and the US, French and Australian opens) and how this is hailed as a victory for “equality.” Yet since the women still only play best of three sets but the men best of five, this actually means the men must work longer for the same pay. Even this, however, doesn’t truly illuminate the issue: what actually constitutes “equal work” in professional tennis?

I’ll introduce the point with another example. The top 10 female fashion models earned 10 times as much as their male counterparts in 2013. Is this unequal pay for equal work? Not really.

While I don’t know if women models’ job is more labor intensive, I know they don’t get paid because they’re capable of posing, wearing clothing, standing under hot lights or parading down runways. It’s because their “work” helps to satisfy a market — and it satisfies a bigger market than the men’s work does.

Note here that while people today frown upon discrimination based on innate qualities, integral to doing the women models’ work is being female. If the male models were women, they might be able to do the same “work” and satisfy the market equally.

Likewise, does the “work” in tennis directly have to do with number of sets played? As an aspiring 12-year-old tennis nut, I’d sometimes play 10 sets a day under the sweltering summer sun, but no one thought of compensating me and I never felt oppressed. Professional tennis players earn money because they satisfy a market, and the men’s “work” does this more effectively than the women’s. And how would we characterize this more valued work?

It is success on the men’s tour — people want to see the grandest stage in the game.

Thus, the only way a woman in tennis could do work equal to that of Roger Federer or Rafael Nadal is to compete on, and succeed equally on, the ATP Tour. Of course, a woman who could would not only enjoy the same prize money (it’s greater in men’s tennis overall), but would become a sporting sensation and might very well receive endorsements dwarfing the men’s. So her “work” then could actually be greater.

There are endless more mundane examples. A woman gynecologist I know will only hire female assistants because she believes it makes her patients more comfortable. Not only is this an example of why sex discrimination is often justifiable, but what if she was forced to hire a man? If the patients were indeed less comfortable — and, therefore, perhaps less likely to visit her practice — would that man truly be doing “equal work”?

Now consider female police officers. Forget for a moment that standards on forces were long ago lowered to accommodate women based on “disparate impact” theory and that Eric Holder is currently suing the Pennsylvania State Police for treating women equally. Imagine a study found that people in general, and the criminally inclined in particular, found male officers more imposing and therefore were more likely to mind their p’s and q’s around them. Would, then, even a highly competent female officer be able to perform “equal work”? And if not, and reflecting the phenomenon with fashion models, wouldn’t being male (or at least appearing so, to head the “transgender” argument off at the pass) be integral to the “work” of policing?

What of a female reporter in male athletes’ locker rooms? Not only wouldn’t it be allowed if the sexes were reversed, but if those men were less comfortable and less likely to be forthcoming in their comments — or even if they just had to modify their behavior — could her “work” really be equal to that of a male reporter’s?

Next, my local hardware store provides knowledgeable workers, all men, who render valuable advice on products and how to perform various home repairs. If it was determined that people found a female in that role less credible and were then not quite as likely to buy from the establishment, would even a highly competent woman be able to do “equal work” in that capacity?

What about the little West Indian restaurant, with all-black workers, I loved when I spent a few weeks in Tampa? If hiring a white person made the eatery seem less authentic and negatively affected its appeal, would that individual be able to do “equal work”? The same, of course, could be asked about a black person working in a German restaurant. In these cases race would be integral to the “work.”

And what of a homosexual Boy Scout troop leader? If his presence made parents less likely to enroll their boys in the organization, could he be capable of “equal work”?

Of course, one knee-jerk reaction here is to say that people “shouldn’t” view female cops or hardware specialists, or homosexuals differently than anyone else. But this is a moral argument of questionable morality, as it applies a bias in selectively objecting to market biases. People take little issue with gynecologists or day-care centers that won’t hire men, with male models being paid less or with ethnic restaurants hiring only non-whites. But try only hiring only male cops or employees; compensating a male hardware specialist more handsomely; or, as with Abercrombie a few years back, valuing employees who don’t wear hijabs over those who do. You may have an experience with the DOJ or EEOC that’ll make a dance with the IRS seem pleasant.

We could also talk about how we “should” value work. If we were deific or at least angelic, we would certainly value a mother-of-four’s labors or Mother Teresa’s loving charity more than Facebook and completely devalue rappers’ vulgarity. And even though I earn less than mainstream-press profferers of pablum, I consider my work infinitely more valuable. But flawed though market determinations may be, they’re still the best guide available.

Even within this worldly context, though, some may say there’s more nuance to the matter of work than my examples express. They may contend, for instance, that female police and hardware specialists might have strengths that counterbalance or even outweigh their weaknesses. And guess what?

I agree.

My examples could possibly be lacking.

And this just buttresses the point: virtually no one — if anyone — can properly assess what constitutes equal work in every situation.

This is yet another reason why the matter of work and pay is none of the government’s business. Are bureaucrats, politicians and judges qualified to determine what equal work might be in the thousands of professions in America? Government isn’t God; it’s not even the market, which can be defined as economic democracy expressed through purchasing decisions. When it intrudes into the economy it’s more like Hitler trumping his generals during WWII and deciding on military strategy: an autocratic agency as incompetent as it is arrogant.

Contact Selwyn Duke, follow him on Twitter or log on to SelwynDuke.com

EDITORS NOTE: The featured image is of students and teachers uniting on the streets to protest for equality. Picture Credit

CLICHÉS OF PROGRESSIVISM #21 – “Capitalism’s Sweatshops and Child Labor Cry Out for Government Intervention” by Paul L. Poirot

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Prevalent in the United States and other industrialized countries is the belief that without govern­mental intervention, such as wage and hour legislation, child labor laws, and rules concerning work­ing conditions for women, the long hours and grueling conditions of the “sweatshop” would run rampant.

The implication is that legislators, in the days of Abraham Lin­coln, for instance, were cruel and inconsiderate of the poor—no better than the caricatured fac­tory owners of the times who would employ men and women and children at low wages, long hours, and poor working conditions. Otherwise, had they been humani­tarians, legislators of a century ago and earlier would have prohibited child labor, legislated a 40-hour work week, and passed other laws to improve working condi­tions.

But the simple truth is that legislators of a few generations ago in the United States were powerless, as Mao or Nehru or Chavez or Castro has been powerless in more recent times, to wave a wand of restrictionist legislation and thereby raise the level of living and abolish poverty among the people. If such a miracle were pos­sible, every dictator and every democratically chosen legislator would “push the button” without hesitation. (Editor’s note: See the recommended readings below for abundant historical evidence of this point).

The reason why women and children no longer find it neces­sary to work for low wages under poor conditions from dawn to dusk six days or more a week is the same reason why strong healthy men can avoid such onerous labor in a comparatively free industrialized society: surviving and earning a living are made easier through the use of tools and capital accumu­lated by personal saving and in­vestment.

In fiction, the children of na­ture may dwell in an earthly para­dise; but in the real life of all primitive societies, the men and women and all the children strug­gle constantly against the threat of starvation. Such agrarian econ­omies support all the people they can, but with high infant mortal­ity and short life spans for all survivors.

When savings can be accumu­lated, then tools can be made and life’s struggle somewhat eased—industrialization begins. And with the growth of savings and tools and production and trade, the pop­ulation may increase. As incomes rise and medical practices im­prove, children stand a better chance of survival, and men and women may live longer with less effort. Not that savings are ac­cumulated rapidly or that indus­trialization occurs overnight; it is a long, slow process. And in its early stages, the surviving women and children are likely to be found improving their chances as best they can by working in factories and so-called sweatshops. To pass a law prohibiting such effort at that stage of development of the so­ciety would simply be to condemn to death a portion of the expand­ing population. To prohibit child labor in developing countries today would be to condemn millions to starvation.

Once a people have developed habits of industry and thrift, learned to respect life and prop­erty, discovered how to invest their savings in creative and pro­ductive and profitable enterprise, found the mainspring of human progress—then, and only then, after the fact of industrialization and a prosperous expanding econ­omy, is it possible to enact child labor laws without thereby pass­ing a death sentence.

A wise and honest humanitarian will know that poverty (and worse) lurks behind every minimum wage law that sets a wage higher than some individual is capable of earn­ing; behind every compulsory 40-hour week rule that catches a man with a family he can’t support ex­cept through more than 40 hours of effort; behind every legislated condition of employment that forces some marginal employer into bankruptcy, thus destroying the job opportunities he otherwise afforded; behind every legal ac­tion that virtually compels retire­ment at age 65.

Men will take their children and women out of sweatshops as fast as they can afford it—as fast as better job opportunities develop—as fast as the supply of capital available per worker increases. The only laws necessary for that purpose are those that protect life and private property and thus encourage personal saving and in­vestment.

To believe that labor laws are the cause of improved living and working conditions, rather than an afterthought, leads to harmful laws that burden wealth creation, sap the incentive of the energetic, and close the doors of opportunity to those least able to afford it. And the ultimate effect is not a boon to mankind but a major push back toward barbarism.

Paul L. Poirot

Summary

  • Sweatshops and child labor were commonplace in preindustrial, precapitalist days because production and productivity were so low, not because people disliked their wives and children more than they do today.
  • Savings, investment, and economic growth improve working and economic conditions faster and more assuredly than well-intentioned but misguided laws that simply close doors of opportunity.

For further information, see:

“Child Labor and the British Industrial Revolution” by Lawrence W. Reed

“Sweatshop Blues: An Interview with Benjamin Powell”

“Book Review: Child Labor and the Industrial Revolution by Clark Nardinelli” as reviewed by David M. Brown

“Why Economies Grow” by Aaron Schavey

“The Man Behind the Hong Kong Miracle” by Lawrence W. Reed

ABOUT PAUL L. POIROT

Paul L. Poirot was a long-time member of the staff of the Foundation for Economic Education and editor of its journal, The Freeman, from 1956 to 1987.

EDITORS NOTE: Paul L. Poirot was a long-time editor of FEE’s journal, The Freeman. This essay is slightly edited from the original, published there in 1963 under the title “To Abolish Sweatshops.”) The featured image is courtesy of FEE and Shutterstock.

Drought Conditions in the U.S. and Immigration

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As water resources necessary for survival dwindle the U.S. Senate, in all its’ wisdom, passed legislation last year that would have doubled mass immigration levels to 2 million a year, dramatically increase worker visas and grant amnesty. Democrats are interested in poverty level voters and Republicans cheap labor. Fortunately the House refused to take up a bill which had no benefits but many negatives for the citizens that voted them into office.

In addition, contemplate what could happen if the population continues to soar.

Here is a link to an article about India, second most populated country in the world, and water their shortages. Don’t forget we are the third most populated country in the world and have 20% of all the world’s immigrants already living here.

When is enough enough?

Five Lessons K–12 Can Learn from Higher Ed by Jenna Robinson

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Colleges aren’t perfect, but they can be instructive for the public schools.

U.S. colleges and universities don’t get everything right. On the whole, they’re overpriced, operationally hidebound, and ideologically stagnant. Despite those problems, American higher education does some things very well—well enough that students from around the world still choose to come to the United States to get advanced degrees.

Primary and secondary schools could learn a lot by taking a close look at some of the best practices in higher education. The underlying difference is that higher education behaves more like a free market, where individual choices and actions determine the outcome.

Here are five things that universities gets right:

1.  Students learn at their own pace. When a student gets to college or university, she arrives with a cohort of other students. They’re mostly the same age, and they’ll probably all take English 101 within their first year on campus. But that’s where the class structure ends. After English 101, students all go their own ways, taking classes to suit their particular talents and interests. Entrance exams mean that students enroll in the math or foreign language courses commensurate with their skills. And if a student flunks differential equations or organic chemistry, he doesn’t have to be held back a whole year. He moves on with the rest of his courses while he retakes the one problem class. There are even classes like “economics for non-majors” that allow students to explore a subject without taking difficult prerequisites or learning complicated methodology.

In K–12, students advance in lockstep with their peers. Students must learn all subjects at the same speed. Special talent in math or language doesn’t result in early promotion to the next level. Until students reach late middle school or early high school, they are expected to learn at exactly the same rate as their peers. And adherence to social promotion (which is allowed in half of U.S. states) means that all students advance from one grade to the next, regardless of achievement. This practice occurs despite the evidence that retaining students who fail their courses generates better outcomes for those students.

2.  Students and parents have skin in the game. Paying tuition affects parents’ and students’ behavior in two ways. First, they shop around for the best deal—not necessarily the cheapest school, but the school at which they can get the most bang for their buck. Second, paying tuition motivates students to care about their educational success (or lack thereof). No one wants to see their hard-earned dollars go down the drain—and scholars have found that this is true for money spent on higher education, particularly as a student approaches graduation. Loans, savings, and money earned from working are better motivators for students to stay in school than scholarships or grants.

If students fail their elementary school courses, they don’t have any financial stake in that failure—at least, not until very far in the future. And parents can’t easily make comparisons to tell whether they’re getting any bang for their buck. Thus, they don’t have strong incentives to hold schools and teachers accountable. More importantly, parents who send their children to public schools can’t take their education dollars elsewhere. Even if one student leaves, the school district will quickly fill her spot with someone else.

3.  Professors are required to have degrees in their field. Community college and university departments only hire professors and lecturers with degrees in the subjects they teach. Professors teaching Introduction to American Government at State U. can be expected to have a Ph.D. in political science—probably with a concentration in American politics. They also research in that same field, keeping abreast of the latest scholarship on their topic. Professors are experts in their own discipline when they enter a classroom to teach undergraduates.

In K–12 schools, many teachers have degrees in education and have spent more time studying pedagogy than the subject they teach. In many states, teachers are even rewarded with raises for getting advanced degrees—regardless of whether that degree is in their field. But the success of programs like Teach for America makes it clear that an education degree can’t substitute for good subject knowledge.

4.  Students can attend any school for which they’re qualified. College students aren’t “zoned” for particular schools. Even public colleges and universities don’t limit applications to students from certain area codes (although they often cap out-of-state enrollment). This system means that every student who chooses to go to college must weigh the costs and benefits of each option and make a decision about where to apply and attend; they cannot simply rely on a default option. Because students can choose where to attend, colleges compete to offer students what they want: good graduation rates, tuition discounts, face time with professors, and opportunities for extracurricular activities. The importance of U.S. News and World Report’s yearly college rankings is a testament to the power of education consumers’ choices.

In stark contrast, a large majority of students in most public school districts simply attend the school for which they’re zoned, and few students consider charter, private, or home-school options.

5.  Professors are paid as individuals, not as a collective. University professors in demanding fields, with unique or extraordinary talent, or with impressive resumes are paid more. Thus, the mean salary for a professor of engineering is $117,911 annually, while a history professor earns $82,944. Instructors, who do no research, earn less than tenure-track professors, who are expected to publish. Moreover, professors are evaluated on their merits when they are up for tenure. How many journal articles have they published? How good (or bad) are their student evaluations? Have they performed any administrative, advising, or outreach work to the satisfaction of the committee? University teachers receive no credit for simply sticking around for a requisite amount of time.

In K–12 public schools, however, “longevity pay” accrues to all teachers who continue to show up. Schools award tenure, in most cases, simply for teaching for a certain number of years without getting negative reviews. Most tellingly, teacher pay is rarely based on individual merit. Teachers receive raises en masse, sometimes for school performance and sometimes just because it’s a good budget year.

Higher education is by no means perfect. But by allowing some market processes, it has avoided the worst failures of the public school system. Politicians and K–12 educators should take heed.

ABOUT JENNA ROBINSON

Jenna Robinson is director of outreach at the Pope Center for Higher Education Policy.

EDITORS NOTE: The featured image is courtesy of FEE and Shutterstock.

TWO REPORTS: Teachers make up only 50% of all Education Jobs

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Parents, concerned citizens and taxpayers have long been concerned about the growing number of non-teaching jobs in public schools. Taxpayers want their property tax dollars to go primarily to the classroom. Two recent studies show that, overtime, education funding is increasingly going to non-teaching jobs.

Visual Editor at The Daily Signal and digital media associate at The Heritage Foundation, Kelsey Harris reports, “Even though the Obama Administration proposes spending $25 billion specifically to ‘provide support for hundreds of thousands of education jobs’ in order to ‘keep teachers in the classroom,’ research by both Heritage and The Fordham Institute reveal alarming numbers: only half of education jobs belong to teachers.”

The Fordham Institutes Matt Richmond writes, “The number of non-teaching staff in the United States (those employed by school systems but not serving as classroom teachers) has grown by 130 percent since 1970. Non-teachers—more than three million strong—now comprise half of the public school workforce. Their salaries and benefits absorb one-quarter of current education expenditures. ”

To show how teachers are no longer the majority The Fordham Institute and Heritage provide the following four charts and map (NOTE: For a larger view click on the chart/map):

Chart 1 & 2: Only half of education jobs are teachers:

Hidden-Half-Report chart 1

chart2-1 (1)

Chart 3: How education staffing has outpaced student enrollment:

chart1600

Chart 4: The farther a school is from a city, the more non-teaching staff it has:

Hidden half report chart 2

Map showing the number of teachers aides per 1,000 students by state:

Final-National-Map-Web

 

EDITORS NOTE: Click on the chart/map for a larger view.

CLICHES OF PROGRESSIVISM #19 – “Big Government Is a Check on Big Business”

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A myth runs through most of America today, and it goes like this: Big business hates government and yearns for an unregulated market. But the reality is the opposite: Big government can be highly profitable for big business.

Many regulations restrict competition that would otherwise challenge existing firms. At the same time, government institutions—many created during the New Deal—funnel money to the largest corporations.

When government regulates X industry, it imposes high costs that hurt smaller firms and reduce competition. Imagine that the Department of Energy imposes a new rule that dishwashers must be more energy efficient. Coming up with designs, retrofitting factories to produce these energy-efficient models, and navigating the forms and licenses around this rule might cost a dishwasher-producing firm thousands of dollars. An industry giant, with more revenue and sizeable profit margins, can absorb this cost. A small dishwasher factory that’s only a year or two old, with little revenue and less profit, cannot. The latter would have to shut down. That means less competition for the industry giant, enabling it to grow even bigger and seize even more market share.

Barriers to entry, such as expensive licenses, also cripple start-ups and reduce competition. The Progressive New Republic speaks favorably of how Dwolla, an Iowa-based start-up that processes payments and competes with credit card agencies, had to pay $200,000 for a license to operate. Rather than hire employees or build a better product to compete with its entrenched competition, Dwolla was forced to spend its first $200,000 on a permission slip. Dwolla could afford it; but how many less-well-funded competitors were forced from the market? How many were deterred from even starting a payment-processing business by this six-figure barrier to entry?

For big businesses, which often sacrifice agility for size, smaller competitors are a major threat. By limiting smaller competition, government helps the industry giants at the expense of everyone else. Barriers to entry can kill the next innovative firm before it can become a threat to its giant competition. When this happens, we don’t even know it: The killed-before-it-can-live company is a classic example of the “unseen” costs of regulation.

While regulations minimize competition, government entities subsidize big business. The Export-Import Bank, established in 1934 as part of the New Deal, exists to subsidize exports by U.S.-based firms. The primary beneficiaries? Large corporations. From 2009 to 2014, for instance, the Ex-Im Bank financed over one-quarter of Boeing’s planes. Farm bills, a key element of the New Deal that still exists today, subsidize huge farms at the expense of smaller ones. The program uses a variety of methods, from crop insurance to direct payments, to subsidize farmers. The program is ostensibly designed to protect small farmers. But 75 percent of total subsidies—$126 billion from 2004 to 2013—go to the biggest 10 percent of farming companies. The program taxes consumers to funnel money to large farms.

Nor are these programs unique. National Journalism Center graduate Tim Carney argues, “The history of big business is one of cooperation with big government.” In the time of Teddy Roosevelt, big meat packers lobbied for federal meat inspection, knowing that the costs around compliance would crush their smaller competitors. New Deal legislation was only passed with help from the national Chamber of Commerce and the American Bankers Association. The Marshall Plan, which subsidized the sale of billions of dollars of goods to Europe, was implemented by a committee of businessmen. President Johnson created the Transportation Department in 1966, overcoming resistance from shipping interests by agreeing to exempt them from the new rules. Costly regulations for thee, but not for me.

If Progressives want to see what free enterprise looks like, they need only look at the Internet. For the past 20 years, it’s been largely unregulated. The result? Start-ups erupt and die every year. New competitors like Facebook bring down existing giants like MySpace and are in turn challenged by a wealth of social media competitors. Yahoo was the Internet search king until two college kids founded Google. Google has been recently accused of monopoly status, but competitors like DuckDuckGo spring up every day.

Let’s imagine if the Internet—a playground of creative destruction—had been as subject to big government as brick and mortar businesses have been. Yahoo would have been subsidized. Facebook would have had to pay six figures to get a licensing fee, crushing college-kid Zuckerberg before he got started and preserving MySpace’s market dominance. Businesses that learned to play the lobbying game would have been allowed to write regulations to crush their competitors.

For those who doubt, the proof of business’s collusion with big government is in the pudding. In 2014, a surprising number of libertarian-leaning men and women are in Congress. How has big business responded? K Street has spent millions of dollars working to replace laissez-faire advocates with those who are establishment-friendly. Sadly, cronyist businesses are fighting to keep free market advocates out of power.

A final note: I have criticized Progressives here, but the institution of big government, which enables businesses to hire lobbyists to write regulations or give themselves a subsidy, is the primary problem. The bigger government grows, the more powerful a tool it becomes for businesses prone to use it for private advantage. That’s not capitalism; it’s what one economist properly labeled “crapitalism.”

Julian Adorney
Economic Historian, Entrepreneur, Fiction Writer

Summary

  • Big Government and Big Business often play well together, at the expense of start-ups, little guys, and consumers.
  • Artificial, politically instigated barriers to entry make markets less competitive and dynamic, and make established firms more monopolistic.
  • A free market (true capitalism, not its adulterated “crapitalism” version) maximizes competition and, therefore, service to the consumer.

For further information, see:

“Of Meat and Myth” by Lawrence W. Reed
“Atlas Shrugged and the Corporate State” by Sheldon Richman
“Ending Corporate Welfare As We Know It” by Lawrence W. Reed
“The Rise of Big Business and the Growth of Government” by Robert Higgs
“Theodore Roosevelt: Big Government Man” by Jim Powell

ABOUT JULIAN ADORNEY

Julian Adorney is an economic historian, entrepreneur, and fiction writer. He writes for the Ludwig von Mises Institute and other websites. You can find his collected work at adorney.liberty.me.

EDITORS NOTE: The featured image is courtesy of FEE and Shutterstock.

INFOGRAPHIC: How Unions Are Chewing Through Taxpayer Dollars

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Nicole Rusenko and Kelsey Harris write and graphically display on The Daily Signal:

Did you know your tax dollars are financing unions?

Thanks to what the federal government calls “official time,” government workers spent 2.4 million hours on union work in 2010. In fact, the Internal Revenue Service alone has 286 full-time employees who work exclusively for the National Treasury Employees Union.

Check out the infographic below for more details on whose special interests (and pockets) your money is going.

WARNING: This infographic may upset your stomach and shrink your wallet.

OfficialTime_Infographic_Rusenko-011

COMMENTARY BY

Portrait of Nicole Rusenko Nicole Rusenko@ncrusen20

Nicole Rusenko is a senior designer at The Heritage Foundation.

 

Portrait of Kelsey Harris

Kelsey Harris
Kelsey Harris is the visual editor at The Daily Signal and digital media associate at The Heritage Foundation.