Tag: Labor Unions

The Minimum Wage Insanity

Well, here we go:

A deal to raise California’s minimum wage to $15 an hour by 2022 was reached Monday by Gov. Jerry Brown and state legislators, making the nation’s largest state the first to lift base earnings to that level and propelling a campaign to lift the pay floor nationally.

The increase will boost the wages of about 6.5 million California residents, or 43% of the state’s workforce, who earn less than $15, according to worker group Fight for $15. The proposal had been headed to a statewide referendum. It’s now expected to be approved by the state assembly.

This $15 thing is part of Sanders campaign and may be passed into law in New York as well. We’re told that this will increase the earnings of low-wage workers and … somehow … not increase unemployment.

Megan McArdle has a really good must read about why the people proclaiming that minimum wage hikes won’t increase unemployment — a tenet of economics that was proclaimed to be gospel as recently as ten years ago — should worry:

The people confidently proclaiming their ability to see the future are often what I like to call “one-study wonders”: people who have gotten their hands on a single study that confirms what they already believe (or would very much like to) and then proceed to wave it around while ignoring the rest of the vast, conflicting, suggestive but hardly definitive economic literature on the subject.

One-study wonders are always dangerous. A single study, no matter how well done, is never proof of anything. It’s too easy for something to accidentally go wrong.

Because being unemployed, especially for a long time, is about the worst thing that can happen to someone in a modern democracy, short of death or dismemberment. People adjust even to terrible life events such as divorce or widowhood; five years after the loss, research shows that happiness levels recover to about where they were before. But five years in, the unemployed are nearly as miserable as they were on the day they got the sack — and this research was done in Germany, which had a quite generous unemployment compensation program.

Moreover, the people affected are most likely to be low-skilled workers, who are most in need of jobs, not just for the money, but also for the skills that employment provides. The job market is like a ladder, and the lowest rungs are where people gain the critical skills and experience to climb that ladder. If you keep someone off those bottom rungs, studies show that their future employment and salary prospects can be permanently harmed.

The case that minimum wage hikes do not cause unemployment is mostly based on one study — the Card and Kreuger study. In this study, they looked at what happened when New Jersey raised its minimum wage and Pennsylvania didn’t. New Jersey saw a slight increase in employment. Supporters of the minimum wage have proclaimed this to be “the perfect experiment” (ignoring perfect experiments that don’t support their theory). But it’s not. No matter how well done the study was:

  • It’s one study.
  • It measured a relatively small increase in minimum wage.
  • It’s one study.
  • It didn’t look at long-term effects, such as whether people didn’t open new stores as a result of higher wages.
  • It’s one study.
  • It was done in 1992, when regulations were way less burdensome, the economy was in a strong recovery phase and Obamacare did not exist.
  • It’s one study.

The Fight for Fifteen people also cite this letter from “600 economists” supporting a minimum wage. There are only four problems with this seemingly bulletproof letter. One, some of the people on that letter are not economists. Two, most of them work in academia or other fields where they can just ask the government for more money; they’re not running businesses. Three, that letter advocates increasing the minimum wage to $10.10 an hour, not $15. I suspect that many of them would argue that while small wage increases do not affect unemployment, large ones do. Four, their conclusions are theoretical. This is real life.1

Let’s take a step back. As McArdle notes, long-term unemployment can have a damaging lifelong effect on earnings, way more than low entry-level wages do. So the Democrats have decided that they are willing to gamble the long-term futures of millions of people on a theory that the Law of Supply and Demand is magically suspended because … well because they want it to be. And even that theory is stretched. It’s mostly based on one paper for a small minimum wage increase in one specific circumstance. And they are extrapolating that to a massive increase.

In the space of one hundred and seventy six years the Lower Mississippi has shortened itself two hundred and forty-two miles. That is an average of a trifle over a mile and a third per year. Therefore, any calm person, who is not blind or idiotic, can see that in the Old Oölitic Silurian Period, just a million years ago next November, the Lower Mississippi was upwards of one million three hundred thousand miles long, and stuck out over the Gulf of Mexico like a fishing-pole. And by the same token any person can see that seven hundred and forty-two years from now the Lower Mississippi will be only a mile and three-quarters long, and Cairo [Illinois] and New Orleans will have joined their streets together and be plodding comfortably along under a single mayor and a mutual board of aldermen. There is something fascinating about science. One gets such wholesale returns of conjecture out of such a trifling investment of fact. – Mark Twain

This isn’t trivial. This is people’s lives. I’m glad the liberals have a a study that makes them feel good about this. I’m sure that will be comfort to people who can’t find even the most basic entry-level jobs or people who lose their jobs to automation. Maybe they can print copies of the study and burn it to keep themselves warm. Back in reality, let’s check in with those crazy right wing hacks at … Brookings:

In a city like Washington D.C. where unemployment among those with a high school education or less is at a worrisome 15%, jobless rates will almost certainly rise. Many employers will be very reluctant to pay high wages to workers whose skills – including the ability to speak English, in the case of many immigrants – are so modest. A likely result would be not only increases in unemployment but also drops in formal labor force activity (where workers work or search for legal jobs) and perhaps some growth in undocumented work among immigrants.

It’s actually worse in California because they are raising the minimum wage in the entire state. Cities that are in economic turmoil with high unemployment? $15 an hour. Suburbs where the unemployment rate is low? $15 an hour. Minority neighborhoods were unemployment rates for young men can be as high as 50%? $15 an hour.

This isn’t some kind of fancy-schmancy rocket science here. This is math. You simply can not increase wages by 50-100% and not expect there to be an effect. The AEI has now looked at Seattle’s labor market after their big minimum wage hike. Now, granted, it’s only nine months and there are reasons to be skeptical. But the preliminary result is devastating. A full point increase in the unemployment rate.

And let’s suppose, for the moment, that this doesn’t increase unemployment. The money has to come from somewhere. People running business aren’t sitting on giant stacks of money that we can just force them to pay to their employees. So what are they going to do? Increase prices. And what kinds of businesses pay minimum wage? Is it fancy-pants restaurants in Beverly Hills? Is it software companies in Silicon Valley? No. It’s McDonalds. It’s Walmart. It’s Burger King. What do these businesses have in common? They are frequently the choice of the poor and middle class. So we’re going to give them higher wages with one hand and take it away with higher prices on the other. So why bother? Stick a pin in that question.

One frequent justification for raising the minimum wage is that low-wage workers are often eligible for food stamps and Medicaid. However, the eligibility for those programs was expanded specifically to benefit low-wage workers. You can’t expand a social program and then claim that the expansion of the social program proves you need to raise wages. On balance, having workers make less wages but get government benefits is better than having them make marginally higher wages. Because it means less unemployment. It is effectively a government subsidy of the lowest rungs on the economic ladder. Yes, I wish the government just stayed out of the whole thing. But we don’t live in that country.

Now, what is the real motivation here? Why are liberals so hell bent on raising the minimum wage? Why are unions members, who generally don’t make anywhere close to the minimum wage, so supportive of such massive increase? Well, mainly because it will increase union wages, which are frequently indexed to minimum wage.

When you see it from that angle, you see what’s really going on here. Labor unions are limited in their ability to demand more wages by the give-and-take of negotiation and by the constraints of what the market will pay for their products. What this is really about is forcing unionizing businesses to pay much higher wages through the back door (and remember, the Democrats are big supporters of card check, which would make it easier to coerce employees into unions).

So when you really break this down, it comes to this: the Democrats are screwing over the poor, screwing over the working class, screwing over the consumer and screwing over businesses so that their primary source of support — labor unions — can enjoy the benefits. And they are basing this on fuzzy-minded idealism, one-study-wonders and a media that can’t be bothered to question the narrative.

And in five years, California — already enjoying one of the highest unemployment rates and inequality indices in the nation — will be wondering where it all went wrong. They’ll probably blame Republicans. I’m sure there’s one or two left in the legislature they can pin it on.

1. Another point: the Democrats are proclaiming that if the minimum wage were equal to what it was in 1968, it would be $10.66 an hour. They pick that year because it was a peak in minimum wage, a peak way higher than any year before or after. It was right after a huge increase that was enacted to deal with inflation that our government was deliberately creating. These are the same liberals who mock global warming skeptics for saying there has been no warming since 1998 — a huge isolated peak in global temperatures cause by a powerful El Nino. Again: it’s not cherry-picking data that liberals object to; it’s someone else cherry-picking data.

The Minimum Wage Follies

Ten days ago, LA made a historically dumb decision to raise its minimum wage to $15 an hour. The usual chorus of Leftists emerged to claim that the contention that raising the minimum wage destroys low-wage jobs — a premise that was accepted by most economists until about two years ago — has been “debunked” as a myth (it hasn’t and it won’t be because the Law of Supply and Demand isn’t magically suspended for low-wage labor).

Some of the biggest supporters of the minimum wage hike were labor unions. You may wonder why labor unions would support hiking the minimum wage since most labor members don’t make minimum wage. The reason is that many union wages are pegged to the minimum wage and are set to automatically rise if the minimum wage does. It further gives them leverage in negotiations. If the minimum wage if $30,000 a year, it gives them an argument for larger starting union salaries. And since, in California, most labor arbitration is done by former union lawyers, it’s a nice racket. So their support has nothing to do with how much they care about the poor masses. It’s about cynically playing on sympathy for those masses to leverage their own pay hikes.

The unions have been at the forefront of claiming that the idea that minimum wage hikes destroy jobs is a myth. Well, guess what folks: they are perfectly aware of what a higher minimum wage will do. Why else would they want this:

Labor leaders, who were among the strongest supporters of the citywide minimum wage increase approved last week by the Los Angeles City Council, are advocating last-minute changes to the law that could create an exemption for companies with unionized workforces.

The push to include an exception to the mandated wage increase for companies that let their employees collectively bargain was the latest unexpected detour as the city nears approval of its landmark legislation to raise the minimum wage to $15 an hour by 2020.

For much of the past eight months, labor activists have argued against special considerations for business owners, such as restaurateurs, who said they would have trouble complying with the mandated pay increase.

But Rusty Hicks, who heads the county Federation of Labor and helps lead the Raise the Wage coalition, said Tuesday night that companies with workers represented by unions should have leeway to negotiate a wage below that mandated by the law.

So here’s how this two-step works:

1) the unions advocate for a higher minimum wage.

2) the raising of the minimum wage either triggers pay hikes for union members or gives them a leg up in negotiations.

3) However, they allow exceptions for industries that might have to lay people off … as long as those industries are unionized.

4) Industries that can’t pay the minimum wage either leave or … become unionized.

The net result? More money for unions, more union members, less jobs and higher prices for everyone else. And liberals wonder why we are so cynical about Big Labor.

Obama’s 2nd term news – Part Deux

I originally intended the first post to be the lead in a weekly series, but the amount of insane shit that is happening just a week after the election just feels like the gift that keeps on giving, so I am going to do another today. BTW, any one of you other authors that want to do some of this, feel free to gang up. I do not want you to feel that I hold exclusive rights to this concept.

Anyway, for those with a sweet tooth and of my age, I am afraid Woody Harrelson’s character in Zombieland is going to be disappointed that Twinkies will not be around. Talk about cutting off your nose to spite your face. Stupid unions. It does look like we will get the Apocalypse, though. Watch it happen because Obama decides to interfere and nationalize Twinkies like he did GM. My bet is they blame Sandy for those 18.5K new unemployment claims that come up next week.

I hear the union geniuses are trying to play Walmart too because it is implementing changes to deal with tax increases and Obamacare. Read about the genius that thinks Walmart is trampling on his rights because when he asked for a transfer to a different department where everyone wants to be since it is cake work, they cut his hours in order to honor his request. This moron thinks it was out of spite, not maybe that they have tons of people lined up to do the cushy job they also have to accommodate, and hence have to resort to reduced hours for everyone. EBIL CAPITALISTS!

Speaking of evil capitalists, it is finally being pointed out that they are now shrinking the size of their packages to overcome rising costs. The price stays the same but you are getting a lot less. The only reason that the nanny- staters aren’t all balking at this travesty is that it goes handily with their need to keep the illusion that there is no inflation. In the mean time we all keep losing. Heh, just get everyone drunk and they won’t care! And while some people are already pointing out how the evil capitalists can help the US follow in the footsteps of some other socialist states that used natural resources to get some serious cash flow while changing everything for the better, it is also obvious that this is all, for now at least, nothing but a pipe dream. The people in charge remind me of the old Soviets that in the name of collectivist ideology would do stupid and damaging things, even when the solutions were blatantly obvious. I guess this is another good reason to point out that referring to the greens as watermelons is very appropriate.

The housing market social engineering tactics that led to the economic meltdown in 2009 continue on, surprisingly, and despite, Dodd & Frank’s promise to fix the “deregulation” with a 2000 page new law that did nothing to address the underlying problem. So it is no surprise that the FHA, which uses Fannie & Freddie to play it’s shell game, is pissing away money like crazy, and again reaching out for a handout. That means they are asking tax payers to yet again cover for the problems this stupid and doomed social engineering practice cause. Doesn’t matter that we have pissed away trillions in wealth and paid billions to keep the crooked shell institutions the Feds use to play their games. The tax payer is told to give more so they can keep buying votes. In the mean time, they tell us they need more income, and from those evil rich of course, to cover their out of control spending – that’s the government wants higher taxes for you rubes – while in the private sector, stories like this abound. At least some of it is good news. Death to the stupid and wasteful green shit movement.

At least it looks like these hard times are not hurting Obama supporters. One buys some premium real estate, while the other dumps her citizenship in order to avoid taxes. That’s not the patriotism they tell us we should all feel when we get shafted, erm, handed the privilege of higher taxes.

Hang on for the ride people.

UPDATE:Too good for parody.

Walker Wins

It looks like Scott Walker has won the recall. More than that, he appears likely to win it by larger fraction than his initial election in 2010. But this has no national implications. No siree Bob.

Discuss amongst yourselves. And think about all the money burned on recalling a governor not over malfeasance, incompetence and corruption but over a policy disagreement — a disagreement that instantly vanished from the recall campaign.