Tag Archives: Unemployment

Will raising the minimum wage cause job creators to lay off employees?

Basic economics: when you raise the price of something, people buy less of it
Basic economics: if you raise the price, then people will buy less of it

Right now, all the candidates for President from the Democrat party are competing with one another to see who can buy the most votes using taxpayer money. One popular Democrat policy to buy votes is to raise the minimum wage. Democrats reason that minimum wage increases are great, because workers will have more money to buy stuff. What could go wrong?

Well, I want to talk about this policy from a theoretical point of view, then give an example of how it works in practice.

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.

Why does it hurt young and unskilled workers most? Because those workers don’t produce as much as older, more experienced workers. So, if all the salaries go up, employers keep the most experienced employees and lay off the youngest, and least experienced employees. This is why the youth unemployment rates of socialist countries in Europe are so much higher than the overall unemployment rate. And just to be clear, minorities are disproportionately harmed by minimum wage laws, since they are the ones who are often trying to move up through those entry-level jobs.

Here’s an example of how this works in reality, from San Francisco, a Democrat-run city.

ABC News reports:

San Francisco’s minimum wage is currently $11.05 an hour. By July of 2018, the minimum wage in San Francisco will be $15 an hour. That increase is forcing Borderlands Bookstore to write its last chapter now.

[…]Borderlands was turning a small profit, about $3,000 last year. Then voters approved a hike in the minimum wage, a gradual rise from $10.75 up to $15 an hour.

“And by 2018 we’ll be losing about $25,000 a year,” he said.

It’s an unexpected plot twist for loyal customers.

“You know, I voted for the measure as well, the minimum wage measure,” customer Edward Vallecillo said. “It’s not something that I thought would affect certain specific small businesses. I feel sad.”

That was in 2018, but strangely enough, Democrat voters haven’t learned their lesson. They still think you can vote people more money, and not ask where the money is coming from.

Shawn sent me this story about Seattle, another Democrat-run city.

Excerpt:

Restaurants Unlimited, a Seattle-based chain with restaurant locations in 47 US cities, announced on Sunday it was seeking Chapter 11 protection, citing “progressive” wage laws.

The company, which has operated since the Lyndon Johnson Administration, said rising labor costs—part of a national trend of government-mandated minimum increases—were part of its decision.

“Over the past three years, the company’s profitability has been significantly impacted by progressive wage laws along the Pacific coast that have increased the minimum wage,” Chief Restructuring Officer David Bagley said in court filings, The Seattle Times reports. “As a large employer in the Seattle metro market, for instance, the company was one of the first in the market to be forced to institute wage hikes.”

[…]BLS data show that New York City experienced its sharpest decline in restaurant jobs since 9/11 following its passage of a $15 minimum wage law. In California, a local newspaper recently detailed how an entire business district virtually disappeared following the city’s aggressive minimum wage push.

Restaurants Unlimited’s announcement came a day before the Congressional Budget Office released a report estimating that a House bill designed to raise the federal minimum wage to $15 an hour would cost 1.3 million jobs.

Now, you might say to me “But Wintery, Democrats are the party of the little guy, why would they vote for something that would leave workers unemployed?” And there are two answers to that. First, Americans who work for a living tend to not look to the government for support. Second, Americans who work for a living tend to dislike when their taxes are raised to pay for people who aren’t working. Democrats are the party of higher taxes and bigger government. They always oppose letting people keep what they earn, and they always want the government to take free market solutions to health care, etc. so they can use the provision of health care to buy votes. So for them, kicking 1.3 million people out of work is a benefit.

When it comes to economics, we know what works. Trump cut taxes, and unemployment for all races is at a record low. If you want to reverse that, and have more people unemployed, living off taxpayer’s, then vote for Democrats.

Wage gap: are women paid less than men because of discrimination?

Google pays men less than women
Far-left social media giant Google pays men less than women

Liberal feminist Hanna Rosin takes a look at this question in the far-left Slate, of all places.

Excerpt:

The official Bureau of Labor Department statistics show that the median earnings of full-time female workers is 77 percent of the median earnings of full-time male workers. But that is very different than “77 cents on the dollar for doing the same work as men.” The latter gives the impression that a man and a woman standing next to each other doing the same job for the same number of hours get paid different salaries. That’s not at all the case. “Full time” officially means 35 hours, but men work more hours than women. That’s the first problem: We could be comparing men working 40 hours to women working 35.

How to get a more accurate measure? First, instead of comparing annual wages, start by comparing average weekly wages. This is considered a slightly more accurate measure because it eliminates variables like time off during the year or annual bonuses (and yes, men get higher bonuses, but let’s shelve that for a moment in our quest for a pure wage gap number). By this measure, women earn 81 percent of what men earn, although it varies widely by race. African-American women, for example, earn 94 percent of what African-American men earn in a typical week. Then, when you restrict the comparison to men and women working 40 hours a week, the gap narrows to 87 percent.

But we’re still not close to measuring women “doing the same work as men.” For that, we’d have to adjust for many other factors that go into determining salary. Economists Francine Blau and Lawrence Kahn did that in a recent paper, “The Gender Pay Gap.”.”They first accounted for education and experience. That didn’t shift the gap very much, because women generally have at least as much and usually more education than men, and since the 1980s they have been gaining the experience. The fact that men are more likely to be in unions and have their salaries protected accounts for about 4 percent of the gap. The big differences are in occupation and industry. Women congregate in different professions than men do, and the largely male professions tend to be higher-paying. If you account for those differences, and then compare a woman and a man doing the same job, the pay gap narrows to 91 percent. So, you could accurately say in that Obama ad that, “women get paid 91 cents on the dollar for doing the same work as men.”

I believe that the remainder of the gap can be accounted for by looking at other voluntary factors that differentiate men and women.

The Heritage Foundation says that a recent study puts the number at 95 cents per dollar.

Excerpt:

Women are more likely than men to work in industries with more flexible schedules. Women are also more likely to spend time outside the labor force to care for children. These choices have benefits, but they also reduce pay—for both men and women. When economists control for such factors, they find the gender gap largely disappears.

A 2009 study commissioned by the Department of Labor found that after controlling for occupation, experience, and other choices, women earn 95 percent as much as men do. In 2005, June O’Neil, the former director of the Congressional Budget Office, found that “There is no gender gap in wages among men and women with similar family roles.” Different choices—not discrimination—account for different employment and wage outcomes.

A popular article by Carrie Lukas in the Wall Street Journal agrees.

Excerpt:

The Department of Labor’s Time Use survey shows that full-time working women spend an average of 8.01 hours per day on the job, compared to 8.75 hours for full-time working men. One would expect that someone who works 9% more would also earn more. This one fact alone accounts for more than a third of the wage gap.

[…]Recent studies have shown that the wage gap shrinks—or even reverses—when relevant factors are taken into account and comparisons are made between men and women in similar circumstances. In a 2010 study of single, childless urban workers between the ages of 22 and 30, the research firm Reach Advisors found that women earned an average of 8% more than their male counterparts. Given that women are outpacing men in educational attainment, and that our economy is increasingly geared toward knowledge-based jobs, it makes sense that women’s earnings are going up compared to men’s.

When women make different choices about education and labor that are more like what men choose, they earn just as much or more than men.

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 .

Under Obama’s socialist policies, youth “Misery Index” reaches record high

Young people usually only get one side of every issue - because we don't tell them the other side
Young people usually only get one side of every issue – because we don’t tell them the other side

Obama added $10 trillion to the national debt in his 8 years, doubling it from $10 trillion to $20 trillion. That will be placed on the backs of the next generation of younger Americans. But it turns out that they have many other problems as well.

This is from the College Fix.

Excerpt:

In the last two presidential elections, young voters served as a key demographic that helped catapult Barack Obama to the White House. What has he done for millennials in return? According to a new analysis, made them more miserable than ever.

Young America’s Foundation on Wednesday released its annual Youth Misery Index, calculated by adding youth unemployment, student loan debt, and national debt (per capita) numbers.

Today the youth unemployment rate exceeds 16 percent, and the average student in the class of 2015 graduated with a record $35,000 in student loan debt; national debt per capita, “a remarkable burden that will fall squarely on the shoulders of millennials,” is just under $59,000, the foundation reports.

With that, the index has spiked to a record high of 109.9 this year, up from 106.5 last January, and 83.5 in 2009 when President Obama took office, the foundation reports.

What about entitlement programs?

Business Daily reports on a Social Security problem:

The Social Security Trust Fund just suffered its first annual decline since Congress shored up the retirement program in 1983.

The unexpected $3 billion decline is an indication of the precarious state of Social Security’s finances. Since 2010, the program has been paying out more in benefits than it gets in tax revenue, but the trust fund, which earns about $95 billion a year in interest, had kept growing, though a little less each year.

[…]Under current policies, the CBO says the trust fund will be gone by 2029.

If nothing were done before that point, it would take an across-the-board 29% benefit cut — including on the oldest retirees and the disabled — to bring program costs in line with revenues.

Since we aborted the next generation of workers, we can’t afford to keep paying out benefits at the current rate. There are more people retiring than entering the work force. I hope they start to invest early, but what I am seeing is that they want to take out loans and travel the world for fun and thrills.

Obama doubled the national debt in 8 years
Obama doubled the national debt in 8 years

Anyway, on to the next problem, trillion dollar deficits. They’re back!

Investors Business Daily explains:

The federal budget deficit is back on the rise — by an expected $105 billion this year — the Congressional Budget Office said Tuesday, the first increase since fiscal 2009. Deficits topping $1 trillion will be back before you know it — three years sooner than expected.

[…]The CBO said the rise was primarily due to the year-end budget deal that extended, and in some cases expanded, corporate and individual tax cuts, as well as busting spending caps. The deficit-to-GDP ratio is expected to grow to 2.9% in fiscal 2016 from 2.5% last year. That would also be the first increase since 2009, with the trend getting worse in the years ahead.

From 2016 to 2025, the CBO expects cumulative deficits of $8.5 trillion — $1.5 trillion more than it predicted in August.

This is the budget deal that establishment Republicans like Paul Ryan supported. Rubio didn’t show up to vote against the Ryan deal. I assume that Rubio was OK with the spending bill passing, and these trillion dollar deficits returning. Cruz showed up to vote against the deal, of course.

And finally, the last problem – Obamacare is making health care more expensive than ever for the middle class.

Investors Business Daily again:

People making just $36,000 a year can easily end up spending 22% of it on health costs, even if they are enrolled in a subsidized ObamaCare insurance plan, according to a report from the Robert Wood Johnson Foundation and the Urban Institute.

[…]Individuals earning between 300% and 400% of the poverty level — which works out to roughly between $35,000 and $47,000 — will pay close to a median of 10% of their income on insurance premiums. (This group is eligible for ObamaCare insurance subsidies but at far lower levels than poorer people.)

And because ObamaCare plans typically come with high deductibles and copays, they’ll spend another 5% on out-of-pocket costs. For a worker making $36,000, the combined costs add up to $5,220.

The report found, however, that these costs could easily double. One in 10 people in this income group will end up devoting 22% of their incomes to insurance and out-of-pocket costs.

Even those in the lowest income group could get hit with big bills. One in 10 of those who make less than 200% of the poverty level will face health costs that eat up 18.5% of their income.

Obama likes to paint a rosy picture of the economy in his state of the union, but the real truth is not so rosy. Young people shouldn’t have voted for him, they are not going to live as prosperously as their elders did under Reagan and George W. Bush.

New study: Obamacare will decrease workforce by 2 million full-time worker’s hours

He voted for Obamacare, and he got it

He voted for Obamacare, and he got it… good and hard!

The study was done by the non-partisan Congressional Budget Office (CBO), and reported by Fox News.

Excerpt:

ObamaCare will reduce work hours equivalent to 2 million jobs in the next decade amid a host of incentives not to work or to work less, a new Congressional Budget Office (CBO) report says — the latest blow to President Obama’s signature health insurance plan.

The report estimates the Affordable Care Act, or ACA, will make the labor supply shrink by 0.86 percent in 2025. This amounts to a shrinkage equivalent to approximately 2 million full-time workers.

The nonpartisan CBO estimates that the decline will come primarily due to workers responding to changes made by the law to federal programs and tax policy. The agency points to the introduction of health care subsidies tied to income as a key factor — which in turn raises effective tax rates as someone’s earnings rise, therefore reducing the amount of work Americans choose to do.

“Subsidies decline as income increases, reducing the return on earning additional income,” the report says. “That decline is effectively an increase in recipients’ effective marginal tax rate, so it generally reduces their work incentives through the substitution effect.”

Since the subsidies also reduce the burdens attached to unemployment, the CBO predicts that the law will create additional “work disincentives” for those who are unemployed for part of the year. It concludes that the exchange subsidies will contribute to half of the overall reduction of the labor supply.

The report also points to direct taxes, such as ACA’s hike of the payroll tax on high earners for Medicare’s Hospital Insurance Program, as a reason for discouraging some from working. Another pressure on wages will come from the employer mandate, which imposes a penalty on employers if they have more than 50 employees and do not provide insurance. The CBO predicts that within a few years this charge will be passed on to employees in the form of lower wages.

[…]The report comes at an awkward time for the Obama administration: just days after the Senate passed a bill that would repeal key parts of the law. The White House has said that President Obama will veto the legislation.

Oh well. It’s not like workers need to be paid fairly for their labor, right? I’m really not seeing how Obama expects the next generation to pay for the $10 trillion he’s added onto the national debt. If they are working less, then they are paying less in taxes. It’s fun to give speeches where you promise your gullible supporters a lot of goodies, but then, if the goodies discourage their employers from giving them work hours, then how will the spending be paid for?

More than anyone in modern politics, Barack Obama is a man who has perfected the art of sounding confident about things he literally knows nothing about. When elect a clown, you get failure. It doesn’t matter how confident a candidate sounds. It matters whether he has a record of solving the problems that he is talking about. Results, not rhetoric.

…integrating Christian faith and knowledge in the public square

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