Tag Archives: Unemployment

Polemics

Obama’s minimum wage hike will raise unemployment, especially for younger workers

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Obama is proposing a hike to the minimum wage rate, so that employers are forced to pay the youngest and/or least skilled workers more money than they are worth. Will this lower unemployment?

When considering what economic policies to adopt, it is not enough to do what feels good. Liberals and conservatives agree that it is good to help the poor. Liberals think that higher minimum wage rates help the poor, and conservatives think that lower minimum wage rates help the poor. This is not a topic that is up for debate, though, because economists across the left-right spectrum agree on this one.

Take a look at this post from Harvard University economist Greg Mankiw.

He writes:

My favorite textbook covers business cycle theory toward the end of the book (the last four chapters) precisely because that theory is controversial. I believe it is better to introduce students to economics with topics about which there is more of a professional consensus. In chapter two of the book, I include a table of propositions to which most economists subscribe, based on various polls of the profession. 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%)

And that’s not all. There have actually been studies done on this, and they echo the consensus.

Consider this 2009 article from the Wall Street Journal that discusses some of the studies.

Excerpt:

Earlier this year, economist David Neumark of the University of California, Irvine, wrote on these pages that the 70-cent-an-hour increase in the minimum wage would cost some 300,000 jobs. Sure enough, the mandated increase to $7.25 took effect in July, and right on cue the August and September jobless numbers confirm the rapid disappearance of jobs for teenagers.

he September teen unemployment rate hit 25.9%, the highest rate since World War II and up from 23.8% in July. Some 330,000 teen jobs have vanished in two months. Hardest hit of all: black male teens, whose unemployment rate shot up to a catastrophic 50.4%. It was merely a terrible 39.2% in July.

[…]Two years ago Mr. Neumark and William Wascher, a Federal Reserve economist, reviewed more than 100 academic studies on the impact of the minimum wage. They found “overwhelming” evidence that the least skilled and the young suffer a loss of employment when the minimum wage is increased.

[…]State lawmakers are also at fault. At least 10 states have raised their minimum wages above the federal level in the last decade, largely in response to union lobbying and in the name of helping the working poor. Four states with among the highest wage rates are California, Massachusetts, Michigan and New York. Studies have shown in each case that their wage policies killed jobs for teens. The Massachusetts teen employment rate sank by one-third when the minimum wage rose by 88% between 1995 and 2008.

According to new numbers from the Labor Department, in 2008 only 1.1% of Americans who work 40 hours a week or more even earned the minimum wage. In other words, 98.9% of 40-hour-a-week workers earn more than the minimum. The data also show that teenagers are five times more likely to earn the minimum wage than adults. Minimum wage jobs are nearly all first-time or part-time jobs, and an estimated two of every three minimum wage workers get a pay raise within a year on the job.

You can read more about minimim wage and unemployment from my second favorite economist Walter Williams, and from my first favorite economist Thomas Sowell. This is an issue that matters to them, because they are both black, and blacks are the hardest hit by these policies – even though most blacks support these policies by voting overwhelmingly for socialists.

This issue is simple and straightforward. To help the poorest and least experienced workers, we have to take away any regulations that separate them from their first employer. From there, they will gain the experience to move up. Nobody stays in a minimum wage job all their lives. They move up when they get experience and a resume. That’s why that first job is so crucial. We have to make it easier for employers to get employees started in their careers.

News

Fracking propels North Dakota to 3.2% unemployment rate

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What happened when North Dakota lowered its regulatory barriers to energy development?

This:

North Dakota had the highest payroll-to-population rate (P2P) and the lowest underemployment rate in 2012, thanks mostly to the state’s booming oil & gas industry.

According to Gallup’s “State of the States” analysis released today, North Dakota ranked number one among the lower 48 states, with a payroll to population rate of 53.6 percent.

Gallup said it measured each state’s P2P rate by the percentage of the adult population aged 18 and older employed full-time by an employer for at least 30 hours per week.

The analysis noted that the numbers are not seasonably adjusted and variations across states reflect a number of factors, including the overall employment situation for each state as well as the demographic composition of that state’s population. P2P rates in Alaska, Hawaii, and the District of Columbia were not considered in the analysis.

Factoring in the most recent unemployment data is key to the Gallup analysis. North Dakota reported just a 3.2 percent unemployment rate, well below the national average unemployment rate of 7.9 percent, according to the U.S. Bureau of Labor Statistics.

The number one ranking should not come as much of a surprise given the Peace Garden state’s rise in oil and gas production and the subsequent rise in jobs over the past few years.

According to North Dakota Jobs Service data from 2011, the most recent available, the number of oil and gas jobs in North Dakota has risen 57.5 percent since 2010 – going from 10,660 jobs in 2010 to 16,786 jobs in 2011, with the oil and gas payroll nearly doubling — going from $852 million in 2010 up to $1.5 billion in 2011.

North Dakota now produces more oil than any other state, including Alaska, which ranked number one in 2011, according to the U.S. Energy Information Administration.

Hydraulic fracturing, or “fracking” which uses high-pressure water, sand, and chemicals to force oil from underground rock formations, has largely contributed to the recent boom in North Dakota’s fossil fuel industry.

North Dakota, as you might expect, is a very, very conservative state.

What about the US as a whole, under Barack Obama and the Democrats? Well, Obama killed the Keystone XL pipeline, which would have created 20,000 jobs. His administration has introduced many burdensome regulations on energy development, as well. Democrat energy policies have been a disaster, and it explains, in part, why we have a huge number of people not in the work force. We could have allowed North Dakota’s success to spread across the United States, if we had only approved that pipeline and removed barriers to energy development imposed by high taxes and regulations. But we didn’t. There’ll be another chance to vote for jobs in 2016.

News

Unemployment rate rises: 169,000 more people not in labor force

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First, I hope everyone remembers about the William Lane Craig vs Alex Rosenberg debate tonight at Purdue University. There is live-streaming available, details here.

And now, three scary stories from CNS News.

First, this one about the recent depressing jobs report.

Excerpt:

The number of Americans not in the labor force grew by 169,000 in January, according to the Bureau of Labor Statistics’ latest jobs report.

BLS labels people who are unemployed and no longer looking for work as “not in the labor force,” including people who have retired on schedule, taken early retirement, or simply given up looking for work. There were 89 million of them last month.

[…]The nation’s unemployment rate increased a tenth of a point in January, rising to 7.9 percent from 7.8 percent, a level the Labor Department described as “essentially unchanged.”

Second, this one about Obamacare health care plans.

Excerpt:

In a final regulation issued Wednesday, the Internal Revenue Service (IRS) assumed that under Obamacare the cheapest health insurance plan available in 2016 for a family will cost $20,000 for the year.

Under Obamacare, Americans will be required to buy health insurance or pay a penalty to the IRS.

The IRS’s assumption that the cheapest plan for a family will cost $20,000 per year is found in examples the IRS gives to help people understand how to calculate the penalty they will need to pay the government if they do not buy a mandated health plan.

The examples point to families of four and families of five, both of which the IRS expects in its assumptions to pay a minimum of $20,000 per year for a bronze plan.

And finally, this one about Obamacare’s effect on job creators, aka “the rich” who need to “pay their fair share”.

Excerpt:

Sixty-one percent of U.S. small business owners said they were “worried about the potential cost of healthcare” and 56 percent said they were “worried about new government regulations,” according to the Wells Fargo/Gallup small business index released on Jan. 31, which also showed that 30 percent of small business owners are not hiring and fear going out of business within a year.

“At the bottom of the list, but still at a surprisingly high level, 30% of owners say they are not hiring because they are worried they may no longer be in business in 12 months,” according to Gallup’s index summary. “This is up from 24% who had the same worry in January 2012.”

[…]Gallup said the reasons given for less hiring, such as healthcare and government regulations, are “troublesome” and have negative implications for the U.S. economy.

Bad news! I remember the good old days of the Bush administration, when we had lower taxes, a 4.4% unemployment rate, and a $160 billion dollar budget deficit. Maybe watching tonight’s debate with WLC and this Duke University naturalist tonight will cheer me up.