The Unintended Consequences of the Minimum Wage.

A few days ago I posted about the economic benefits to minimum wage, which are few and not overly valuable. But a case can be made for some benefit in purely economic terms.   In general, minimum wage laws are created for political reasons – there is a claim of compassion but you shouldn’t be too quick to believe those.  Politicians don’t do things out of compassion, they do them to get re-elected.  Politicians work on the philosophy of delayed blame.  They’ll spend your future money to buy votes today on the theory that when the debt comes due, most voters will have forgotten who to blame.  Sadly, it works really well.

There are a number of downsides to minimum wage laws. Beyond the obvious distortion of the free market (see previous post), there is the tendency to increase them once they’re established. The dangers of what I’m seeing now, which is a trend toward a more than doubling of the Federal minimum wage in the wake of events in two of the most liberal states in the country.  Both New York and California went against all rational advice from economists and did the “Feel Good” thing anyway – assuming that voters will forget who just screwed them by the time the next election comes up.  For those people who manage to keep their jobs, it will be a big win.   For everyone else, not so much. This is going to be lengthy, and hardly exhaustive, but it should give you an idea of what kind of trouble we’re borrowing.

There is strong consensus amongst economists that raising the minimum wage results in few jobs for unskilled and inexperienced workers.  The only big holdout I know of is Paul Krugman, who lives in a world with unicorns.

If destroying entry level jobs were the only effect, it would be bad enough.  The hike from $10 to $15 per hour has resulted in UC Berkeley laying off 500 people.   That’s 500 people whose wage went from $10 to $0.  And believe me – the real minimum wage is $0.  Berkeley is just the beginning – the full effect of that increase won’t be seen for two to five years.  I expect to see more businesses flee California – which they’ve been doing in droves.   It is a business hostile environment. Between the constant assault of regulatory strangulation and now a 53.1% increase in unskilled labor costs – assuming there are no other hidden costs beyond the 6.2% FICA which means that $5/hour is really costing the employer $5.31.

Unfortunately, there is a trickle up of costs. Few employers that depend on minimum wage worker can afford to absorb a 53% hike to what is probably their biggest single expense.  They will have no choice but to raise prices – with that price increase comes a decrease in demand.  So, while prices are up – sales are down.  Since prices are unlike to go up any more than one needs to cover the actual costs in the first round, there will be a net loss in revenue. With that will be a net decrease in what the State collects for taxes.  Yes, that’s one of those little unintended consequences that is so easy to overlook. More so for a state that has a major budged shortfall, and a seriously underfunded public pension.

There may be some good news depending on what labor pool is used. If supermarkets are already paying $15/ hour (which seems unlikely) then the impact to food prices will only come from their suppliers – otherwise, the costs of eating at home will rise even further than the the cost of goods sold.  That will have some mitigating effect on the demand of dining out.  The nice thing about food is that overall, it has a relatively inelastic demand.

When those sales decrease, the demand for raw materials will fall.  Taking a restaurant as an example.  When the prices on the menu increase significantly, people will make the rational choice to eat out less.  So the restaurant sells less, and the minimum wage workers now get fewer tips – oops yet another unintended consequence. The company that supplies the food, and condiments will also lose business, lowing revenue and hence taxes.  If the restaurant sells liquor, those sales will also drop, which is bad because that’s a real profit center for restaurants. Oh, and the state loses even more tax income.

Now, if sales drop enough, a rational business owner will be forced to confront the decision of how to allocate his capital. In other words, struggle along or close up shop and find someplace else to do business.  When those shops close all the employees are now at the true minimum wage of 0$.  And the state now gets hit with an additional tax burden – unemployment compensation.

The suppliers lose even more business – potentially resulting in more layoffs.  Certainly less income and hence – less taxes paid.

You can expect to see capital replace labor in more places, since the relative cost of capital just went down. The nice thing about capital – it doesn’t show up late, rarely takes sick days, and complains about overtime, or not enough hours.

So, we’ve killed jobs for unskilled, inexperienced workers, we’ve put unskilled workers out of jobs, we’ve put skilled workers, and management out of work. We’ve decrease tax revenues and increase the tax burden. We’ve increase overall unemployment. And increased welfare spending. But at least some of those people are making a living wage now – except the prices on everything just went up so that $5 / hour feels a bit more like $1.75/ hour.   Feels pretty good doesn’t it.

At which point I will reiterate my advice – Capitalists – be compassionate, pay as much as you can afford, don’t price yourself out of existence, but if you wait, the government will do it for you. Workers – have a little compassion for all those people you seem so willing to throw under the bus,  $7 or $10 may not be a living wage, but neither is $0.


Well, you get the picture.   It’s too bad that people demanding these huge increases in the minimum wage don’t see it.  Nor apparently do the politicians.   And if you think they do, I would point you to the following:

How White Castle Will Adjust to a $15 Minimum Wage in New York

How High should the Minimum Wage Be? 

You know Marko Kloos right?   You do read science fiction right?  

If you like SciFi,  and you like action, and military, and military SciFi then you must know about Marko Kloos - Frontlines series.   Book 4 is a great read, which comes as no supprise.  Andrew Grayson is about as real as they come. Once again, Andrew is on the pointy end of the speer, but the enemy has changed, for the moment anyway.

Chains of Command at Amazon

















If you haven't read the other three - you probably should.



  Terms of Enlistment - book 1  at Amazon 



















Lines of Departure - book 2 at Amazon 



























Angles of Attack - book 3 at Amazon  

Minimum Wage - Good and Bad

I was writing a comment to Bayou Renaissance Man: Yes, this is the unacceptable face of capitalism

It's one of my regular daily stops, highly recommended.  This post concerns the issue of Minimum Wage - and mostly references this article by Fred  

So what happened was, as usual, I got long winded, and pedantic, and well - Me.  So I decided to post it here rather than clutter up Peter's comment section with my lengthy response. 

Speaking as an economist (well sort of - I only have a BA in Econ which is the next best thing to useless).

Economics makes a lot of assumptions - it has to, without those simplifying assumptions we're lost.  We've learned to deal with how regulation affects the free market to some extent. There are a lot of assumptions about the free market that are, well...not quite accurate in real life. Often people who are advocates of Free Market Capitalism (of which I am one).  Don't really think though what those assumptions are and what they mean. 

I've studied the effects of minimum wage quite a bit.  In general, it's possible to pick a minimum wage which is supportable by the general economy. What that minimum does is force business owners into meeting the price of the labor market at large.  If you've got the only jobs in a small town, without minimum wage, you get to take advantage of people who have no mobility. With perfect mobility, the workers can simply pick up and move to a place that's paying the market wage.  But we don't have perfect mobility, we have in many cases captive labor markets.  Less so today than in the years before anyone ever considered the notion of a minimum wage.  But, still, it's an issue, although not a large one.  

Another assumption is near perfect information.  The assumption that an individual will "magically" figure out what the market is paying for the labor of which they are capable.  That doesn't happen either, although I can't decide if it's because may people lie about how much they make, or because everyone knows what the minimum wage is. Or, is it that people hate talking about it. Still - without that minimum, how would an unskilled person know how much was fair?  There's the assumption that if you accept the deal then you think it's fair - which is also not completely accurate. If you need to eat, and this is the only job in town, then you either take it or starve - unless you and everyone else happens to know that you can walk to the next town and do better.   If you don't know that, then you have a problem.   

There are a lot of assumptions.  The unskilled labor market may fit a few of them; and can probably deal with a few more, but certainly not all of them. Even with the help of the internet and it’s not quite ubiquitous ubiquity and its perfectly imperfect information.  

So, a minimum wage solves some issues avoided by a number of free market assumptions. It does this by establishing the labor market price via regulation - no it's not the most efficient method in a perfect world but we don't live in a perfect world.   But, if you do the work to figure out what the labor market can bear - the going rates for labor and you set the minimum wage to that amount (And for God's sake, not at the federal level) give or take a little bit, then it has minimal effect on the efficient allocation of resources.   Hardly ideal, but in a world that his far from ideal, it's maybe the most compassionate way to solve the problem. 

Where things go wrong is when Politicians get involved and "Decide" what the market price should be.  They're not doing the research to determine what it should be, they're just Feeling It -or more likely feeling what it will do for the re-election campaign.    That's when we get stupid ideas like $15 an hour in places that can't support it.   Maybe San Francisco can support it (although anecdotal information indicates that it can’t) Settle really can't - $12 maybe... Perhaps Manhattan can - we'll see. Can Fresno?  Or Bakersfield?   Or Danube, NY with its population of 1039, and a median household income of $31,815?   I'm betting - NO.  

Then there is the question of weather a minimum wage job is supposed to be a "Living Wage".  I would argue that it's not.   If it is, then there are NO entry level jobs for the completely unskilled and inexperienced - To support a "living minimum wage" we raise prices on everything - a lot - and all of a sudden your "Living Wage" isn't - again.  It's complicated - seriously complicated; people hate complicated - but it's what we've got and simple solutions are often worse than doing nothing (not always but often).  

So, I don't really have a problem with a minimum wage that is a reasonable attempt at nailing the fair market value of unskilled labor - it's more than a high-school kid at his first ever job might be worth, but not enough for a person to feed a family - and yeah you might need roommates to make it livable.  Therein lies the incentive to move beyond the minimum wage - to move up, to get out of poverty.   We can probably legislate everyone out of poverty - but in the process we'll legislate a larger number of people into "damn near" poverty.    How will that help? 

I don't like blaming everything on Capitalism, that's too easy.  I also don't like the typical Capitalist response of a Free Market assures Fairness - it doesn't - and it's too easy.   More government is pretty much the WRONG answer to any question - it just replaces Capitalism with Cronyism and that is MUCH worse.   

So is it Fair? No. Why?  Fair is a stupid useless word that's why. There is no "Fair".  Capitalists - if you want less government - be as compassionate as you can afford to be.  And workers - unless you're looking forward to a life of a dollar over the poverty line - stop asking the government to solve all your problems. 

And if all of the #NEVERWHOEVER people stick to their guns and don't vote for that Asshat (which ever one that might be) then we'll get someone who will push for and get a Federal $15 minimum wage - then we're screwed, well and truly screwed.

If you think Science is Broken now....

This is a scary fascinating aricle on the problems with science as we do it today.


You might not notice that he's just ripped all the defenses used by The Science is Settled™ people.  The same people who have now decided that those of us who are actually skeptical should be in prison, or the nearest Gulag for re-education.


(On a side note - I'm beginning to wonder if George Orwell did us any favors by writing his dire warning of things to come - 1984)

I might be wrong - it seems that more people use it as a Lifestyle Guide than as the warning he'd intended. 

Get out. Get out now!

California is now exploring ways to steal another 3-5% of your money. 

Why?  Well because you're too stupid to manage for yourself, and the Social Security System funds are out of their reach.  So you need to give money to the state to manage for you. This would be in addition to the Social Security Ponzi scheme, which doesn't actually work in your favor. This is the same state that has a massively underfunded state pension system by the way.

No - Really.  Why? 
Their bankrupt public sector pensions, woefully underfunded due to the need to buy votes.  Access to private sector funds would help pay that off - how they're going to pay off the private sector once they've stolen the funds?   Well, they'll just get the tax payers to bail them out.   Yep, you'll get put put in 3-5% and later you'll get to pay more taxes to pay for that money they took from you earlier and gave to state employees.

So if you think opting out of this - which employees can do (at the moment) but employer can't, get over it.  They're going to take your money one way or another.

Do yourself a favor - if your a conservative get out, get out while you can still afford it.   If, on the other hand, your a democrat or progressive - please stay there.  I'm not sure we can stand another wave of the California Liberal Plague.

Totalitarian Science

More calls for the punishment or imprisonment of people who disagree.  From the Providence Journal - Michael E. Kraft puts his bid in for the Stalin's Hero of the People award for demanding punishment for those who WrongThink about Climate Science.

The Narrative is strong with this one. 

The sad lack of science is the real problem. The problems with the "data" are almost too many to enumerate.  For example, I can make a case for both Global Warming and Global Cooling very easily by simply picking my starting point - which is invariably arbitrary.   Ground measurement stations suffer from urban island heat distortions in many cases. Normalization of disparate sources is highly prone to error - Especially the ideological kind - where corrections always lean in the direction of supporting the theory.




We don't have a good method of studying warming of the ocean, which has a much higher heat capacity than the dry surface.   Greenland ice is melting, quite possibly because of local geothermal activity, since records indicate that the polar ice mass is actually increasing

The "Theory" has two parts - greenhouse gas effect on temperature (fairly wide consensus) and the 3-5x positive feedback loop in the environment (which as near as I can is a primarily caused by the ubiquitous element Becauseium

If there can be a consensus in science -it should be that we haven't actually done any real science, and maybe we should.

Fake Rape Culture - Meet the Real Thing.

The rape culture narrative took a beating with the outing of the Rolling Stone Rape Hoax.  To make matters worse - UVA and seven other hoaxes were exposed.  It's unsurprising because the data were never data, it was nothing but a bunch of crazy feminists pushing their agenda of "Men are the source of All EVIL"  Even USA today agrees - the data just doesn't support the theory - at least after being introduced to the idea of fact checking which they apparently skipped for this article.

So, let's talk about Europe.  There is an actual rape epidemic going on in Europe - even the NY Times has given up trying to hide it.  Yet, the rape culture narrative has become silent.  The feminists have always held this weird doublethink idea that Western Culture (created by Evil White MEN) is the epicenter of Rape Culture and Sexism and at the same time, remained completely silent on the documented and systemic abuse, rape and murder of women in Islamic countries.

Why?  Multiculturalism trumps Feminism. The new god - Diversity - is more powerful than the old godess - Feminism. Neither have any value to Western Culture. Not because we have rampant racism, or rape culture, or rampant sexism - we don't. But, because Western Culture has been at the forefront of eliminating those things - which is why Western Culture is the Enemy.  Western Culture is the proof that the Regressive-Progressive narrative is crap.  Self serving crap.  Dangerous, harmful, abusive crap.

The Regressive-Progressives are beginning to eat their own.  The facade is falling and the truth is coming out.  Their diversity is only skin deep. Their patriarchy doesn't exist.  And their multiculturalism kills.  They actively agitate for the elimination of free speech because truth is anathema to their narrative.

The Boss becomes the boob

So the Boss loses his balls and caves to the Regressive left insanity.  From the Daily Beast: 

Springsteen Nixes NC Show Over Anti-LGBT Law

Seriously - men in the women's bathroom is a bad idea - even if they're transgender - maybe if they've completed the full conversion and no longer have man parts. But that's not what's happening with these stupid laws.  You simply have to say - I Feel Like A Woman.   Yeah, what could possibly go wrong with that.

I suppose I'll have to return the favor and Nix any future purchases of the Boss's music.  Oh well.



 

A matter of perspective

The high school kids around where I live, when they here me talk about politics usually end up asking what the difference is between Socialism and anything else, or why I refer to socialist as fascists.

It's not hard, it simply a matter of perspective.  The primary difference between the four most common totalitarian philosophies is fairly simple.  Who is the perceived owner of the means of production.

Communists - Make no bones about it - the state owns it all.  This described the Soviet Union quite well. It also described China until they saw what happened to the Soviet Union. After which they "embraced" capitalism.   They don't actually embrace capitalism, they are using it as a tool to build a military prior to resuming their state economy in a more world wide fashion. Oh and they're happy to build the bank accounts of the party elites in the process.

Socialists - Give the impression that private individuals own some of the means of production, and the state owns others.  The fact that they regularly eliminate that ownership with a bullet should indicate who really owns the property.   Just try not paying your (lease) taxes and you'll understand right away. Off to the deep dark hole you go, were you'll either work to death, starve to death or maybe they'll be nice and just shoot you after you've been forgotten.

Democratic Socialists - They try not to openly own any means of production - again just try not paying your lease (taxes) and you'll see just how secure your ownership really is - you'll find your business has a new owner and you have a new residence - a deep dark hole somewhere.

Fascists are somewhere between Socialists and Democratic socialists but rather than tossing you in a deep dark hole, the just put a hole in your head when you disagree.

So, the only real difference is what sort of public face they put on their totalitarian economy, and perhaps how quick they are to pull the trigger to make their point.

Media and Trump / Anti-Trump Cruz / Anti-Curz

I'm finding it difficult to even read many of my favorite blog/media sites. The distain and contempt normally reserved for the Progressive/Regressive Left seems to have become the common vernacular when discussing their least favorite Republican.   And it seems to not matter overly much - Ted or Donald. 

I'm more that a bit disappointed at many of these nominally Libertarian sights.   Geez people, get a grip. They both have problems and they both have good points and they're both better than the alternative.

Despite Ted's not so long history as a Republican outsider, he is more of an insider than Trump.  Trump on the other hand has yet to display a coherent plan for anything besides immigration (although that alone might be enough)   I'm not fond of his constant assault on free trade, although an assault on Regulation would be welcome. 

Both have changed their positions on a number of items - which smacks a bit of "fingering the wind" but compared to the Hill-Troll or the smiling commie, I suppose I can overlook that.

Just please, if you're going to beat each others camp up - stick to policy and lay off their supporters. 

Oh for the love of...

Raised Hands Violate University Safe-Space Policy

Just do the world a favor - decide that breathing is a violation and kill yourselves.

Emory, Bill Maher and me

I so rarely agree with Bill Maher, until recently.  Why all of a sudden does he seem to be one of the two liberals who are not certifiable, the other being Dave Rubin.  Granted, we only seem to agree on the threat of Islam, and this, but it's a start.


From (well everywhere but this specifically from Inquisitr

As the Inquisitr previously reported, pro-Donald Trump chalk messages so frightened and upset the college students that they claimed they were in pain and needed counseling because their safe space had been violated. The Donald Trump Emory University chalk drawings on sidewalks and stairs did not include any foul language, political rhetoric, or crude images. They simply bore the Republican presidential front runner’s name or urged the young adults, “Vote Trump,” and said “Trump 2016.”

Bills Response:

“Let’s talk about the liberal bubble… and I’m always criticizing what goes on on college campuses. There was a doozy this week at Emory University. Oh my gosh. You know what happened at Emory? Somebody wrote pro-Trump messages on the sidewalk in chalk. And, I swear to God, the kids went apesh*t… One student said, ‘I legitimately feared for my life. I thought we were having a KKK rally on campus.’ Here’s another one: ‘I’m supposed to feel comfortable and safe, but this man — Trump — is being supported by students on campus.’ As is their right in a democracy. ‘And our administration shows by their silence they support it as well. I don’t deserve to feel afraid at my school.’ I so badly want to dropkick these kids into a place where there is actual pain and suffering. What happened in this country?”

Emphasis is mine.  Dropkick away Bill. 

Part of me really wants to just punch the next asshole who points to “Trump2016” written in chalk and calls it violence, right in the nose. “No asshole, that’s violence – see the difference!”

Wake the F*** Up

Campus Reform

I love this site  CampusReform.org  Well, that's not quite right,  I find the site to be sort of depressing in a very insightful and informative way.    Do you know anyone getting ready to head off to college?  Parents with kids that they're about to turn over to the worlds most expensive indoctrination centers?

Make sure they take a look - it might save them a lot of money, and keep their kids from being committed to a mental health facility.

From the Weekly Roundup.

Emory student gov. approves ‘emergency funds’ for students ‘triggered’ by Trump chalkingsSo, if Trump is elected president, should we just go ahead and have the student body committed to a psychiatric institution?

Why wait? They're clearly going to need years of therapy and deprogramming before they become functional members of society.