Tag Archive for: jobs

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Home Economics

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

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

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

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

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

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

The Rule Writ Large — The Case of the Keystone Pipeline

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

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

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

Beyond the Pipeline

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

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

T. Norman Van CottT. Norman Van Cott

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

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

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

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

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

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

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

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

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

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

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

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

Cross-posted from Mercatus.org.

Adam Millsap

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

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

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

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

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

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

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

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

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

Cross-posted from HumanProgress.org.

Chelsea GermanChelsea German

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

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

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

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

What Is Efficiency?

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

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

What Is Innovation?

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

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

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

Where’s the Conflict?

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

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

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

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

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

Dynamic Efficiency?

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

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

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

Sandy IkedaSandy Ikeda

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

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

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

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

Lane writes:

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

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

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

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

So Dube would oppose such an increase, right?

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

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

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

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

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

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

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

This will not be good.

Cross-posted from Econlog.

David R. HendersonDavid R. Henderson

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

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

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

McCain and Grandi

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

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

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

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

The UN trumpets the news here:

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

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

[….]

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

Marc_Schulman

Eli’s CEO Marc Schulman

 

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

[….]

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

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

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

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

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

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

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

Update!  National layoff numbers skyrocket! Breaking story.

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

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

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

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

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

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

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

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

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

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

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

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

Neil-MacDonald-3112161-220

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

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

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

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

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

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

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

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

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

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

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

More on MacDonald, here.

See 83 previous posts on Nashville by clicking here.

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

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

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

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

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

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

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

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

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

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

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

According to Monras,

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

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

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

Corey IaconoCorey Iacono

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Cross-posted from HumanProgress.org.

Chelsea German

Chelsea German

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

Busting Myths about Income Inequality by Chelsea German

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

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

Reality is much more interesting than soundbites.

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

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

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

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

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

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

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

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

This article first appeared at CapX.

Chelsea GermanChelsea German

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

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

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

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

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

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

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

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

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

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

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

This post originally appeared at CapX.

Preston CooperPreston Cooper

Preston Cooper is a Policy Analyst at Economics21.

Exposed: The big donors behind open borders movement/refugee resettlement/Trump protests

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Thanks to Ed for sending this great investigative piece by Lee Stranahan at Breitbart on Unbound Philanthropy and its big kahuna William Reeves (and wife Debbie Berger).  What a coincidence too, the pair is from Hawaii (BFF of Obama?).

bill-reeves-house (1)

Update: Reeves and Bergers ‘house’ in Hawaii, thanks to Ed!   How many refugees could be housed here?

Stranahan tells us that when Trump was protested in Arizona and California a few months ago, the groups protesting were recipients of Reeves’ largess.

Know the enemy!  Read Stranahan’s article by clicking here.

We wrote about Reeves in 2011

I’m posting in full my post from February 2011.  I was most interested in the connection between Unbound Philanthropy’s role in helping create that damn Shelbyville, TN propaganda film that was used by the U.S. State Department and others to promote more Somali migration to America.

We have come a long way in the last four years in understanding the massive money machine we are up against.

You will recognize the Migration Policy Institute (in Stranahan’s piece and mine) as one of the groups putting on that Georgetown gig, Jim Simpson and I attended here in October.

Unbound Philanthropy is also one of the organizers and funders of that big Open Borders pow-wow starting Sunday in New York, here.  They will have a whole session on exposing the likes of us!

bill-reeves

Bill Reeves

Here is what I said in 2011 in a post entitled:

Unbound Philanthropy: an example of what we are up against…<

…..and why the average American trying to maintain our culture and country through immigration control has a hard time fighting the battle.  The other side is rich and connected to big business (offshore money too!).

Yesterday as I searched for more information on the Migration Policy Institute, an organization that pretends to be a balanced nonpartisan think tank which just this week put out a report that goes after Sheriff’s in some counties overseeing the 287g program,  I came upon Unbound Philanthropy.  It is one of those private foundations used by the super wealthy to channel their excess funds (avoiding taxes by so doing) to pet charities and political projects.

In this case the rich guy is William Reeves of Hawaii:

William Reeves is a director and co-founder of BlueCrest Capital Management Ltd. Based in London, BlueCrest manages investments for a predominantly institutional investor base across 15 diverse funds. Until April 2000, when he left to establish BlueCrest, Mr. Reeves was a Managing Director at J.P. Morgan in London and head of macro strategy and trading within the proprietary trading group. Prior to that, Mr. Reeves was a fund manager at Salomon Brothers Asset Management Limited and at Fisher Francis Trees and Watts, with responsibility for managing leveraged capital. He has also worked for JP Morgan New York where, from 1991 to 1993, he was a Vice President in charge of a team managing the company’s leveraged multi-currency proprietary investment portfolio. Mr. Reeves is a US Trustee of the Children’s Investment Fund Foundation. He holds an MA in Philosophy from New York University and a BA in English from Yale University. Mr. Reeves was born in Honolulu and raised in Richmond, Virginia where his parents were both educators.

Check out Unbound Philanthropy’s most recent Form 990.  This is a private foundation with a net worth approaching $100 million (note offshore accounts).  In 2008 Mr. Reeves donated $2,619,583 to the foundation (probably reducing his tax liability) to his mostly political projects.  He passed most of that  money through this foundation to a list of projects that include (among others):

The Tides Center (money scrubber supreme):  $250,000

Southern Poverty Law Center:  $150,000

American Immigration Law Foundation: $150,000

Center for American Progress (LOL! Pushing back against Hate Project):  $46,000

And, it looks like the big winner is the International Rescue Committee*** with three grants:  $150,000, $200,000, and $212,000

Debbie-Berger

Debbie Berger

On their website they brag about many more recent grants, including my favorite:

Mr. Reeves gave $85,000 in 2010 to Active Voice a San Francisco social change advocacy group to promote that damn propaganda film on Shelbyville, TN.

Also in 2010 he passed $500,000 through the Tides Foundation.  In 2009 he gave $150,000 to Media Matters (George Soros) and $240,000 to the Tennessee Immigrant and Refugee Rights Coalition (ahhhhh!).   And, this is how I found Unbound Philanthropy in the first place, they (rich Mr. Reeves) gave the Migration Policy Institute $95,000 to study amnesty for “undocumented youth and women.”

It’s all legal of course, but the next time you hear whining from the pro-migration forces that this is all about the poor and the downtrodden, remember it isn’t.  It is about politics, about new immigrants as Democratic voters, and it’s about cheap labor for big business (like the meatpackers) and nannies and gardeners for rich people.

Just a reminder that David North of the Center for Immigration Studies summed it up well when he attended a recent meeting of the Migration Policy Institute:

It is useful to note that the pro-migration advocates, though allied with each other, come in three different groupings. There are the employers, who want lower wages; there are the ethnic organizations who say, in effect, “Let My People In”; and then there are the intellectuals [ed: read Leftists!], represented Thursday at a session of the foundation-supported Migration Policy Institute.

So our side (the immigration control side) is up against the big money and the hard left political machine using the average do-gooders and  immigrants as their foils.

A final question for Mr. Reeves:  If you are so interested in promoting social change (aka the redistribution of wealth), why not redistribute all your holdings now directly to the refugees and other poor immigrants being dropped off in our cities and towns by the US State Department and their federal contractors.   If the social justice Marxist one-worlders you are supporting win the political war in the US, they will be taking it from you or your heirs anyway.

Go here to the link for the Reeves’ Hawaiian home.  (LOL!  we assume it is in Hawaii but note that for “privacy concerns” its location is not given.

***International Rescue Committee is of course now headed by British former Foreign Secretary David Miliband and is one of nine major federal contractors raking in big bucks from your wallets (and rich elitists like Reeves!) and pushing Obama to admit 100,000 Syrian Muslims to be distributed to your towns!

I wonder that since Unbound Philanthropy works in the UK as well to agitate and organize against the ‘right wing,’ did they have any role in getting Miliband planted in NYC? Hmmmm!

Nine contractors (for new readers):

RELATED ARTICLES:

Unconstitutionality of refugee program in 12 states explained

Speaker Ryan blasts Trump over Muslim ban, can we hear Grover in his words?

President Obama’s Absurd Reasons for Rejecting the Keystone XL Pipeline

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President Obama tossed economics and science out the window and onto the White House lawn when he rejected the Keystone XL pipeline.

After leaving it in bureaucratic limbo for seven years, the president claimed the project–which would safely transport Canadian and American crude oil to Gulf Coast refineries–would have little economic effect and would hurt U.S. leadership in reducing carbon emissions.

Both claims are bunk, as the State Department’s analysis shows.

Let’s first take up President Obama’s economic argument.

“The pipeline would not make a meaningful long-term contribution to our economy,” President Obama said at a White House event.

The State Department’s analysis disagrees:

  • 42,000 jobs would be created.
  • $3.4 billion would be added to the U.S. economy.
  • $405 million would be earned by workers building the pipeline in Montana, South Dakota, and Nebraska.
  • $55 million in property tax revenue would go to local communities.

Not only did President Obama tossed aside the Keystone XL pipeline’s economic benefits, he also ignored the science showing that the project’s environmental effects will be minimal.

“America is now a global leader when it comes to taking serious action to fight climate change,” President Obama said. “And frankly, approving this project would have undercut that global leadership.”

The only thing the Keystone XL pipeline would undercut it America’s reliance on oil from unfriendly countries. It certainly wouldn’t undercut efforts to reduce carbon emissions.

In fact, the State Department found that not building the pipeline would result in higher greenhouse gas emissions, increases ranging anywhere from 28%-42%.

Impacts of Keystone XL alternatives [table]

But as Phil Kerpen tweeted, the administration is more concerned about perception than real science.

The truth is, our president–a “science geek” according to his top science advisor–rejected science and instead chose to side with anti-energy opponents of the pipeline.

The reaction to President Obama’s decision was strong and swift.

“In rejecting the Keystone XL pipeline, President Obama has put politics before the best interests of the country,” said U.S. Chamber President and CEO Tom Donohue. “Rejecting Keystone breaks two promises the president made—to put jobs and growth first and to seek bipartisan solutions.”

President and CEO of the American Petroleum Institute Jack Gerard said: “This decision will cost thousands of jobs and is an assault to American workers. It’s politics at its worst.”

Labor union leaders were beyond disappointed.

Terry O’Sullivan, general president for Laborers’ International Union of North America (LIUNA), saidPresident Obama threw “hard-working, blue-collar workers under the bus.”

On a press call, Sean McGarvey, president of the North America’s Building Trades Unions, called the Keystone XL pipeline, “a victim of the radical environmental movement.” The jobs lost by President Obama’s decision “are real jobs for real people supporting real families.”

Before he flies off to Paris, President Obama should order Air Force One to head west. He himself should visit people living along the pipeline’s route and explain why they can’t have the jobs, the economic growth, and the local tax revenue that would come from the pipeline. As I wrote in 2014:

Bonnie Davidson of the Glasgow Courier said that local residents were scratching their head as to what the controversy is with the pipeline. She told me she hopes that if the Obama administration denies the permit someone should come to Glasgow and tell them why.

Those people deserve to be told why he took those opportunities away from them.

MORE ARTICLES ON: ENERGY

RELATED ARTICLE: New York Attorney General Tries to Criminalize Scientific Dissent on Climate Change

Adam Smith’s Wealth of Nations and the FairTax by Rep. Dave Brat (VA-7)

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Adam Smith, the father of economics, published An Inquiry into the Nature and Causes of the Wealth of Nations nearly 240 years ago[i]. Soon after, an extraordinary flourishing of innovation and human well-being took off and transformed the globe. According to economist Deirdre McCloskey, the average American today is roughly 30 to 100 times better off than our ancestors in 1800[ii], the point when humanity began to escape crushing poverty. Notwithstanding modern prosperity, however, human nature hasn’t changed much. Smith’s insights remain relevant.

The Wealth of Nations considers taxation in Book V, Chapter 2: “Of the Sources of the General or Public Revenue of the Society.” In the prior chapter, “Of the Expenses of the Sovereign or Commonwealth,” he describes the primary functions of the national government. Some—like defense—need to be paid for by general revenue, while others—like transportation infrastructure—can be built and maintained with fees paid by users.

Revenue policy should fund the necessary expenses of the government. Not to benefit this or that industry. Not to advance social objectives. Certainly not to suppress political speech.

Smith set out four goals for evaluating tax options. First, tax contributions should be proportionate to abilities. Second, the rules should be certain and not arbitrary. Third, taxes should be levied when and how its payment is most convenient. Fourth, collection should minimize administrative overhead.

He then evaluated possible tax bases using those principles: rents of land and houses, profits, wealth, wages, head taxes, and consumption. He concluded that the ideal tax bases are residential property and consumption, particularly on luxury goods.

What does Adam Smith have to do with the FairTax? Everything. Setting aside property taxes—a state and local issue—consider how his principles relate to a consumption tax like the FairTax.

Is it proportionate to abilities? Yes. Those who earn more also consume more, thus contributing proportionately more to the general revenue. Savings—which our current tax system discourages but the FairTax would not—provide no current consumption benefits. They are deferred consumption, which in the meantime enables others to borrow to finance education, infrastructure, factories, and much more while also reducing the trade deficit.

Is the FairTax certain and not arbitrary? Yes. Everyone pays the same, known rate on consumption.

Is it convenient to pay? Yes. Merchants include the tax in the prices of final goods and services, which consumers pay all at once. Businesses simply remit the revenue to the government from time to time.

The FairTax also minimizes administrative overhead. The U.S. has around six million businesses.[iii] Not all would collect revenue under the FairTax, since many don’t sell directly to consumers. Current tax law requires the processing of six million business returns, 150 million individual and household tax returns[iv] (some overlap), and various trust, foundation, and other returns that are processed today, all under a complex, burdensome, and unFairTax code.

A broad-based consumption tax like the FairTax has other benefits. It eliminates the bureaucratic discretion that enabled the illegal and corrupt targeting of political speech, as the Richmond Tea Party experienced first-hand. Less taxation on productive activities yields greater physical and human capital investment by businesses and individuals, which makes workers more productive, boosting their compensation and standards of living while also increasing returns to saving.

It eliminates a major source of favor trading between Congress and big businesses. The concentrated interests of businesses associations create enormous pressure for Congress to provide tax preferences. The FairTax dramatically reduces the ability of political insiders to manipulate the tax system.

After nearly a decade of poor economic performance, we need comprehensive, pro-growth, simplifying tax reform like the FairTax. That’s why I’m a proud cosponsor of H.R. 25. To fully restore the American Dream, however, we must also pursue major regulatory and spending reforms.

We can have even more of the market-tested innovations that improve our lives and that would have astounded Adam Smith and our ancestors. Smart policy reforms—like the FairTax—can clear the path.

[i] http://www.econlib.org/library/Smith/smWN.html

[ii] https://www.aei.org/publication/perhaps-the-most-powerful-defense-of-market-capitalism-you-will-ever-read/

[iii] http://www.census.gov/content/dam/Census/library/publications/2015/econ/g12-susb.pdf, Appendix Table 1, pp. 7.

[iv] https://www.irs.gov/uac/SOI-Tax-Stats—Individual-Statistical-Tables-by-Size-of-Adjusted-Gross-Income, “All Returns: Selected Income and Tax Items: 2013”

ABOUT CONGRESSMAN DAVE BRAT

Congressman Dave Brat represents Virginia’s 7th congressional district, serving since 2014 when he won a special election. Brat is a member of the House Budget Committee, Education and the Workforce Committee, and Small Business Committee. He has a Ph.D. in economics, formerly was a professor of economics and chairman of the economics department at Randolph Macon College, and previously worked for the World Bank and Arthur Andersen.

EDITORS NOTE: To learn more about the FairTax please click here.