Minimum Wage

[philunderwood]

Raise levels of personal responsibility, not the minimum wage

By Star Parker

www.JewishWorldReview.com |

The late Sen. Daniel Patrick Moynihan famously observed that “Everyone is entitled to his own opinion, but not his own facts.”

It’s an admonition not taken particularly seriously by today’s political left. They embrace, extol and advocate ideas and policies based on what they wish were true, regardless of how often and consistently their ideas have been proven wrong.

Take, for instance, the minimum wage.

Rep. Jesse Jackson Jr., D-Ill., wants to again raise the minimum wage � from $7.25 to $10.00 � despite an abundance of experience that doing so accomplishes exactly the opposite of what minimum-wage advocates claim is their objective � to make low-income earners better off.

Why doesn’t McDonald’s increase the price of Big Macs if they want to sell more? It’s pretty obvious that consumers will buy less of a product when its price goes up.

So why is it not equally obvious that consumers of labor � employers � will buy less of a class of labor if the price of that labor increases?

The data bear out this very simple logic. We have a long history showing correlation between increases in the minimum wage and corresponding increases in unemployment in those sectors that earn in this range � the young and unskilled.

University of Michigan economist Mark Perry has calculated that over the period of the last minimum wage increase � increasing it from $5.15 in 2007 to $7.25 in 2009 � teen unemployment increased 5 percentage points more than the general increase in unemployment over that period.

Nevertheless, Rep. Jackson feels entitled to his own facts. At his press conference announcing his bill to raise the minimum wage, he said, “Now it’s time to bail out working people who work hard every day and they still only make $7.25. The only way to do that is to raise the minimum wage.”

Ron Haskins, co-director of the Center on Children and Families at the Brookings Institution, recently testified before the Senate Finance Committee during hearings on poverty.

Among the factors he identified as the causes of poverty is declining participation in the workforce. According to Haskins, between 1980 and 2009, workforce participation among males declined from 74.2 percent to 67.6 percent.

However, among young black men, work rates declined from 60.9 percent in 1980 to 46.9 percent in 2009.

How exactly does Rep. Jackson think he is helping the prospects for these young black men by making it more expensive to hire them?

Haskins’ testimony presents an abundance of facts about our experience with poverty and with government-centered approaches to dealing with it � experience generally characterized, for those that choose to consider facts, by more and more government spending getting less and less.

According to Haskins, federal government spending per person in poverty has tripled since 1980. The total being spent by all levels of government � federal, state and local � per person in poverty is now about $23,700.

Despite dramatic expansion of government spending on poverty programs over the years, there has been little change in the overall rate of poverty.

What’s key in alleviating poverty?

Individual initiative and personal responsibility. According to Haskins, following three rules reduces to 2 percent the chances that an individual will wind up in poverty and increases to 72 percent his chance of winding up a middle-class wage earner.

“Complete at least a high school education, work full time, and wait until 21 and get married before having a baby.”

According to Haskins’ research, those violating these three rules have a 77 percent chance of winding up in poverty.

What can government do so that our economy will grow more rapidly and generate more jobs?

Appreciate that government cannot create jobs or wealth. Only private individuals can do this. Government should do its proper job and protect lives and property of citizens and minimize getting in their way so they may work, produce and invest.

[philunderwood]

First Jobs

By John Stossel

www.JewishWorldReview.com |

What was your first job?

I stuck pieces of plastic and metal together at an Evanston, Ill., assembly line. We produced photocopiers for a company called American Photocopy.

I hated the work. It was hot and boring. But it was useful. It taught me to get good grades in school so I might have other choices.

Four years later, good grades got me a job as a researcher at a TV station.

To my surprise, that became a career. I never planned to be a TV reporter. I hadn't even watched TV news. I never took a journalism course.

But by showing up and trying stuff, I found a career.

I write about this because I'm appalled watching politicians kill off "first" jobs. (They say it's to protect us.)

First, they raise the minimum wage. Forcing employers to pay $7.25 an hour leaves them reluctant to give unskilled kids a chance — why pay more than a worker can produce? So they offer fewer "first" jobs.

On top of that, the Obama Labor Department has issued a fact sheet that says free internships are only legal if the employer derives "no immediate advantage" from the intern.

Are you kidding me? What's the point of that? I want interns who are helpful!

The bureaucrats say they will crack down on companies that don't pay, but that's a terrible thing to do.

Unpaid internships are great. They are win-win. They let young people experiment with careers, and figure out what they'd like and what they're good at. They help employers produce better things and recruit new employees.

I've used interns all my career. They have done some of my best research. Some became journalists themselves. Many told me: "Thank you! I learned more working for you than I learned in college, and I didn't have to pay tuition!

I could have paid them, but then I would have used fewer interns. When I worked at ABC, the network decided to pay them — $10 an hour — but it also cut the number of internships by half. Politicians don't get it. Neither do most people. Polls show that Americans support raising the minimum wage. Most probably also support limits on unpaid internships, believing that they replace paid work.

But they don't.

OK, sometimes they do. But the free exchange of labor creates so many good things that, in the long run, more jobs are created and many more people get paid work — and we get better work.

But American politicians think they "protect" workers by limiting employers' (and workers') choices and giving handouts to the unemployed.

Outside a welfare office near Fox News, I was told that because of high unemployment, there are no jobs: "There's nothing out there. Nothing." I asked my team to check that out. They walked around for two hours, and within a few blocks of that welfare office they found lots of businesses that want to hire people. On the same block where I was told that there are no jobs, a store manager said he was desperate for applicants. "We need like two or three people all the time."

Of the 79 businesses that we asked, 40 said they would hire. Twenty-four said they would take people with no experience. All wished more people would apply.

I told German Munoz, a recent high school graduate, about one of the jobs offered, at a soul food restaurant. He went there and was hired to wash dishes for minimum wage. Within a few days, he was promoted to busboy — then to waiter. Now, two weeks later, he makes twice the minimum wage. German doesn't want a career as a waiter, but he says it's great having a real first job.

"I meet successful people, and they give good advice and tips on how to become successful. I love it. I love going there every day and learning new stuff. It is like a stepping stone," he said. Exactly.

Low-wage first jobs are indispensable for both personal advancement and social progress. Our best hope for prosperity is the free market. Government must get out of our way and allow consenting adults to create as many "first" jobs as possible.

[philunderwood]

Mandated Wages and Discrimination

By Walter Williams

www.JewishWorldReview.com |

Let's work through an example. Suppose 100 yards of fence could be built using one of two techniques. You could hire three low-skilled workers for $15 each, or you could hire one high-skilled worker for $40. Either way, you get the same 100 yards of fence built. If you sought maximum profits, which production technique would you employ? I'm guessing that you'd hire one high-skilled worker and pay him $40 rather than hire three low-skilled workers for $15 each. Your labor costs would be $40 rather than $45.

Suppose the high-skilled worker came into your office and demanded $55 a day. What would be your response? You'd probably tell him to go play in the traffic and hire the three low-skilled workers. After all, hiring the three low-skilled workers for $45, to get the same 100 yards of fence, would be cheaper than the $55 a day now demanded by the high-skilled worker.

The high-skilled worker is not stupid and knows that's exactly what you'd do. He will do a bit of organizing first, convincing decent, caring people that low-skilled workers are being exploited and not earning a living wage and that Congress should enact a minimum wage in the fencing industry of at least $20. After Congress enacts a minimum wage of $20, what then happens to the chances of a high-skilled worker's successfully demanding $55 a day? They go up because he's used the coercive powers of Congress to price his competition out of the market. Because of the minimum wage, it would cost you $60 to use the three low-skilled workers.

The minimum wage not only discriminates against low-skilled workers but also is one of the most effective tools of racists everywhere. Our nation's first minimum wage came in the form of the Davis-Bacon Act of 1931. During the legislative debate over the Davis-Bacon Act, which sets minimum wages on federally financed or assisted construction projects, racist intents were obvious. Rep. John Cochran, D-Mo., supported the bill, saying he had "received numerous complaints in recent months about Southern contractors employing low-paid colored mechanics getting work and bringing the employees from the South." Rep. Miles Allgood, D-Ala., complained: "That contractor has cheap colored labor that he transports, and he puts them in cabins, and it is labor of that sort that is in competition with white labor throughout the country." Rep. William Upshaw, D-Ga., spoke of the "superabundance or large aggregation of Negro labor." American Federation of Labor President William Green said, "Colored labor is being sought to demoralize wage rates." The Davis-Bacon Act, still on the books today, virtually eliminated blacks from federally financed construction projects when it was passed.

During South Africa's apartheid era, the secretary of its avowedly racist Building Workers' Union, Gert Beetge, said, "There is no job reservation left in the building industry, and in the circumstances, I support the rate for the job (minimum wage) as the second-best way of protecting our white artisans." The South African Nursing Council condemned low wages received by black nurses as unfair. Some nurses said they wouldn't accept wage increases until the wages of black nurses were raised. The South African Economic and Wage Commission of 1925 reported that "while definite exclusion of the Natives from the more remunerative fields of employment by law has not been urged upon us, the same result would follow a certain use of the powers of the Wage Board under the Wage Act of 1925, or of other wage-fixing legislation. The method would be to fix a minimum rate for an occupation or craft so high that no Native would be likely to be employed."

Whether support for minimum wages is motivated by good or by evil, its effect is to cut off the bottom rungs of the economic ladder for the most disadvantaged worker and lower the cost of discrimination.

[philunderwood]

Minimum Wage Madness

By Thomas Sowell

www.JewishWorldReview.com |

Political crusades for raising the minimum wage are back again. Advocates of minimum wage laws often give themselves credit for being more "compassionate" towards "the poor." But they seldom bother to check what are the actual consequences of such laws.

One of the simplest and most fundamental economic principles is that people tend to buy more when the price is lower and less when the price is higher. Yet advocates of minimum wage laws seem to think that the government can raise the price of labor without reducing the amount of labor that will be hired.

When you turn from economic principles to hard facts, the case against minimum wage laws is even stronger. Countries with minimum wage laws almost invariably have higher rates of unemployment than countries without minimum wage laws.

Most nations today have minimum wage laws, but they have not always had them. Unemployment rates have been very much lower in places and times when there were no minimum wage laws.

Switzerland is one of the few modern nations without a minimum wage law. In 2003, "The Economist" magazine reported: "Switzerland's unemployment neared a five-year high of 3.9 percent in February." In February of this year, Switzerland's unemployment rate was 3.1 percent. A recent issue of "The Economist" showed Switzerland's unemployment rate as 2.1 percent.

Most Americans today have never seen unemployment rates that low. However, there was a time when there was no federal minimum wage law in the United States. The last time was during the Coolidge administration, when the annual unemployment rate got as low as 1.8 percent. When Hong Kong was a British colony, it had no minimum wage law. In 1991 its unemployment rate was under 2 percent.

As for being "compassionate" toward "the poor," this assumes that there is some enduring class of Americans who are poor in some meaningful sense, and that there is something compassionate about reducing their chances of getting a job.

Most Americans living below the government-set poverty line have a washer and/or a dryer, as well as a computer. More than 80 percent have air conditioning. More than 80 percent also have both a landline and a cell phone. Nearly all have television and a refrigerator. Most Americans living below the official poverty line also own a motor vehicle and have more living space than the average European — not Europeans in poverty, the average European.

Why then are they called "poor"? Because government bureaucrats create the official definition of poverty, and they do so in ways that provide a political rationale for the welfare state — and, not incidentally, for the bureaucrats' own jobs.

Most people in the lower income brackets are not an enduring class. Most working people in the bottom 20 percent in income at a given time do not stay there over time. More of them end up in the top 20 percent than remain behind in the bottom 20 percent.

There is nothing mysterious about the fact that most people start off in entry level jobs that pay much less than they will earn after they get some work experience. But, when minimum wage levels are set without regard to their initial productivity, young people are disproportionately unemployed — priced out of jobs.

In European welfare states where minimum wages, and mandated job benefits to be paid for by employers, are more generous than in the United States, unemployment rates for younger workers are often 20 percent or higher, even when there is no recession.

Unemployed young people lose not only the pay they could have earned but, at least equally important, the work experience that would enable them to earn higher rates of pay later on.

Minorities, like young people, can also be priced out of jobs. In the United States, the last year in which the black unemployment rate was lower than the white unemployment rate — 1930 — was also the last year when there was no federal minimum wage law. Inflation in the 1940s raised the pay of even unskilled workers above the minimum wage set in 1938. Economically, it was the same as if there were no minimum wage law by the late 1940s.

In 1948 the unemployment rate of black 16-year-old and 17-year-old males was 9.4 percent. This was a fraction of what it would become in even the most prosperous years from 1958 on, as the minimum wage was raised repeatedly to keep up with inflation.

Some "compassion" for "the poor"!

[philunderwood]

Minimum Wage Madness: Part II

By Thomas Sowell

www.JewishWorldReview.com |

A survey of American economists found that 90 percent of them regarded minimum wage laws as increasing the rate of unemployment among low-skilled workers. Inexperience is often the problem. Only about 2 percent of Americans over the age of 24 earned the minimum wage.

Advocates of minimum wage laws usually base their support of such laws on their estimate of how much a worker "needs" in order to have "a living wage" — or on some other criterion that pays little or no attention to the worker's skill level, experience or general productivity. So it is hardly surprising that minimum wage laws set wages that price many a young worker out of a job.

What is surprising is that, despite an accumulation of evidence over the years of the devastating effects of minimum wage laws on black teenage unemployment rates, members of the Congressional Black Caucus continue to vote for such laws.

Once, years ago, during a confidential discussion with a member of the Congressional Black Caucus, I asked how they could possibly vote for minimum wage laws.

The answer I got was that members of the Black Caucus were part of a political coalition and, as such, they were expected to vote for things that other members of that coalition wanted, such as minimum wage laws, in order that other members of the coalition would vote for things that the Black Caucus wanted.

When I asked what could the black members of Congress possibly get in return for supporting minimum wage laws that would be worth sacrificing whole generations of young blacks to huge rates of unemployment, the discussion quickly ended. I may have been vehement when I asked that question.

The same question could be asked of black public officials in general, including Barack Obama, who have taken the side of the teachers' unions, who oppose vouchers or charter schools that allow black parents (among others) to take their children out of failing public schools.

Minimum wage laws can even affect the level of racial discrimination. In an earlier era, when racial discrimination was both legally and socially accepted, minimum wage laws were often used openly to price minorities out of the job market.

In 1925, a minimum wage law was passed in the Canadian province of British Columbia, with the intent and effect of pricing Japanese immigrants out of jobs in the lumbering industry.

A well regarded Harvard professor of that era referred approvingly to Australia's minimum wage law as a means to "protect the white Australian's standard of living from the invidious competition of the colored races, particularly of the Chinese" who were willing to work for less.

In South Africa during the era of apartheid, white labor unions urged that a minimum wage law be applied to all races, to keep black workers from taking jobs away from white unionized workers by working for less than the union pay scale.

Some supporters of the first federal minimum wage law in the United States — the Davis-Bacon Act of 1931 — used exactly the same rationale, citing the fact that Southern construction companies, using non-union black workers, were able to come north and under-bid construction companies using unionized white labor.

These supporters of minimum wage laws understood long ago something that today's supporters of such laws seem not to have bothered to think through. People whose wages are raised by law do not necessarily benefit, because they are often less likely to be hired at the imposed minimum wage rate.

Labor unions have been supporters of minimum wage laws in countries around the world, since these laws price non-union workers out of jobs, leaving more jobs for union members.

People who are content to advocate policies that sound good, whether for political reasons or just to feel good about themselves, often do not bother to think through the consequences beforehand or to check the results afterwards.

If they thought things through, how could they have imagined that having large numbers of idle teenage boys hanging out on the streets together would be good for any community — especially in places where most of these youngsters were raised by single mothers, another unintended consequence, in this case, of well-meaning welfare policies?

[philunderwood]

Destroying Household Jobs

By Thomas Sowell

www.JewishWorldReview.com |

Despite evidence from around the world that minimum wage laws can price low-skilled workers out of jobs, the U.S. Department of Labor is planning to extend minimum wage coverage to domestic workers, such as maids or those who drop in from time to time to do a few household chores for the sick and the elderly.

This coverage is scheduled to begin in January 2015 — that is, after the 2014 elections and nearly two years before the 2016 elections. Politicians show a lot of cleverness in protecting their own interests, even if they show very little wisdom as far as serving the public interest.

If making household workers subject to the minimum wage law is expected to produce good results, why not let those good results begin early, so that voters will know about them before the next election?

But, if this new extension of the minimum wage law opens a whole new can of worms — as is more likely — politicians who support this extension want to insulate themselves from a voter backlash. Hence artfully choosing January 2015 as the effective date, to minimize the political risks to themselves.

The reason this particular extension of the minimum wage law is likely to open a can of worms is that both household workers and those who employ them will face more complications than employers and employees in industry or commerce.

First of all, ill or elderly individuals who need someone to help them from time to time are not like employers who have a business that regularly hires people and may have a personnel department to handle all the paperwork and keep up with all the legal requirements when government bureaucrats are involved.

Often the very reason for hiring part-time household workers is that some ill or elderly individuals have limited energy or capacity for handling things that were easy to handle when they were younger or in better health. Bureaucratic paperwork and legal technicalities are the last thing they need to have to add to their existing problems.

The people being hired to do household chores also have special problems. Often such people have limited education, and may also have limited knowledge of the English language.

Why make it harder for ill or elderly people to get some much-needed help in their homes, and harder for low-skilled people to get some much-needed jobs?

Despite all the talk about how we need more people with high-tech skills, there is also a need for people who can help clean a home or carry groceries or do other things that need doing, and which do not require years of schooling. As the elderly become an ever growing proportion of the population, there will be a growing demand for such people.

More precisely, there would be more jobs for such people if the government did not step in to complicate the hiring process and price potential workers out of jobs, with minimum wages set by third parties who do not, and cannot, know what the economic realities are for either the ill and the elderly or for those whom the ill and the elderly wish to hire.

Minimum wage laws in general are usually set with no real knowledge of the economic realities and alternatives for either employers or employees. Third parties are simply enabled to indulge themselves by imagining what is "fair" — and pay no price for being wrong about the actual economic consequences.

That is why countries with minimum wage laws usually have much higher rates of unemployment than those few places where there have been no minimum wage laws, such as Switzerland or Singapore — or the United States, before the first federal minimum wage law was passed in 1931.

Government interventions in labor markets have already created needless complications, and not just by minimum wage laws. The welfare state has already taken out of the labor market millions of people who could perform work that would be well within the capacity of inexperienced young people or people with limited education.

With welfare, such people can stay home, watch television, do drugs or whatever — or else they can hang out in the streets, often confirming the old adage that the devil finds work for idle hands.