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.

Arthur Brooks: why is the American public shifting from optimism to envy?

Labor Force Participation down to 62.8%
Labor Force Participation down to 62.8%

An editorial by Arthur Brooks appeared today in the leftist New York Times. His topic is the shift from optimism to envy, why it is happening, and whether envy makes us happier than optimism.

Excerpt: (links removed)

The Irish singer Bono once described a difference between America and his native land. “In the United States,” he explained, “you look at the guy that lives in the mansion on the hill, and you think, you know, one day, if I work really hard, I could live in that mansion. In Ireland, people look up at the guy in the mansion on the hill and go, one day, I’m going to get that bastard.”

[…]Unsurprisingly, psychologists have found that envy pushes down life satisfaction and depresses well-being. Envy is positively correlated with depression and neuroticism, and the hostility it breeds may actually make us sick. Recent work suggests that envy can help explain our complicated relationship with social media: it often leads to destructive “social comparison,” which decreases happiness. To understand this, just picture yourself scrolling through your ex’s wedding photos.

My own data analysis confirms a strong link between economic envy and unhappiness. In 2008, Gallup asked a large sample of Americans whether they were “angry that others have more than they deserve.” People who strongly disagreed with that statement — who were not envious, in other words — were almost five times more likely to say they were “very happy” about their lives than people who strongly agreed. Even after I controlled for income, education, age, family status, religion and politics, this pattern persisted.

It’s safe to conclude that a national shift toward envy would be toxic for American culture.

Unfortunately, in the wake of the Great Recession, such a shift may well be underway, given the increasing anxiety about income inequality and rising sympathy for income redistribution. According to data from the General Social Survey, the percentage of Americans who feel strongly that “government ought to reduce the income differences between the rich and the poor” is at its highest since the 1970s. In January, 43 percent of Americans told the Pew Research Center that government should do “a lot” to “reduce the gap between the rich and everyone else.”

Why the shift? The root cause of increasing envy is a belief that opportunity is in decline. According to a 2007 poll on inequality and civic engagement by the Maxwell School of Citizenship and Public Affairs at Syracuse University, just 30 percent of people who believe that everyone has the opportunity to succeed describe income inequality as “a serious problem.” But among people who feel that “only some” Americans have a shot at success, fully 70 percent say inequality is a major concern.

People who believe that hard work brings success do not begrudge others their prosperity. But if the game looks rigged, envy and a desire for redistribution will follow.

This is the direction we’re heading. According to Pew, the percentage of Americans who feel that “most people who want to get ahead” can do so through hard work has dropped by 14 points since about 2000. As recently as 2007, Gallup found that 70 percent were satisfied with their opportunities to get ahead by working hard; only 29 percent were dissatisfied. Today, that gap has shrunk to 54 percent satisfied, and 45 percent dissatisfied. In just a few years, we have gone from seeing our economy as a real meritocracy to viewing it as something closer to a coin flip.

There is a good lesson in this for people who want what is best for the poor. Simply receiving money from others is not going to make poor people happy. What we need to focus on is providing the poorest people with opportunities.

One way to help the poor is by giving poor children a better education. Conservatives support school choice, which takes money away from government and puts it back in the hands of parents, letting them choose the best school for their child. Schools have to produce good outcomes in order to earn the money, just like private businesses have to compete for customers. But Democrats oppose school choice, as when they killed the D.C. voucher program that helped poor black students. Less school choice helps public schools to be insulated from competition, which provides worse outcomes to students, especially poor minority students. If we really cared about poor, minority students, we would put pressure on public schools to compete with private schools. But the Democrats don’t want that, they prefer to give favors to their teacher union allies.

Democrats also want to punish job creators with high taxes and burdensome regulations. Democrats passed Obamacare, which punishes businesses with taxes if they allow part-time workers to work for more than 30 hours a week. Many jobs were lost because of this, and many people are now struggling to pay higher premiums for plans with higher deductibles and co-pays. Obamacare is a nightmare of intrusive regulations, too. Now the Democrats are talking about raising the minimum wage, which is going to put even more pressure on employers to lay off workers, because they can’t afford to pay them more money for the same work. For Democrats, this is all to the good, though. Because if the poor don’t have jobs, or can’t work enough hours, they start to see the economic game as “rigged” and they are more responsive to “envy rhetoric”. They start to look to big government for handouts, rather than trying to prevent the government from taxing and regulating job creators.

What we need to see is that it’s not the Democrats’ objective to help people find jobs. They gain when people become more envious, like in European countries, and start to vote to grow the size and power of government to redistribute wealth. Speeches about income inequality never have the goal of giving people jobs. None of Obama’s policies aim to do that. That’s why he won’t build the Keystone XL pipeline, or boost domestic energy development here at home. Instead, they want to extend unemployment benefits and pass the costs on to the next generation. Their goal is to get you unemployed or on disability or on welfare, so that you will vote for the government to continue to take your neighbor’s money to give it to you. That manufactured envy is what keeps the Democrats in power.

This plan to borrow from young people to buy the votes of old people today works for a while, until the money runs out. But by then, the politicians who put in place the redistribution programs are usually long gone .

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.

Free trade in the real world

This is not a theoretical problem, either. Millions of people in the Ukraine are protesting against Vladimir Putin and his restrictive Russian policies in order to get more economic freedom by signing a free trade deal with the European Union.

Rick Pearcey posted about it on the Pearcey Report: (H/T Nancy Pearcey)

France24.com reports:

Hundreds of thousands of protesters swarmed Ukraine’s capital Kiev on Sunday, where the country’s opposition leaders urged them to continue heaping pressure on President Viktor Yanukovich to sack his government and abandon plans for closer ties with Russia.

Many of the demonstrators who gathered at the city’s central Independence Square are furious with the government over its decision to back out of a historic agreement with the European Union in favour of a possible trade deal with Russia, Ukraine’s Soviet-era ruler.

The protest . . . is just the latest sign of mounting tensions in Ukraine over the past two weeks, raising fears over the country’s political and economic stability.

That’s a real crisis: freedom-loving people fighting for their right to be prosperous by adopting the economic policies that produce wealth.

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. They favor imposing restrictions on free trade. For example, people on the left favor making those who import goods pay tariffs, which makes it harder to trade with other nations. People on the left want to pass rent control laws to block landlords and tenants from trading more freely. People on the left want to pass minimum wage laws that block employers and workers from trading wages for labor more freely. But economists generally don’t agree with any of restrictions on free trade. In fact, even across the ideological spectrum, the majority of economists view free trade as a wealth creating policy, and restrictions on free trade as a wealth destroying policy.

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%)

Now when you are talking to a Democrat, you are talking to someone who disagrees with most or all of those common sense economic policies. For example, Obama’s backers in the labor movement inevitably endorse higher import tariffs, which discourage free trade between countries. No economist supports these tariffs on imports, because history has shown (e.g. – Smoot-Hawley Act) that tariffs destroy economic growth and reduce wealth creation. And that’s what I mean when I talk about economic illiteracy – I mean ignoring what we know from economics and our own experience with bad policies when we make policy.

Democrat 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.

Neil Cavuto explains basic economics to college student who wants free tuition

She has $280,000 in student loan debt for "Chinese medicine"
She has $280,000 in student loan debt for “Chinese medicine”

The video, which goes about 10 minutes. This is a must watch.

The description of the video explains the contents:

Keely Mullen, an organizer for the Million Student March movement, joined Fox Business Network anchor Neil Cavuto on the air Thursday to discuss the movement’s demands for free public college, student debt cancelation and a $15-an-hour minimum wage for student workers. In the awkward 9-minute interview, Cavuto repeatedly cited facts and figures that seemed to fluster the student.

When asked who would pick up the tab for the demands she listed, Mullen said, “The 1 percent of people who are hoarding the wealth and causing a catastrophe students are facing.”

“If the 1 percent just had their taxes raised a few years ago back to almost 40 percent then to pay for the healthcare law, they had them raised another few percentage points, then they had their deductions limited to raise another couple points — depending on the state or locality — they’re pushing over about 50 percent in taxes,” Cavuto told Mullen. “How much more do you think they should pay?”

Cavuto’s question, asked within the first two minutes of the interview, became the centerpiece of the entire discussion, as Mullen was unable to provide a clear answer.Mullen did say the rate should be raised to “enough until we have a system where not one in two families are threatened with poverty.” And when asked if she and her friends and family would pay more in taxes for her demands, she said “we already are.” However, according to Forbes, 45 percent of households pay no federal income taxes.

Cavuto asked Mullen where the money would come from should “these 1 percent hoarders” leave the country, and Mullen insisted there would always be wealthy people in the U.S. However, later in the interview, Cavuto told his guest that countries around the world, using Greece as an example, have run out of money because the top earners are fleeing.

When Cavuto asked her if she think the 1 percent could actually fund all her demands, Mullen said, “Absolutely.” However, Cavuot claimed taxing the 1 percent at 100 percent wouldn’t even fund Medicare for three years — let alone all of her demands for free services.

“They’ve done studies on this, Keeley, I don’t want to get boring here, but even if you were to take the 1 percent and take all of their money — tax it 100 percent — do you know that couldn’t keep Medicare, just Medicare, in this country going for three years?” Cavuto asked. “Did you know that?”

“Yeah, I don’t believe that,” Mullen said in response. “Yeah, I’m sorry, that just sounds completely ludicrous to me.”

Toward the end of the interview, Cavuto told Mullen taxing the 1 percent on 100 percent of their income would only yield “about one trillion” toward any entitlement program.

I took a look and found out that her father owns a million-dollar home. Also, she is studying two non-STEM subjects – political science and sociology. Both of these have some value, but they are also not the STEM areas that are in demand by employers.

By the way, Cavuto is not joking about how much money you can get by taking everything the 1% make.

The radically leftist New York Times explains how much you can get from “the rich” with a reasonably high tax rate:

To get the most accurate picture possible, throw in all the scraps of income, from the most obvious (like wages, interest and dividends) to the least (like employer contributions to health plans, overseas earnings and growth in retirement accounts). According to that measure — used by the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution — the top 1 percent includes about 1.13 million households earning an average income of $2.1 million.

Raising their total tax burden to, say, 40 percent would generate about $157 billion in revenue the first year. Increasing it to 45 percent brings in a whopping $276 billion.

The Wall Street Journal has computed the costs of Bernie Sanders’ spending plan, and it came out to $18 trillion. Getting rid of all the current outstanding student loan balances would cost $1.2 trillion alone. I’ve already talked about the consequences of raising the minimum wage for young, minority workers – they won’t be able to find the entry level jobs they need to get their careers started, so they can move up.

The real question that needs to be asked is the one that Cavuto asked – do you expect the wealthy to continue producing at the same level when you take half or all of what they make. On the student’s view, the rich would work just as hard even if you took all their money and gave it to students taking underwater basket weaving, medieval pottery and puppetry. This is the question that people on the left never ask – what are the consequences of these policies for ALL of the parties who will be affected. That’s a simple question, but apparently not something that leftist professors teach their students to ask. College is generally little narcissists learning from big narcissists, at least in non-STEM programs. It certainly is not the place to learn basic economics and basic civics.

Is there any downside to raising the minimum wage to $15 an hour?

They told me if I voted Republican, we'd lose jobs, and they were right!
They told me if I voted Republican, we’d lose jobs, and they were right!

This article is from the libertarian Reason.com. They’re terrible at social issues, but really really good at economics.

They write:

Raising the minimum wage like this is an idea that’s become increasingly common amongst more liberal Democratic politicians and policymakers: The city of Seattle, Washington passed a law raising its minimum wage to $15 last year, and the Los Angeles city council voted to follow suit. Soon after, New York state announced a plan to raise the minimum wage of all fast food workers to $15, and the state’s governor, Andrew Cuomo, recently said he believes it should apply to all workers.

Many of these plans start from the assumption, implicitly or explicitly, that these minimum wage hikes would be relatively cost-free, pointing to several studies seeming to show that increases in the minimum wage don’t have much effect on jobs.

Here is what the author of some of the most influential of those studies, former Obama administration economic adviser Alan B. Krueger, had to say about raising the federal minimum wage to $15 an hour in an op-ed for The New York Times last week:

15 an hour is beyond international experience, and could well be counterproductive. Although some high-wage cities and states could probably absorb a $15-an-hour minimum wage with little or no job loss, it is far from clear that the same could be said for every state, city and town in the United States.

Krueger goes on to warn of greater risk, and the potential for “severe” trade-offs, if policymakers pursue a $15 minimum wage, warning that it would go beyond what any research supports. Ultimately, he concludes, it is  “a risk not worth taking.”

Krueger wasn’t disowning his own work or abandoning his position. He still supports raising the minimum wage to $12 an hour over a period of years, which he thinks could be done with essentially no job loss.

There are some reasons to be skeptical of that claim too: The Congressional Budget Office, which generally tries to take a moderate approach to economic evidence and put its estimates right in the middle of the consensus range, found that even a more modest hike to $10.10 an hour nationally would most likely cost about a half a million jobs, and while it’s possible such a raise might produce minimal job loss, it’s equally possible that it would cost a million jobs.

Overall, as David Neumark and William Wascher have found, the bulk of the evidence from research into the minimum wage suggests that hikes tend to decrease employment.

Let’s review the facts on minimum wage.

Abstract from a National Bureau of Economic Research study:

We estimate the minimum wage’s effects on low-skilled workers’ employment and income trajectories. Our approach exploits two dimensions of the data we analyze. First, we compare workers in states that were bound by recent increases in the federal minimum wage to workers in states that were not. Second, we use 12 months of baseline data to divide low-skilled workers into a “target” group, whose baseline wage rates were directly affected, and a “within-state control” group with slightly higher baseline wage rates. Over three subsequent years, we find that binding minimum wage increases had significant, negative effects on the employment and income growth of targeted workers.

[…]Over the late 2000s, the average effective minimum wage rose by 30 percent across the United States. We estimate that these minimum wage increases reduced the national employment-to-population ratio by 0.7 percentage point.

That comes out to 1.4 million workers who lost their jobs, thanks to minimum wage mandates. And those are primarily young, unskilled workers who are affected – people trying to get a start in the workplace and build their resumes, so they can move up.

Harvard economist Greg Mankiw explains the top 14 views that a majority professional economists agree on, and here’s #12:

12. A minimum wage increases unemployment among young and unskilled workers. (79%)

This is not controversial. This is the kind of basic “how America works” economics stuff that people used to learn in their civics classes before the schools became so politicized.