Wintery Knight

…integrating Christian faith and knowledge in the public square

Minimum wage: doing what feels good doesn’t produce good results

Labor Force Participation down to 62.8%

Labor Force Participation down to 62.8%

Will Obama’s plan to raise minimum wage help people?

From the Daily Caller. (H/T Conway)

Excerpt:

The Obama administration’s proposal to raise the minimum wage to $10.10 an hour could result in as many 1,084,000 jobs eliminated from the work force, according to a new study conducted by the Employment Policies Institute (EPI)

“No amount of denial by the president and his political allies — and no number of ‘studies’ published by biased researchers — can change the fact that minimum wage hikes eliminate jobs for low-skill and entry-level employees. Non-partisan economists have agreed on this consensus for decades, and the laws of economics haven’t changed,” Michael Saltsman, research director at EPI, said in a statement.

He offered an alternative to the president’s plan: “Instead of raising small businesses’ labor costs and creating more barriers to entry-level employment, the president and the Senate should focus on policies that help reduce poverty and create jobs.”

The  study was released in the wake of an expected vote on a Senate bill that aims to raise the federal minimum wage from the current $7.25 an hour to $10.10 an hour — a nearly 40 percent increase.

Many Democrats argue that increasing the federal minimum will reduce poverty without having an adverse effect on unemployment.

EPI’s report, which used analysis from economists at Miami and Trinity University, reached a different conclusion.

Researchers used recently updated Census Bureau data from 2012 and 2013 to calculate how each individual state would be impacted by the proposed wage hikes. As a lump sum, Americans would see a loss of at least 360,000 jobs, and perhaps even over one million if hourly wages are increased to $10.10.

The number of job losses would be the most dramatic in large states, such as California and Texas. Economists found that California could lose as many as 100,016 jobs and Texas could see up to 128,617 jobs disappear from its economy.

But’s it’s not just this proposal that is the problem, it’s his past policies.

After FIVE YEARS of Obamanomics, we still have a record 100 MILLION people still out of work from when he became President. There has been NO RECOVERY since the housing bubble, which was caused by the Democrats in Congress. Policies like raising the minimum wage only make that worse, although it sounds great to Obama’s low information supporters.

Minimum wage raises cause higher unemployment

Government Spending Vs Jobs

Government Spending Vs Jobs

From Investors Business Daily.

Excerpt:

How amusing to watch Democrats wring their hands over what they can do to get businesses to create jobs, when one of the biggest job killers is the minimum wage they keep hiking.

Recall that it was Democrats who raised the federal wage floor a whopping $2.10 an hour in the middle of the recession. The record 41% increase has led to record unemployment among young people, especially black teens.

Congress started ratcheting up the minimum wage from $5.15 an hour in mid-2007, arguing it would help abate poverty. But retailers looking to slash costs eliminated low-skilled, entry-level jobs rather than pay the mandated increases.

Now 1.5 million fewer teens are working. Last year’s unemployment rate for workers ages 16 to 19 shot up to 26% from 2007’s 15%.

As for black teens, their joblessness soared to a record 43% after the final raise to $7.25 took effect in mid-2009. It helped put more than half of young black men out of work — a first.

The president proposes cranking the minimum wage even higher to $9.50. Then he wants to raise it every year thereafter as a “living wage” indexed to inflation.

Yes, this is the problem that happens when you elect someone who knows nothing whatsoever about economics. And when I say nothing, I mean he is in disagreement with virtually all economists across the ideological spectrum.

A large majority of economists agree

Moderate economist Gregory Mankiw of Harvard University lists the policies that are accepted by virtually all economists.

Here’s Greg’s list, together with the percentage of economists who agree:

  1. A ceiling on rents reduces the quantity and quality of housing available. (93%)
  2. Tariffs and import quotas usually reduce general economic welfare. (93%)
  3. Flexible and floating exchange rates offer an effective international monetary arrangement. (90%)
  4. Fiscal policy (e.g., tax cut and/or government expenditure increase) has a significant stimulative impact on a less than fully employed economy. (90%)
  5. The United States should not restrict employers from outsourcing work to foreign countries. (90%)
  6. The United States should eliminate agricultural subsidies. (85%)
  7. Local and state governments should eliminate subsidies to professional sports franchises. (85%)
  8. If the federal budget is to be balanced, it should be done over the business cycle rather than yearly. (85%)
  9. The gap between Social Security funds and expenditures will become unsustainably large within the next fifty years if current policies remain unchanged. (85%)
  10. Cash payments increase the welfare of recipients to a greater degree than do transfers-in-kind of equal cash value. (84%)
  11. A large federal budget deficit has an adverse effect on the economy. (83%)
  12. A minimum wage increases unemployment among young and unskilled workers. (79%)
  13. The government should restructure the welfare system along the lines of a “negative income tax.” (79%)
  14. Effluent taxes and marketable pollution permits represent a better approach to pollution control than imposition of pollution ceilings. (78%)

You can find out more about how raising the minimum wage increases unemployment, especially for young people and minorities, from this comprehensive, 50-year, government study.

This is why it is important for voters to understand economics. When you raise the price of labor, fewer employers will purchase labor. Supply and demand. This is so basic, that I am surprised that someone as educated as Obama doesn’t understand it. It’s probably because he has virtually no experience working in the private sector.

Filed under: Polemics, , , , , , , , , , , , , , , , , , ,

New study: Obama’s proposed minimum wage hike could destroy 1 million jobs

Labor Force Participation down to 62.8%

Labor Force Participation down to 62.8%

From the Daily Caller. (H/T Conway)

Excerpt:

The Obama administration’s proposal to raise the minimum wage to $10.10 an hour could result in as many 1,084,000 jobs eliminated from the work force, according to a new study conducted by the Employment Policies Institute (EPI)

“No amount of denial by the president and his political allies — and no number of ‘studies’ published by biased researchers — can change the fact that minimum wage hikes eliminate jobs for low-skill and entry-level employees. Non-partisan economists have agreed on this consensus for decades, and the laws of economics haven’t changed,” Michael Saltsman, research director at EPI, said in a statement.

He offered an alternative to the president’s plan: “Instead of raising small businesses’ labor costs and creating more barriers to entry-level employment, the president and the Senate should focus on policies that help reduce poverty and create jobs.”

The  study was released in the wake of an expected vote on a Senate bill that aims to raise the federal minimum wage from the current $7.25 an hour to $10.10 an hour — a nearly 40 percent increase.

Many Democrats argue that increasing the federal minimum will reduce poverty without having an adverse effect on unemployment.

EPI’s report, which used analysis from economists at Miami and Trinity University, reached a different conclusion.

Researchers used recently updated Census Bureau data from 2012 and 2013 to calculate how each individual state would be impacted by the proposed wage hikes. As a lump sum, Americans would see a loss of at least 360,000 jobs, and perhaps even over one million if hourly wages are increased to $10.10.

The number of job losses would be the most dramatic in large states, such as California and Texas. Economists found that California could lose as many as 100,016 jobs and Texas could see up to 128,617 jobs disappear from its economy.

This article from Investors Business Daily, written by the famous economist Thomas Sowell has more on the effects of raising the minimum wage.

Excerpt:

Switzerland is one of the few modern nations without a minimum-wage law. In 2003, the Economist magazine reported: “Switzerland’s unemployment neared a five-year high of 3.9% in February.”

In February of this year, Switzerland’s unemployment rate was 3.1%. A recent issue of the Economist showed Switzerland’s unemployment rate as 2.1%.

Most Americans today have never seen unemployment rates that low. However, there was a time when there was no federal minimum-wage law in the United States.

The last time was during the Coolidge administration, when the annual unemployment rate went as low as 1.8%. When Hong Kong was a British colony, it had no minimum-wage law. In 1991 its unemployment rate was under 2%.

[...]Most people in the lower income brackets are not an enduring class. Most working people in the bottom 20% in income at a given time do not stay there over time. More of them end up in the top 20% than remain behind in the bottom 20%.

There is nothing mysterious about the fact that most people start off in entry-level jobs that pay much less than they will earn after they get some work experience.

But when minimum-wage levels are set without regard to their initial productivity, young people are disproportionately unemployed — priced out of jobs.

In European welfare states where minimum wages, and mandated job benefits to be paid for by employers, are more generous than in the United States, unemployment rates for younger workers are often 20% or higher, even when there is no recession.

Unemployed young people lose not only the pay they could have earned but, at least equally important, the work experience that would enable them to earn higher rates of pay later on.

Minorities, like young people, can also be priced out of jobs. In the United States, the last year in which the black unemployment rate was lower than the white unemployment rate — 1930 — was also the last year when there was no federal minimum-wage law.

Inflation in the 1940s raised the pay of even unskilled workers above the minimum wage set in 1938. Economically, it was the same as if there were no minimum-wage law by the late 1940s.

In 1948 the unemployment rate of black 16-year-old and 17-year-old males was 9.4%. This was a fraction of what it would become in even the most prosperous years from 1958 on, as the minimum wage was raised repeatedly to keep up with inflation.

A survey of American economists found that 90% of them regarded minimum-wage laws as increasing the rate of unemployment among low-skilled workers.

Harvard University economist Greg Mankiw puts the level of opposition to minimum wage hikes at 79% among professional economists across the ideological spectrum.

Filed under: News, , , , , ,

Fast-food walk out ignores basic economics: minimum wage hike creates unemployment

Investors Business Daily explains what’s wrong with the plan of fast-food industry workers to strike for higher wages.

Excerpt:

Egged on by unions, fast-food workers plan to strike in dozens of U.S. cities for much higher wages. Sadly, they’re being used to do something that’s not in their own interests.

Sensing the time is ripe, the Service Employees International Union and union-funded front groups are organizing a walkout of workers at fast-food joints in about 100 cities to protest how tough it is to live on the federal minimum wage of $7.25 an hour.

They’d like that nearly doubled to $15 — and not just for fast food, but retailing and other industries too.

Sounds great. But even by the loopy logic of the left, this is economic insanity and would lead to greater misery, fewer jobs and fewer opportunities for all.

That’s not just our opinion. Economists David Neumark and William Wascher, in their comprehensive book “Minimum Wages,” looked at virtually all the scholarly and statistical evidence worldwide, digging up literally dozens of studies.

Their finding: Minimum wage laws almost always result in a “reduction in employment opportunities for low-skilled” employees while limiting “skill acquisition by reducing educational attainment and perhaps training, resulting in lower adult wages and earnings.”

And, they said, it reduces the total amount of human capital — a huge cost to society.

The minimum wage is so devastating that roughly 85% of all economists in a recent survey — from both the left and the right sides of the spectrum — said they think it’s a bad idea.

[...]The idea that working families depend on these jobs is false. Most of those working for minimum wage are young, ages 16 to 24. They live in middle-class homes with above-average household incomes.

And as James Sherk of the Heritage Foundation notes, two-thirds of minimum-wage earners get a raise in their first year. This is how they learn to show up, work hard and get along with others — valuable life skills young people acquire as they begin work and the very things that will make them a success later on.

A higher minimum wage would cost young workers jobs and opportunities. They’d be wise to ignore the unions’ siren song of higher wages for nothing.

From Investors Business Daily, an article by famous economist Thomas Sowell has more on this issue.

Excerpt:

Switzerland is one of the few modern nations without a minimum-wage law. In 2003, the Economist magazine reported: “Switzerland’s unemployment neared a five-year high of 3.9% in February.”

In February of this year, Switzerland’s unemployment rate was 3.1%. A recent issue of the Economist showed Switzerland’s unemployment rate as 2.1%.

Most Americans today have never seen unemployment rates that low. However, there was a time when there was no federal minimum-wage law in the United States.

The last time was during the Coolidge administration, when the annual unemployment rate went as low as 1.8%. When Hong Kong was a British colony, it had no minimum-wage law. In 1991 its unemployment rate was under 2%.

[...]Most people in the lower income brackets are not an enduring class. Most working people in the bottom 20% in income at a given time do not stay there over time. More of them end up in the top 20% than remain behind in the bottom 20%.

There is nothing mysterious about the fact that most people start off in entry-level jobs that pay much less than they will earn after they get some work experience.

But when minimum-wage levels are set without regard to their initial productivity, young people are disproportionately unemployed — priced out of jobs.

In European welfare states where minimum wages, and mandated job benefits to be paid for by employers, are more generous than in the United States, unemployment rates for younger workers are often 20% or higher, even when there is no recession.

Unemployed young people lose not only the pay they could have earned but, at least equally important, the work experience that would enable them to earn higher rates of pay later on.

Minorities, like young people, can also be priced out of jobs. In the United States, the last year in which the black unemployment rate was lower than the white unemployment rate — 1930 — was also the last year when there was no federal minimum-wage law.

Inflation in the 1940s raised the pay of even unskilled workers above the minimum wage set in 1938. Economically, it was the same as if there were no minimum-wage law by the late 1940s.

In 1948 the unemployment rate of black 16-year-old and 17-year-old males was 9.4%. This was a fraction of what it would become in even the most prosperous years from 1958 on, as the minimum wage was raised repeatedly to keep up with inflation.

A survey of American economists found that 90% of them regarded minimum-wage laws as increasing the rate of unemployment among low-skilled workers.

Harvard University economist Greg Mankiw puts the level of opposition to minimum wage hikes at 79% among professional economists across the ideological spectrum.

Learn economics for Christmas

By the way, if you’re looking for a really good drama that shows the business-owner vs union-leader conflict, I really recommend the BBC production of North and South. It’s a beautiful period drama that’s based on a Christian woman’s novel. The author of the book wrote in the time of Charles Dickens, and he even named the book for her. It’s rated 8.7/10 on IMDB. It’s $19.99 on Amazon, although it sometimes goes lower than that! A great way to communicate basic economics to your liberal spouse or significant other – especially on this minimum wage issue. Oh, apparently there is a love story in it, but I didn’t really pay any attention to that part of it, other than to be pleased that there was no sex or nudity at all – not even kissing! Perfect! This DVD is WK-approved. It is also Dina-approved, because she was the one who suggested it to me.

Just to give you an idea of how much I liked it, I tried watching Downton Abbey and stopped after two episodes. It’s boring nonsense. But North and South I rated 9.5/10 and could not stop watching it once I started. There are no wasted scenes, no fluff at all. Everything they did worked to develop the theme of the story. How different it is from the garbage they have in theaters today! The presentation of capitalism is absolutely heroic, and yet the union side is presented sympathetically as well. Of course, if you want to read an economics book instead, then just get Thomas Sowell’s “Basic Economics“. One of my friends (Letitia) is actually reading that now.

Filed under: News, , , , , ,

Basic economics: what’s wrong with raising minimum wage rates?

Economist Thomas Sowell

Economist Thomas Sowell

From Investors Business Daily, an article by famous economist Thomas Sowell.

Excerpt:

Political crusades for raising the minimum wage are back again. Advocates of minimum-wage laws often give themselves credit for being more “compassionate” towards “the poor.”

But they seldom bother to check what are the actual consequences of such laws.

One of the simplest and most fundamental economic principles is that people tend to buy more when the price is lower and less when the price is higher.

Yet advocates of minimum-wage laws seem to think that the government can raise the price of labor without reducing the amount of labor that will be hired.

[...]Switzerland is one of the few modern nations without a minimum-wage law. In 2003, the Economist magazine reported: “Switzerland’s unemployment neared a five-year high of 3.9% in February.”

In February of this year, Switzerland’s unemployment rate was 3.1%. A recent issue of the Economist showed Switzerland’s unemployment rate as 2.1%.

Most Americans today have never seen unemployment rates that low. However, there was a time when there was no federal minimum-wage law in the United States.

The last time was during the Coolidge administration, when the annual unemployment rate went as low as 1.8%. When Hong Kong was a British colony, it had no minimum-wage law. In 1991 its unemployment rate was under 2%.

[...]Most people in the lower income brackets are not an enduring class. Most working people in the bottom 20% in income at a given time do not stay there over time. More of them end up in the top 20% than remain behind in the bottom 20%.

There is nothing mysterious about the fact that most people start off in entry-level jobs that pay much less than they will earn after they get some work experience.

But when minimum-wage levels are set without regard to their initial productivity, young people are disproportionately unemployed — priced out of jobs.

In European welfare states where minimum wages, and mandated job benefits to be paid for by employers, are more generous than in the United States, unemployment rates for younger workers are often 20% or higher, even when there is no recession.

Unemployed young people lose not only the pay they could have earned but, at least equally important, the work experience that would enable them to earn higher rates of pay later on.

Minorities, like young people, can also be priced out of jobs. In the United States, the last year in which the black unemployment rate was lower than the white unemployment rate — 1930 — was also the last year when there was no federal minimum-wage law.

Inflation in the 1940s raised the pay of even unskilled workers above the minimum wage set in 1938. Economically, it was the same as if there were no minimum-wage law by the late 1940s.

In 1948 the unemployment rate of black 16-year-old and 17-year-old males was 9.4%. This was a fraction of what it would become in even the most prosperous years from 1958 on, as the minimum wage was raised repeatedly to keep up with inflation.

A survey of American economists found that 90% of them regarded minimum-wage laws as increasing the rate of unemployment among low-skilled workers.

Harvard University economist Greg Mankiw puts the agreement level at 79%. This is not controversial. This is one of the most widely-accepted facts in economics. Generally, if you raise the price of domestic labor, without any increase in worker productivity, then it reduces demand for domestic labor and causes companies to reduce hiring and retention, possibly looking elsewhere for labor. Compassionate-sounding policies actually cause negative results like outsourcing and layoffs. The very people who agitate the most for a “living wage” cause higher unemployment – especially among youth and minorities.

The only sure way to help workers is to give them marketable skills and job experience – that’s what really draws higher salaries and better benefits. And that means advocating for smarter policies: fewer regulations on job creators, lowering the employer portion of payroll taxes, merit pay for teachers, vouchers to encourage competition between schools, making work pay more than collecting welfare for doing nothing. And so on. That would actually solve the problem of people not having work.

Filed under: Commentary, , , , ,

First black president: unemployment rate up for blacks and women since Obama’s election

From CNS News.

Excerpt:

 Unemployment for both women and African-Americans is higher today than it was when President Barack Obama first took office in 2009, according to federal government data.

Despite an economy that has technically been in recovery since June of 2009, many economic indicators are the same or worse than when President Obama gave his first address to a Joint Session of Congress in February 2009.

“We will rebuild, we will recover, and the United States of America will emerge stronger than before,” Obama said in that speech.

However, employment for African-Americans and women has not recovered and, in fact, is worse today than it was when Obama said those words.

At the end of January 2009, 12.7 percent of African-Americans were unemployed. Four years later, January 2013, the situation was worse, with unemployment higher at 13.8 percent.

Further, an additional 1.2 million African-Americans had left the workforce entirely during the same time period, with the number of those reported as not in the workforce rising from 10.3 million in January 2009 to 11.5 million in January 2013.

People not in the labor force are those who are younger than the retirement age who are unemployed and no longer looking for work, indicating they have either given up looking for work or gone into early retirement.

For women, the story is not much better. In January 2009, 6.9 percent of women in America were unemployed. By January 2013, 7.8 percent of women were unemployed.

He’s had four years, and his new plan to raise the minimum wage is not going to help younger workers, unskilled workers or minority workers.

Filed under: News, , , , , , , , , , , , , , , , , , , , , , , ,

Wintery Tweets

Error: Twitter did not respond. Please wait a few minutes and refresh this page.

RSS Evolution News

  • An error has occurred; the feed is probably down. Try again later.
Click to see recent visitors

  Visitors Online Now

Page views since 1/30/09

  • 4,328,360 hits

Enter your email address to follow this blog and receive notifications of new posts by email.

Join 2,039 other followers

Archives

Follow

Get every new post delivered to your Inbox.

Join 2,039 other followers

%d bloggers like this: