Tag Archives: Work

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Is a higher minimum wage good for younger workers and minority workers?

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Let’s take a look at the data, and leave the feelings and rhetoric out of it.

Excerpt:

Battles are brewing in New York, California, Minnesota and the nation’s capital over hiking minimum wages, with Democrats having the votes to ram through hikes in all four cases.

These politicians are claiming the moral high ground, saying it will help the poorest in our communities. Don’t be fooled.

Hiking the minimum wage hurts — not helps — the lowest-paid workers, especially young black men. A 10% hike in the minimum wage causes a 2.5% drop in employment among young white men without a high school diploma and a staggering 6.5% drop among young black men without that degree.

Young black males get clobbered three times as hard because they tend to work in the fast-food and restaurant industries, where any increase in labor costs produces layoffs.

[…]Only 5% of American workers earn the federal minimum, according to the latest government data, compared with 13% in 1979. Minimum wage workers are largely first-time workers. They are learning what all of us learn on our first job: to be prompt, dress appropriately, do what the boss asks and be reliable.

First-time workers face the biggest risk of being priced out of the job market by a minimum wage hike. They aren’t worth much to an employer when they start working. They don’t have the skills.

When the government increases the minimum wage, it’s more expensive to hire first-timers. According to David Neumark and J.M. Salas, University of California economists, and William Wascher of the Federal Reserve Board, “minimum wages tend to reduce employment among teenagers.”

New York needs that like a hole in the head. Teen unemployment in New York City hit a stunning 35.6% last August, compared with 23.7% nationwide.

All teens are harmed, but black male teenagers are hit hardest by minimum wage hikes, according to a 2011 study by labor economists David Macpherson and William Evans. Unemployment among young black males is currently 29%, double the rate for young white males.

Macpherson and Evans found the reason is that one out of three young black men without a high school diploma works in the restaurant/fast-food industry, where profit margins are thin. Any labor-cost hikes compel these businesses to cut their workforce.

On top of the threatened minimum-wage hikes, businesses now face the certainty of ObamaCare, which will impose the largest government-mandated labor-cost hike in history.

In 2014, employers with 50 or more full-time workers will be required to provide a package of “essential health benefits” or pay a penalty. This government mandated package will add a whopping $1.79 an hour to the cost of hiring an employee. Maybe that’s affordable when you’re hiring lawyers or bankers, but not for hiring unskilled first-time workers.

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

New study: fewer than one in ten women staying home with children

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Dina sent me this article from the UK Daily Mail.

Excerpt:

Fewer than one in ten women stay at home to look after their children

  • Latest census figures show 300,000 fewer staying home than thought
  • Concerns for well-being of mothers and impact on toddlers in day care
  • Stay-at-home figures dropped from 17 per cent of women 20 years ago

The stay-at-home mother is fast becoming consigned to history, according to the latest census figures.

Returns showed there are 300,000 fewer than officials  had previously estimated, with those who devote their lives to bringing up families now reduced to a tiny minority.

Fewer than one in ten women of working age are stay-at-home mothers.

The collapse follows a decade in which governments urged mothers to take jobs on the grounds that working is the route to fulfilment for women and that families with two incomes are much less likely to fall into poverty.

Critics, however, are concerned for the well-being of mothers who might prefer to be with their families, and the impact on increasing numbers of toddlers who spend long hours in day care.

The 2011 census results found there are 1,598,000 women who do not work because they are looking after their home and family – 298,000 fewer than estimates from the Office for National Statistics.

Note that this is applauded by feminist groups, like the UK Labour Party:

The decline in numbers of stay-at-home mothers will be welcomed by ministers as the Labour drive to push mothers into work has continued under the Coalition.

Childcare minister Elizabeth Truss has made a priority of providing cheaper day care to help mothers into jobs.

In an article earlier this year  she said it was ‘vital’ for mothers to work, adding: ‘To power ahead Britain needs to look at best practice from overseas to discover how to increase women’s participation, especially for those who are parents.’

But critics say the sky-high level of house prices and the lack of help for two-parent families in the tax and benefit systems means most mothers have to work, whether they like it or not.

Earlier this week I blogged studies that showed the importance of fathers to children. But it’s important to remember that mothers are also important to children, especially in the first few years of the child’s life. And we have studies to back that up as well.

Brain scans of 3-year old children: normal vs neglected
Brain scans of 3-year old children: normal vs neglected

This was discussed before in another article from the UK Daily Mail. (H/T Dina)

Excerpt:

Both of these images are brain scans of a two three-year-old children, but the brain on the left is considerably larger, has fewer spots and less dark areas, compared to the one on the right.

According to neurologists this sizeable difference has one primary cause – the way each child was treated by their mothers.

The child with the larger and more fully developed brain was looked after by its mother – she was constantly responsive to her baby, reported The Sunday Telegraph.

But the child with the shrunken brain was the victim of severe neglect and abuse.

According to research reported by the newspaper, the brain on the right worryingly lacks some of the most fundamental areas present in the image on the left.

The consequences of these deficits are pronounced – the child on the left with the larger brain will be more intelligent and more likely to develop the social ability to empathise with others.

But in contrast, the child with the shrunken brain will be more likely to become addicted to drugs and involved in violent crimes, much more likely to be unemployed and to be dependent on state benefits.

The child is also more likely to develop mental and other serious health problems.

Professor Allan Schore, of UCLA, told The Sunday Telegraph that if a baby is not treated properly in the first two years of life, it can have a fundamental impact on development.

He pointed out that the genes for several aspects of brain function, including intelligence, cannot function.

[…]The study correlates with research released earlier this year that found that children who are given love and affection from their mothers early in life are smarter with a better ability to learn.

The study by child psychiatrists and neuroscientists at Washington University School of Medicine in St. Louis, found school-aged children whose mothers nurtured them early in life have brains with a larger hippocampus, a key structure important to learning, memory and response to stress.

The research was the first to show that changes in this critical region of children’s brain anatomy are linked to a mother’s nurturing, Neurosciencenews.com reports.

The research is published online in the Proceedings of the National Academy of Sciences Early Edition.

Lead author Joan L. Luby, MD, professor of child psychiatry, said the study reinforces how important nurturing parents are to a child’s development.

If we are really interested in providing for the needs of young children, then we have to voluntarily limit the freedom of adults. Traditional marriage is the way that societies have provided for the needs of young children. Marriage puts boundaries on sexual activity (premarital chastity, post-marital fidelity) that are beneficial to children. Children need to have access to their parents over the course of their development.

We should be promoting behaviors and policies that strengthen marriage, like chastity and low tax rates. We should be opposing behaviors and policies that weaken marriages, like hooking-up and no-fault divorce. That’s what we would do if we really had the best interests of children at heart instead of the best interests of adults.

News

New York Times columnist exposes the moral hazards created by welfare programs

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Ultra-leftist Nicholas Kristoff writes about the incentives created by welfare programs in the New York Times.

Excerpt:

This is what poverty sometimes looks like in America: parents here in Appalachian hill country pulling their children out of literacy classes. Moms and dads fear that if kids learn to read, they are less likely to qualify for a monthly check for having an intellectual disability.

Many people in hillside mobile homes here are poor and desperate, and a $698 monthly check per child from the Supplemental Security Income program goes a long way — and those checks continue until the child turns 18.

“The kids get taken out of the program because the parents are going to lose the check,” said Billie Oaks, who runs a literacy program here in Breathitt County, a poor part of Kentucky. “It’s heartbreaking.”

This is painful for a liberal to admit, but conservatives have a point when they suggest that America’s safety net can sometimes entangle people in a soul-crushing dependency. Our poverty programs do rescue many people, but other times they backfire.

Some young people here don’t join the military (a traditional escape route for poor, rural Americans) because it’s easier to rely on food stamps and disability payments.

Antipoverty programs also discourage marriage: In a means-tested program like S.S.I., a woman raising a child may receive a bigger check if she refrains from marrying that hard-working guy she likes. Yet marriage is one of the best forces to blunt poverty. In married couple households only one child in 10 grows up in poverty, while almost half do in single-mother households.

Most wrenching of all are the parents who think it’s best if a child stays illiterate, because then the family may be able to claim a disability check each month.

“One of the ways you get on this program is having problems in school,” notes Richard V. Burkhauser, a Cornell University economist who co-wrote a book last year about these disability programs. “If you do better in school, you threaten the income of the parents. It’s a terrible incentive.”

About four decades ago, most of the children S.S.I. covered had severe physical handicaps or mental retardation that made it difficult for parents to hold jobs — about 1 percent of all poor children. But now 55 percent of the disabilities it covers are fuzzier intellectual disabilities short of mental retardation, where the diagnosis is less clear-cut. More than 1.2 million children across America — a full 8 percent of all low-income children — are now enrolled in S.S.I. as disabled, at an annual cost of more than $9 billion.

That is a burden on taxpayers, of course, but it can be even worse for children whose families have a huge stake in their failing in school. Those kids may never recover: a 2009 study found that nearly two-thirds of these children make the transition at age 18 into S.S.I. for the adult disabled. They may never hold a job in their entire lives and are condemned to a life of poverty on the dole — and that’s the outcome of a program intended to fight poverty.

Charles Murray of the American Enterprise Institute is delighted that a leftist has finally discovered what welfare programs actually do in practice:

Several people have tagged me and Losing Ground since Nicholas Kristoff’s column on Friday about the ways that social programs can backfire. It was a praiseworthy column—all of us on both sides of the political spectrum should be as ready as Kristoff to acknowledge problems with our beliefs. But it also offers an opportunity to recall the three laws of social programs in Losing Ground, because the backfires are not idiosyncratic. They occur everywhere and always for inherent reasons.

1. The Law of Imperfect Selection. Any objective rule that defines eligibility for a social transfer program will irrationally exclude some persons.

This law accounts for the reason that programs like Food Stamps and the Supplemental Security Income program constantly expand. Whenever the people who administer the programs run into a case of a genuinely needy person who has been excluded under a current rule, they tend to redefine the rule or otherwise alter the program’s administration to be more inclusive, which in turn brings more people who don’t need the social transfer under its umbrella.

2. The Law of Unintended Rewards. Any social transfer increases the net value of being in the condition that prompted the transfer.

Kristoff referenced the increased net value of being illiterate because of the “intellectual disability” payment of $698 per month that leads parents to withdraw their children from literacy classes. But the same thing is true of every payment of any kind that requires people to demonstrate that they have a problem before they qualify for the payment. It is not a defect in program design. It is inescapable whenever you give rewards for having a problem.

3. The Law of Net Harm. The less likely it is that the unwanted behavior will change voluntarily, the more likely it is that a program to induce change will cause net harm.

This is not as obvious as the first two laws, but just as inexorable. My favorite chapter of Losing Ground is a thought experiment about a government program that uses financial rewards to reduce smoking. If the rewards are small, nothing will change. If they are large enough to induce a significant number of people to quit smoking, the program will inevitably lead to more people who take up smoking in the first place and the net number of inveterate smokers.

Fewer and fewer people are old enough to remember, but once upon a time almost all children were born to married couples and almost all young men were physically able to work and knew how to show up on time and work hard. Then, in the mid-1960s, before globalization, before manufacturing jobs disappeared, while working-class wages were still going up, we decided that compassion should be bureaucratized. The three laws of social programs explain a lot of what has happened to the working class since then.

The Daily Caller reported that food stamp usage reached a record high – now up to 47.7 million. That’s about 1 in 6 Americans. We used to be a country of independence, entrepreneurship and hard work. But things changed – we had an explosion in welfare spending. Welfare spending changed the incentives and that changed behaviors. We have to understand that having the government reward laziness gets us more laziness. Taxing people who create jobs gets us fewer jobs. It’s that simple – people respond to incentives.