Tag Archives: Minimum Wage

Five liberal Democrat policies that hurt minorities

Marriage and Poverty
Marriage and Poverty

The five policies are:

  • higher minimum wage rates
  • opposition to school voucher programs
  • releasing criminals from jail
  • affirmative action
  • single mother welfare

This article is by Jason L. Riley, and it appeared in the Wall Street Journal.

Excerpt:

At the urging of labor unions, President Obama has pushed for higher minimum wages that price a disproportionate percentage of blacks out of the labor force. At the urging of teachers unions, he has fought voucher programs that give ghetto children access to better schools.

Both policies have a lengthy track record of keeping millions of blacks ill-educated and unemployed. Since the 1970s, when the federal government began tracking the racial achievement gap, black test scores in math, reading and science have on average trailed far behind those of their white classmates. And minimum-wage mandates have been so effective for so long at keeping blacks out of work that 1930, the last year in which there was no federal minimum-wage law, was also the last year that the black unemployment rate was lower than the white rate. For the past half-century, black joblessness on average has been double that of whites.

Last week the Justice Department said it would release some 6,000 inmates from federal prison starting later this month. The goal, according to the White House, is to ease overcrowding and roll back tough sentencing rules implemented in the 1980s and ’90s.

But why are the administration’s sympathies with the lawbreakers instead of their usual victims—the mostly law-abiding residents in low-income communities where many of these inmates eventually are headed? In dozens of large U.S. cities, violent crime, including murder, has climbed over the past year, and it is hard to see how these changes are in the interest of public safety.

The administration assures skeptics that only “nonviolent” drug offenders will be released, but who pays the price if we guess wrong, as officials have so often done in the past?

When Los Angeles asked the Rand Corp. in the 1990s to identify inmates suitable for early release, the researchers concluded that “almost no one housed in the Los Angeles jails could be considered non-serious or simply troublesome to their local communities” and that “jail capacity should be expanded so as to allow lengthier incarceration of the more dangerous.”

A 2002 federal report tracked the recidivism rate of some 91,000 supposedly nonviolent offenders in 15 states over a three-year period. More than 21% wound up rearrested for violent crimes, including more than 700 murders and more than 600 rapes. The report also noted the difficulty of identifying low-risk inmates. Auto thieves were rearrested for committing more than a third of the homicides and a disproportionate share of other violent offenses.

Keep in mind that when criminals are release, they don’t go move into wealthy progressive neighborhoods. It’s not the wealthy leftists elites who have to deal with the released inmates. It’s the poor, low-income minority neighborhoods that have to deal with them.

By the way, I covered the minimum wage argument here, and I covered the school choice argument here.

That covers the first 3 policies. This article from The College Fix covers the fourth policy, affirmative action.

It says:

A UCLA law professor critiques affirmative action as detrimental to the very people it strives to aid: minority students.

Professor Richard Sander, though liberal-leaning, has deemed affirmative action practices as harmful, a notion that contradicts a liberal view in college admissions, said Stuart Taylor, a nonresident senior fellow at the Brookings Institution.

[…]Sander began teaching law at UCLA in 1989. After a few years he garnered an interest in academic support and asked permission to analyze which strategies most effectively assist struggling students.

After reviewing statistics on performance, especially those of students with lower academic merit, he noticed correlations between race and academic success.

“I was struck by both the degree to which it correlated with having weak academic entering credentials and its correlation with race,” Sander said in a recent interview with The College Fix. “And as I looked into our admissions process I realized that we were giving really a large admissions preference.”

Sander noticed that students admitted into the law school with lower academic credentials than their peers had significantly lower percentages of passing the Multistate Bar Examination, Sander said. This especially pertained to minority students who were given special consideration in the admittance process due to their race rather than their academic preparedness.

He then began thinking about whether or not these students would have better chances of succeeding if they went to a less elite university, he said.

He called this discrepancy a mismatch; when minority students with lower credentials than their peers are accepted into more challenging universities and then suffer academically as a result.

And the fifth policy is welfare. Welfare encourages women to not marry the men that they have sex with, since they will lose their single mother benefits if they do. Children who are raised fatherless are more likely to struggle in a number of areas, and they are especially likely to be poor. What we should be doing (if we really want to help the poor) is paying people to get married and stay married. But Democrats are opposed to that. The connection between welfare, fatherlessness, poverty and crime is explained in a previous post.

Jay Richards: eight common myths about wealth, poverty and the free market

I have a key that will unlock a puzzling mystery
I have a key that will unlock a puzzling mystery

Have you read Jay Richards’ book “Money, Greed and God?” Because if you haven’t, he’s written a series of articles that summarize the main points of the book.

The index post is here.

Here are the posts in the series:

  • Part 1: The Eight Most Common Myths about Wealth, Poverty, and Free Enterprise
  • Part 2: Can’t We Build A Just Society?
  • Part 3: The Piety Myth
  • Part 4: The Myth of the Zero Sum Game
  • Part 5: Is Wealth Created or Transferred?
  • Part 6: Is Free Enterprise Based on Greed?
  • Part 7: Hasn’t Christianity Always Opposed Free Enterprise?
  • Part 8: Does Free Enterprise Lead to An Ugly Consumerist Culture?
  • Part 9: Will We Use Up All Our Resources?
  • Part 10: Are Markets An Example of Providence?

Parts 4 and 5 are my favorites. It’s so hard to choose one to excerpt, but I must. I will choose… Part 4.

Here’s the problem:

Myth #3: The Zero Sum Game Myth – believing that trade requires a winner and a loser. 

One reason people believe this myth is because they misunderstand how economic value is determined. Economic thinkers with views as diverse as Adam Smith and Karl Marx believed economic value was determined by the labor theory of value. This theory stipulates that the cost to produce an object determines its economic value.

According to this theory, if you build a house that costs you $500,000 to build, that house is worth $500,000. But what if no one can or wants to buy the house? Then what is it worth?

Medieval church scholars put forth a very different theory, one derived from human nature: economic value is in the eye of the beholder. The economic value of an object is determined by how much someone is willing to give up to get that object. This is the subjective theory of value.

And here’s an example of how to avoid the problem:

How you determine economic value affects whether you view free enterprise as a zero-sum game, or a win-win game in which both participants benefit.

Let’s return to the example of the $500,000 house. As the developer of the house, you hire workers to build the house. You then sell it for more than $500,000. According to the labor theory of value, you have taken more than the good is actually worth. You’ve exploited the buyer and your workers by taking this surplus value. You win, they lose.

Yet this situation looks different according to the subjective theory of value. Here, everybody wins. You market and sell the house for more than it cost to produce, but not more than customers will freely pay. The buyer is not forced to pay a cost he doesn’t agree to. You are rewarded for your entrepreneurial effort. Your workers benefit, because you paid them the wages they agreed to when you hired them.

This illustration brings up a couple important points about free enterprise that are often overlooked:

1. Free exchange is a win-win game.

In win-win games, some players may end up better off than others, but everyone ends up better off than they were at the beginning. As the developer, you might make more than your workers. Yet the workers determined they would be better off by freely exchanging their labor for wages, than if they didn’t have the job at all.

A free market doesn’t guarantee that everyone wins in every competition. Rather, it allows many more win-win encounters than any other alternative.

2. The game is win-win because of rules set-up beforehand. 

A free market is not a free-for-all in which everybody can do what they want. Any exchange must be free on both sides. Rule of law, contracts, and property rights are needed to ensure exchanges are conducted rightly. As the developer of the house, you’d be held accountable if you broke your contract and failed to pay workers what you promised.

An exchange that is free on both sides, in which no one is forced or tricked into participating, is a win-win game.

On this view, what you really need to fear as a consumer is government intervention that restricts your choices in the marketplace, or makes some choices more expensive than they need to be (tariffs).

If you care about poverty, it’s often tempting to think that it can only be solved one way – by transferring wealth from the rich to the poor. But that is a very mistaken view, as any economist will tell you. The right way to create prosperity is by creating laws and policies that unleash individual creativity. Letting individuals create innovative products and services, letting them keep what they earn, making sure that the law doesn’t punish entrepreneurs – that incentivizes wealth creation. Fixing poverty does not mean transferring wealth, it means giving people more freedom to create wealth on their own. Free trade between nations is an important way that we encourage people to create better products and services that what they have available in their own countries.

Economists agree on the benefits of free trade

Who could possibly disagree with free trade? Well, many people on the left do. But economists across the spectrum of ideology (university and private sector and public sector) agree on the benefits of free trade.

Harvard economist Greg Mankiw explains what most professional economists agree on.

Excerpt:

Here is the 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%)

Socialist economic policies don’t work because they are making policies that are based on economic myths. We know that these myths are myths because of economics is a mathematical science, and because we have tried good and bad policies in different times and places. We have calculations and we have experience to know what works and what doesn’t work. If you want to help the poor, you have to respect what economists know about how wealth is created. The solution is not to “spread the wealth around”, it’s to encourage people to create more wealth by inventing things that people freely choose to buy.

New study: in 2017, minimum wage increases will cost 383,000 low income jobs

I have a key that will unlock a puzzling mystery
I have a key that will unlock a puzzling mystery

Is raising the minimum wage a good idea? Where would the money come from for the higher wages? Would job creators be able to afford to pay people more for the same level of productivity?

Investors Business Daily discusses a new study about the minimum wage increases that will take effect in 2017:

One of the most vexing economic issues today is the minimum wage. For many, the failure to raise the minimum wage to $15 or higher is a sign of our nation’s stinginess and an essential part of the fight for income equality. However, the truth, sad to say, is quite different, as a new study shows.

The study by the American Action Forum, a nonpartisan think tank led by former Congressional Budget Office Director Douglas Holtz-Eakin, looked at minimum-wage hikes scheduled to take effect in the coming years in 14 states and the nation’s capital and found they will “cost millions of jobs across the country and each lost job only leads to total wage earnings rising by a few thousand dollars.”

The reason is simple: When you raise the minimum wage of low-skilled, low-productivity labor — a group that disproportionately includes young minority males — you inevitably destroy jobs. No business will hire someone and pay him more than he’s worth.

So all those states might think they’re helping the downtrodden and the poor, and striking a blow for equality by mandating higher wages, but they’re doing just the opposite: Pricing many young people out of entry-level jobs.

The study estimates that minimum-wage hikes in just 2017 will kill off 383,000 low-end jobs. When phased in over a series of years, the losses become truly big: 2.6 million jobs. But wait, won’t the minimum-wage hike at least boost incomes?

Yes, but not much. For each job lost, earnings for the employees affected by the increase would go up just $6,900.

“While proposals to raise the minimum wage are well intended, it is important to consider the negative labor market consequences,” the report said. “A 10% increase in the real minimum wage is associated with a 0.3 to 0.5 percentage-point decline in the net job rate.”

What will happen when all of these young workers come out of high school and cannot find entry level jobs? Answer: they will have to get money through crime or black market or by collecting welfare. That’s how you earn money if you can’t get employment through legal means.

If we left the minimum wage low, they would be able to find entry level jobs and move up the ladder, perhaps by taking classes at night, like my parents did. My Dad was able to earn his Bachelor’s degree by working in a flower shop and as a security guard for minimal pay. Then he was able to find full-time work that allowed him to have another child, i.e. – me. My parents married first, got jobs, then had children later. But they relied on the availability of entry level jobs in order to work that plan through.

It’s very important to understand that not everyone who INTENDS to help the poor really ACHIEVES helping the poor. I really hope that Americans start to understand from disasters like Obamacare that you cannot let economic illiterates drive policy decisions. No matter how good the happy-talk sounds when read off of a teleprompter, there is no getting around the laws of economics.

Jay Richards: eight common myths about wealth, poverty and the free market

I have a key that will unlock a puzzling mystery
I have a key that will unlock a puzzling mystery

Have you read Jay Richards’ book “Money, Greed and God?” Because if you haven’t, he’s written a series of articles that summarize the main points of the book.

The index post is here.

Here are the posts in the series:

  • Part 1: The Eight Most Common Myths about Wealth, Poverty, and Free Enterprise
  • Part 2: Can’t We Build A Just Society?
  • Part 3: The Piety Myth
  • Part 4: The Myth of the Zero Sum Game
  • Part 5: Is Wealth Created or Transferred?
  • Part 6: Is Free Enterprise Based on Greed?
  • Part 7: Hasn’t Christianity Always Opposed Free Enterprise?
  • Part 8: Does Free Enterprise Lead to An Ugly Consumerist Culture?
  • Part 9: Will We Use Up All Our Resources?
  • Part 10: Are Markets An Example of Providence?

Parts 4 and 5 are my favorites. It’s so hard to choose one to excerpt, but I must. I will choose… Part 4.

Here’s the problem:

Myth #3: The Zero Sum Game Myth – believing that trade requires a winner and a loser. 

One reason people believe this myth is because they misunderstand how economic value is determined. Economic thinkers with views as diverse as Adam Smith and Karl Marx believed economic value was determined by the labor theory of value. This theory stipulates that the cost to produce an object determines its economic value.

According to this theory, if you build a house that costs you $500,000 to build, that house is worth $500,000. But what if no one can or wants to buy the house? Then what is it worth?

Medieval church scholars put forth a very different theory, one derived from human nature: economic value is in the eye of the beholder. The economic value of an object is determined by how much someone is willing to give up to get that object. This is the subjective theory of value.

And here’s an example of how to avoid the problem:

How you determine economic value affects whether you view free enterprise as a zero-sum game, or a win-win game in which both participants benefit.

Let’s return to the example of the $500,000 house. As the developer of the house, you hire workers to build the house. You then sell it for more than $500,000. According to the labor theory of value, you have taken more than the good is actually worth. You’ve exploited the buyer and your workers by taking this surplus value. You win, they lose.

Yet this situation looks different according to the subjective theory of value. Here, everybody wins. You market and sell the house for more than it cost to produce, but not more than customers will freely pay. The buyer is not forced to pay a cost he doesn’t agree to. You are rewarded for your entrepreneurial effort. Your workers benefit, because you paid them the wages they agreed to when you hired them.

This illustration brings up a couple important points about free enterprise that are often overlooked:

1. Free exchange is a win-win game.

In win-win games, some players may end up better off than others, but everyone ends up better off than they were at the beginning. As the developer, you might make more than your workers. Yet the workers determined they would be better off by freely exchanging their labor for wages, than if they didn’t have the job at all.

A free market doesn’t guarantee that everyone wins in every competition. Rather, it allows many more win-win encounters than any other alternative.

2. The game is win-win because of rules set-up beforehand. 

A free market is not a free-for-all in which everybody can do what they want. Any exchange must be free on both sides. Rule of law, contracts, and property rights are needed to ensure exchanges are conducted rightly. As the developer of the house, you’d be held accountable if you broke your contract and failed to pay workers what you promised.

An exchange that is free on both sides, in which no one is forced or tricked into participating, is a win-win game.

On this view, what you really need to fear as a consumer is government intervention that restricts your choices in the marketplace, or makes some choices more expensive than they need to be (tariffs).

If you care about poverty, it’s often tempting to think that it can only be solved one way – by transferring wealth from the rich to the poor. But that is a very mistaken view, as any economist will tell you. The right way to create prosperity is by creating laws and policies that unleash individual creativity. Letting individuals create innovative products and services, letting them keep what they earn, making sure that the law doesn’t punish entrepreneurs – that incentivizes wealth creation. Fixing poverty does not mean transferring wealth, it means giving people more freedom to create wealth on their own. Free trade between nations is an important way that we encourage people to create better products and services that what they have available in their own countries.

Economists agree on the benefits of free trade

Who could possibly disagree with free trade? Well, many people on the left do. But economists across the spectrum of ideology (university and private sector and public sector) agree on the benefits of free trade.

Harvard economist Greg Mankiw explains what most professional economists agree on.

Excerpt:

Here is the 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%)

Socialist economic policies don’t work because they are making policies that are based on economic myths. We know that these myths are myths because of economics is a mathematical science, and because we have tried good and bad policies in different times and places. We have calculations and we have experience to know what works and what doesn’t work. If you want to help the poor, you have to respect what economists know about how wealth is created. The solution is not to “spread the wealth around”, it’s to encourage people to create more wealth by inventing things that people freely choose to buy.

Five liberal Democrat policies that hurt minorities

Marriage and Poverty
Marriage and Poverty

The five policies are:

  • higher minimum wage rates
  • opposition to school voucher programs
  • releasing criminals from jail
  • affirmative action
  • single mother welfare

This article is by Jason L. Riley, and it appeared in the Wall Street Journal.

Excerpt:

At the urging of labor unions, President Obama has pushed for higher minimum wages that price a disproportionate percentage of blacks out of the labor force. At the urging of teachers unions, he has fought voucher programs that give ghetto children access to better schools.

Both policies have a lengthy track record of keeping millions of blacks ill-educated and unemployed. Since the 1970s, when the federal government began tracking the racial achievement gap, black test scores in math, reading and science have on average trailed far behind those of their white classmates. And minimum-wage mandates have been so effective for so long at keeping blacks out of work that 1930, the last year in which there was no federal minimum-wage law, was also the last year that the black unemployment rate was lower than the white rate. For the past half-century, black joblessness on average has been double that of whites.

Last week the Justice Department said it would release some 6,000 inmates from federal prison starting later this month. The goal, according to the White House, is to ease overcrowding and roll back tough sentencing rules implemented in the 1980s and ’90s.

But why are the administration’s sympathies with the lawbreakers instead of their usual victims—the mostly law-abiding residents in low-income communities where many of these inmates eventually are headed? In dozens of large U.S. cities, violent crime, including murder, has climbed over the past year, and it is hard to see how these changes are in the interest of public safety.

The administration assures skeptics that only “nonviolent” drug offenders will be released, but who pays the price if we guess wrong, as officials have so often done in the past?

When Los Angeles asked the Rand Corp. in the 1990s to identify inmates suitable for early release, the researchers concluded that “almost no one housed in the Los Angeles jails could be considered non-serious or simply troublesome to their local communities” and that “jail capacity should be expanded so as to allow lengthier incarceration of the more dangerous.”

A 2002 federal report tracked the recidivism rate of some 91,000 supposedly nonviolent offenders in 15 states over a three-year period. More than 21% wound up rearrested for violent crimes, including more than 700 murders and more than 600 rapes. The report also noted the difficulty of identifying low-risk inmates. Auto thieves were rearrested for committing more than a third of the homicides and a disproportionate share of other violent offenses.

Keep in mind that when criminals are release, they don’t go move into wealthy progressive neighborhoods. It’s not the wealthy leftists elites who have to deal with the released inmates. It’s the poor, low-income minority neighborhoods that have to deal with them.

By the way, I covered the minimum wage argument here, and I covered the school choice argument here.

That covers the first 3 policies. This article from The College Fix covers the fourth policy, affirmative action.

It says:

A UCLA law professor critiques affirmative action as detrimental to the very people it strives to aid: minority students.

Professor Richard Sander, though liberal-leaning, has deemed affirmative action practices as harmful, a notion that contradicts a liberal view in college admissions, said Stuart Taylor, a nonresident senior fellow at the Brookings Institution.

[…]Sander began teaching law at UCLA in 1989. After a few years he garnered an interest in academic support and asked permission to analyze which strategies most effectively assist struggling students.

After reviewing statistics on performance, especially those of students with lower academic merit, he noticed correlations between race and academic success.

“I was struck by both the degree to which it correlated with having weak academic entering credentials and its correlation with race,” Sander said in a recent interview with The College Fix. “And as I looked into our admissions process I realized that we were giving really a large admissions preference.”

Sander noticed that students admitted into the law school with lower academic credentials than their peers had significantly lower percentages of passing the Multistate Bar Examination, Sander said. This especially pertained to minority students who were given special consideration in the admittance process due to their race rather than their academic preparedness.

He then began thinking about whether or not these students would have better chances of succeeding if they went to a less elite university, he said.

He called this discrepancy a mismatch; when minority students with lower credentials than their peers are accepted into more challenging universities and then suffer academically as a result.

And the fifth policy is welfare. Welfare encourages women to not marry the men that they have sex with, since they will lose their single mother benefits if they do. Children who are raised fatherless are more likely to struggle in a number of areas, and they are especially likely to be poor. What we should be doing (if we really want to help the poor) is paying people to get married and stay married. But Democrats are opposed to that. The connection between welfare, fatherlessness, poverty and crime is explained in a previous post.