Tag Archives: Economics

News

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

3 Comments

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.

News

UK Supreme Court rules against Christian B&B couple’s conscience rights

1 Comment

Dina sent me this article from the UK Telegraph about a recent Supreme Court decision from the UK.

Excerpt:

The devoutly Christian owners of a Cornish hotel who refused to allow two gay men to take a double room have lost their final appeal to the Supreme Court. It ruled that Peter and Hazelmary Bull had discriminated against the couple, even though they had long operated a rule that unmarried guests had to sleep apart. One of the judges, Lady Hale, said such a case would have been unthinkable less than two decades ago, and it is a measure of how both the law and societal norms have changed that the Bulls should have found themselves in such a predicament.

It is also a pity this matter was not settled amicably when the Bulls made an offer of redress; but campaigners were intent on making an example of them. The aggrieved men, Martyn Hall and Steven Preddy, who were in a civil partnership, were supported by the Equalities and Human Rights Commission (EHRC). The Bulls were perplexed as to why the EHRC should act against them, since their right to exercise their religious beliefs was being set against that of the men not to be discriminated against on the grounds of their sexual orientation.

Dina also sent me this article from the pro-gay Spiked Online.

Excerpt:

[A]s the systematic unequal treatment of gays has ended, so another problem has grown. One pernicious social force has been replaced by another: the willingness of the state to outlaw minority or eccentric views and behaviours. State-backed oppression has yielded to state-backed intolerance.

The Bulls have been hauled before the courts and told they can no longer practise what they preach. To deny a couple the right to make a living in a manner consistent with their Christian values is draconian. The Bulls’ fate is similar to that of Lillian Ladele, an Islington marriage registrar, and Gary McFarlane, a Relate counsellor, who were both sacked after declining to provide their professional services to lesbians and gays. Equality laws did for them all.

The problem here is not, as it appears, merely a slap in the face to Christians. It is a slap in the face to the right of all individuals to act free of state control absent a compelling reason for intervention. As John Stuart Mill put it in On Liberty (1859): ‘The only purpose for which power can be rightfully exercised over any member of a civilised community, against his will, is to prevent harm to others.’

As if to satisfy Mill’s harm principle, the Supreme Court went in search of Preddy and Hall’s ‘harm’. What they found was that when the Bulls’ house rules were explained to Preddy and Hall, they found it ‘upsetting’ and ‘very hurtful’. Even in the touchy-feely twenty-first century, where self-esteem is seen as so important and so fragile, this is pretty lame.

The Supreme Court judge, Lady Hale, may have been aware that this ‘affront to their dignity’, as she put it, was not the sort of harm, in the Mill sense, that should justify the state’s coercive power. She bolstered her argument by linking Preddy and Hall’s hurt feelings to a bigger historical picture. ‘We should not underestimate’, she said, ‘the continuing legacy of those centuries of discrimination, persecution even, which is still going on in many parts of the world’.

Fascism happens when the normal desire for compassion is taken out of the family context and becomes the policy of a powerful feminist welfare state. And that’s when it becomes a threat to the right of individuals to make moral judgments and to exercise religious liberty.

The EHRC, you’ll remember, was a project of the Labour Party of the UK, which is the socialist party in the UK. There is also a communist party called the Liberal Democrats. The striking thing is that many church-attending Christians not only vote for the Labour Party, but they also vote for the Liberal Democrats, which are even more liberal. A lot of this is because British Christians are so far to the left on economic issues that they sort of go along with the assault on their own religious liberty out of ignorance. They vote for bigger and bigger government, and then they are surprised when they actually get it.

The same thing happened in Canada with the Liberal Party and their introduction of Human Rights Commissions and Human Rights Tribunals, which criminalize offending people with free speech. The very Christians that voted for expanding government to reduce poverty were the ones who were then persecuted by the same big government they voted to create. This goes to show why we need to have better economics knowledge among Christians, because many of us are voting for left-wing parties because we think that private, voluntary charity can be replaced with government-controlled redistribution of wealth. Not only does that not work to reduce poverty, but in the end, we lose our liberties, too.

In the UK, you’ll find a lot of Christians who think that rent control is a good thing, that price controls are a good thing, that raising minimum wage is a good thing, that tariffs on imported goods are a good thing – positions which are generally viewed as incorrect by academic economists across the ideological spectrum. That’s why churches need to teach the Christian worldview, including economics. The UK church should be training Christians to undo this ignorant, patriotic confidence that UK Christians have in their welfare state. We all have a lot of work to do to educate ourselves on how the Bible applies to the real world (e.g. – economics), or else we will end up undermining our own liberties.

Additionally, I find it very frustrating that so many churches are so focused on providing emotional comfort and a sense of community to the people in the pews that they neglect to talk about these religious liberty issues. Pastors don’t want to alert ordinary Christians about how dangerous it’s becoming to take unpopular stands on issues like gay rights in public – it’s scary and divisive and drives people away from church. You’re not going to hear them trying to apply the Bible to moral issues or economic issues, etc. from the pulpit, because that spoils the “experience” and “the show” – the comfort and entertainment that people expect from church. We need to do better at helping Christians to be aware of threats to our liberties. They need to be trained to connect their faith to specific laws and policies in the real world.

News

Doctor shortage: how Obamacare makes it harder to find a doctor

2 Comments

Remember how Obama promised that if you liked your doctor, then you could keep your doctor? It turns out that there is more to making policies than just saying what you’d like to do in a scripted campaign speech. The truth is that some health care policies will make you lose your doctor, regardless of what the President reads off of a teleprompter. Is Obamacare one of these policies? Let’s see.

Avik Roy writes about it in Forbes magazine.

Excerpt:

On Saturday, the Wall Street Journal reported that, due to Obamacare’s cuts to Medicare Advantage, among other factors, UnitedHealth expects its network of physicians “to be 85 percent to 90 percent of its current size by the end of 2014.” The result? Some retirees enrolled in Medicare Advantage will need to find new doctors. And it’s a trend that could accelerate in future years.

[…]Over the next ten years, Obamacare was designed to spend around $1.9 trillion on expanding health coverage to the uninsured. The law pays for this new spending with $1.2 trillion in new taxes, and $716 billion in cuts to Medicare, relative to prior law.

[…]The private insurers who supply Medicare Advantage plans, like UnitedHealth and Humana, have been responding to the cuts by squeezing out inefficiencies in the way they deliver care. One obvious way to do that is to pay doctors and hospitals less—or kick out the providers who refuse to accept lower reimbursement rates. And that’s what United has done, according to the WSJ report from Melinda Beck.

“Doctors in at least 10 states have received termination letters, some citing ‘significant changes and pressures in the health-care environment,’” writes Beck.

Another one of my favorite health care policy experts is the ex-Canadian Sally C. Pipes, who knows all about the horrors of single-payer health care. It killed her mother! Here’s what she had to say about the doctors shortage in a Forbes magazine article from earlier this year.

The first problem is that we have an aging doctor population and since we do such a poor job of educating our children (public school indoctrination centers) we aren’t making any new ones:

Right now, the United States is short some 20,000 doctors, according to the Association of American Medical Colleges. The shortage could quintuple over the next decade, thanks to the aging of the American population — and the aging and consequent retirement of many physicians. Nearly half of the 800,000-plus doctors in the United States are over the age of 50.

The second problem is that adding more regulations and burdensome paperwork makes a lot of people not want to be doctors any more:

Obamacare is further thinning the doctor corps. A Physicians Foundation survey of 13,000 doctors found that 60 percent of doctors would retire today if they could, up from 45 percent before the law passed.

The third problem is that the government isn’t reimbursing doctors as much as private insurance companies do, and it makes them refuse to take government-funded patients:

They’ve long limited the number of Medicaid patients they’ll treat, thanks to the program’s low reimbursement rates. According to a study published in Health Affairs, only 69 percent of doctors accepted new Medicaid patients in 2011. In Florida, just 59 percent do so. And a survey by the Texas Medical Association of doctors in the Lone Star State found that 68 percent either limit or refuse to take new Medicaid patients.

Medicaid pays about 60 percent as much as private insurance. For many doctors, the costs of treating someone on Medicaid are higher than what the government will pay them.

These underpayments have grown worse over time, as cash-strapped states have tried to rein in spending on Medicaid. Ohio hasn’t increased payments to doctors in three years; Kentucky hasn’t raised them in two decades. Colorado, Nebraska, South Carolina, Arizona, Oregon, and Arizona all cut payments in 2011.

By throwing nine million more people into the program without fixing this fatal flaw, Obamacare will make it even harder for Medicaid patients to find doctors.

It’s not just Medicaid that’s the problem, either. It’s the government-controlled exchanges.

Healthcare providers are signaling that they may turn away patients who purchase insurance through the exchanges, too.

In California, for example, folks covered by Blue Shield’s exchange plan will have access to about a third of its physician network. The UCLA Medical Center and its doctors are available to customers of just one plan for sale through the state exchange, Covered California. And the prestigious Cedars-Sinai Medical Center is not taking anyone with exchange insurance.

Now I know what you’re thinking – why not just force doctors to work for lower wages, like a good socialist country might? Well, that actually makes the shortage worse, because people don’t like to learn hard things and then work hard for little pay. And doctors work VERY hard – it’s not an easy profession to get into. That will just make all the doctors leave the country for other countries where they can be paid fairly for the work they do.

And in fact that is exactly what happened in a 100% socialized health care system in Venezuela, according to this report from the left-leaning Associated Press.

Excerpt:

Half the public health system’s doctors quit under Chavez, and half of those moved abroad, Natera said.

Now, support staff is leaving, too, victim of a wage crunch as wages across the economy fail to keep up with inflation.

At the Caracas blood bank, Lopez said 62 nurses have quit so far this year along with half the lab staff. It now can take donations only on weekday mornings.

I recommend reading that entire article for a glimpse of where the Democrats are trying to take us. There is not a dime’s worth of difference on policy between the Democrat party and the socialist party of Venezuela, except that the socialists have been in control in Venezuela for longer, and so they are further along the road to serfdom.

In other news, the Washington D.C. insurance commissioner was fired after raising concerns about the “fix” proposed by Obama in his speech last week. That’s also something that you might expect to see in a country like Venezuela. That’s what happens in authoritarian socialist countries. Whistleblowers and critics just disappear.