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Posts Tagged ‘minimum wage’
Minimum Wage Law — Great For Big Business, Terrible For Workers
Posted by M. C. on April 9, 2024
Posted in Uncategorized | Tagged: Big Business, minimum wage, Workers | Leave a Comment »
The Left Will Tell You That Raising the Minimum Wage Will Boost Productivity – Don’t Let That Fallacy Fool You
Posted by M. C. on October 18, 2023
But what about the producers of airplanes, yachts and office towers? There is no way that the average individual employee can be able to purchase these pricey items.
Is this then yet another “market failure”? Hardly. The failure, rather, is one of logic. There is simply no earthly reason why those who work on a product should be able to purchase it, too.
https://substack.com/inbox/post/137999590
According to this fallacy, Henry Ford raised wages so as to increase productivity
The “newspaper of record” trots out this economic fallacy: “Perhaps the most famous illustration of the benefits [of higher wages stoking the sputtering engine of economic growth] is the story of Henry Ford’s decision in 1914 to pay $5 a day to workers on his Model T assembly lines. He did it to increase production — he was paying a premium to maintain a reliable work force. The unexpected benefit was that Ford’s factory workers became Ford customers, too.”
Who says so? What is the evidence that he did this so as to increase productivity? His own claim? Why believe him?
Were his workers starving and feeble before this great generosity of his? Of course not. And, even if this were true, it by no means follows that this is the royal road to profits.
From an economic point of view, even if this were the result, it would have been in spite of this “decision” of his, not due to it.
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Magical Thinking
Posted by M. C. on August 14, 2023
Magical thinking is all around us. It is difficult to escape from it, wherever we turn.
Wokesters who favor the minimum wage can typically be relied upon to also champion foreign aid. But this is a downright self-contradiction. For if they were correct in the first of these positions, there would simply be no justification for the latter. People in poor countries, “developing” ones too, could simply be told that the foreign aid spigot was being turned off, and that they should all implement a minimum wage law, and keep raising its level until poverty was eradicated.
https://substack.com/inbox/post/136010897
“Developing” Countries
There is the fact that nations such as Cuba, Venezuela, several in Africa and south Asia, are commonly characterized as “developing.” In some cases, this is an accurate description as to what is really going on. Others of them are stuck in a rut, neither improving nor worsening. Life goes on there as it always has. But in all too many examples, this appellation is the very opposite of the truth: they are actually retrogressing.
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Why, then, call them “developing?” The hope, presumably, is that this nomenclature will affect reality. One might as well call a rainy day “sunny” in the expectation that the weather will change. If there is a dry spell, one might as well do a rain dance in order to impact the climate in that direction.
Ms.
Nor can we ignore “Ms.” in this context. At one time in our past women were referred to as Miss or Mrs. What was this distinction based upon? Marital status, of course. The former were married, the latter, not. But this distinction was seen as invidious by the forces of political correctness. Women should not be defined by marital status. Marriage, presumably, exploited women, and this was one way of reducing the sway of that evil institution.
In any case, no such distinction was made for men. Well, there was Mister for married men, Master for the unmarried ones but very few people even knew about this. The latter had to go, for obvious reasons (as are, now, grandmaster in chess, master bedroom, etc., now under attack).
White and Black
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Posted in Uncategorized | Tagged: Developing Countries, Foreign Aid, Magical Thinking, minimum wage, wokesters | Leave a Comment »
Should Minimum Wage Implementers be Jailed? – International Man
Posted by M. C. on February 5, 2022
Suppose I purchased a big powerful weapon with an indefinitely large amount of ammunition and had not only nine lives like a cat but millions of them. I then went to every potential employer of unskilled workers and made the following threat to them: employ any of these people, and I’ll shoot you. I also traveled to the inner cities and other places where unskilled workers are to be found and threatened to murder any of them who became employed.
https://internationalman.com/articles/should-minimum-wage-implementers-be-jailed/
by Walter Block
Notice the question posed above mentions implementers, not supporters. The latter consists of, what? 95% of the electorate? We can document that some 2/3 of the voters favor a minimum wage of $15. It is my estimate that virtually all voters favor this law at some level. That is, perhaps at most 5% of those who cast a ballot favor wiping this enactment entirely from the law books.
The former, in sharp contrast, consist of at most a few hundred people, perhaps 1000 at most. It would consist of all the senators and congressmen who passed this legislation, the judges who rule in its favor, the police who arrest those who violate it, and the jailers who incarcerate them.
Assume, arguendo if you must, that the effect of this legislation is not to raise anyone’s wage. Rather, it is to create unemployment for all those whose discounted marginal revenue productivity is less than the level stipulated by law. At present, federal law requires that at least $7.25 be paid to all employees. But there are some people, mainly young, minority group members, the mentally and physically disabled, whose productivity is less than that. If this law is boosted to $15, it is likely that far more people will be consigned to lives of permanent unemployment. The minimum wage is not akin to a rising floor, which raises pay scales. Rather, it resembles a hurdle over which the worker must “jump” with his productivity to obtain a job in the first place and keep it thereafter.
Remember, we are positing for the sake of argument that all of this is true and that arguments to the contrary are complete balderdash.
Assume now the entire absence of any minimum wage law (the first one in the U.S. was passed in 1938; before that, it just did not exist.) Suppose I purchased a big powerful weapon with an indefinitely large amount of ammunition and had not only nine lives like a cat but millions of them. I then went to every potential employer of unskilled workers and made the following threat to them: employ any of these people, and I’ll shoot you. I also traveled to the inner cities and other places where unskilled workers are to be found and threatened to murder any of them who became employed.
How would I be regarded? Obviously, under these assumptions, I would be a criminal. I need not ever have to pull any trigger. The mere threats that I made would render me a very serious law-breaker. I did not act in this way to benefit myself financially. I did not ask, nor demand of any of them, that they pay me a single penny. I just have a hatred for the economically “differently-abled,” and I want them to lead miserable unemployed lives. Ok, ok, I’m a bit of a weirdo, I admit it, but the economic analogy holds.
However, I am still a felon. I still had no right to assault businessmen and the unskilled in this despicable manner.
Now, let us return to the real world. Most of those who favor this legislation do so out of economic ignorance. They think this law will actually raise wages on more than a very temporary basis (when the law was last roughly doubled, from $.40 to $.75 in 1949, all elevators were manually operated; were these people fired the very next day? No. It takes a while to substitute automatic machinery for these workers).
If all supporters favor this malicious evil law, they are innocent of any crime; economic illiteracy is not criminal behavior. If they directly voted for this law, then, yes, they deserve a visit to the hoosegow, just as I did when I acted in a manner that brings about the very same result: forced joblessness for people at the bottom of the economic pyramid.
Fortunately for such voters, we have secret ballots in this country, and people are innocent of a crime unless they are proven guilty; here, we can have no proof of their vicious behavior.
But not all ballots are secret. Those that occur in our legislatures are a matter of public record. And then there are judicial findings in favor of this law, which are equally available to all and sundry. I fail to see the relevant difference between what I did in that made-up scenario and what these people are guilty of. Oh, yes, I was a criminal, and they are certainly not, given our present laws. But that is not a relevant difference. That is not justice. These people should be made to pay for their crimes.
There is all the difference in the world between me wanting to jail implementers of minimum wage laws and lefties trying to imprison climate deniers. I favor free speech for supporters of this law but not for implementers. Ditto for Nazi or Communist supporters, not for those who impose these philosophies upon others.
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The 2021 Nobel Prize and the Trend of Economic Thinking | Mises Wire
Posted by M. C. on October 13, 2021
The decreasing popularity of theory corresponds to the naïve belief that science, as Lord Kelvin famously put it, is all about measurement and that the data somehow “speak for themselves“—when in reality, empirical data are useful only in the way they are interpreted by thinking, choosing, acting human beings.
https://mises.org/wire/2021-nobel-prize-and-trend-economic-thinking
The 2021 Nobel Prize in Economics has been awarded to Berkeley’s David Card, MIT’s Josh Angrist, and Stanford’s Guido Imbens for their work on “natural experiments,” a currently fashionable approach to estimating the causal impact of one economic variable on another. Card, of course, became famous in and outside the profession for his 1994 paper with the late Alan Krueger on the minimum wage. Card and Krueger eschewed the conventional supply-and-demand analysis of the minimum wage (which predicts that, other things equal, increasing the minimum wage leads to increased unemployment) in favor of an atheoretical, empirical exercise. They compared the change in fast-food restaurant employment in New Jersey, which increased its state minimum wage, to that in neighboring Pennsylvania, which didn’t, and found no substantial differences, concluding that—contrary to the conventional wisdom among economists—minimum wages do not price low-productivity workers out of the labor market.
While the details of the Card-Krueger study are widely disputed (to put it politely), the empirical approach they championed is not. Their work helped usher in what has been called the “credibility revolution” or “identification revolution” in applied microeconomics (also called the “design-based approach” as opposed to the older, “model-based approach”). Angrist and Imbens developed econometric techniques for estimating the “treatment effects” that are central to this approach. Unlike laboratory experiments, in which subjects can be assigned randomly to treatment and control groups, with the experimenter holding all other conditions constant, observational studies require statistical tricks to satisfy the “ceteris paribus” conditions. Developing and applying these tricks has been the main focus of mainstream applied economics over the last three decades.
Despite its popularity, this approach is not without its critics. To Austrians, causality in social science is a theoretical construct, not something that can be teased out of the data without some a priori understanding of human behavior and how it affects (and is affected by) economic and social phenomena. Experimental and quasi-experimental methods may provide some limited historical-empirical insight but tend to lack “external validity,” i.e., one never knows if the results will hold up in other settings. There are plenty of mainstream critics of the overuse of natural experiments, field experiments (randomized controlled trials), and the overemphasis on identification over importance (George Akerlof calls this a bias toward “hardness”).
More generally, the newer approaches herald a declining interest in theory in favor of what might be called crude empiricism—”crude” not in the sense that the empirical methods are unsophisticated, but meaning that the underlying questions are simple, “does this x affect this y” questions that rarely involve economic ideas, constructs, or relationships at all. I have previously written about the move away from economic questions and toward issues that are “small” in the sense that they don’t involve economic principles at all. The decreasing popularity of theory corresponds to the naïve belief that science, as Lord Kelvin famously put it, is all about measurement and that the data somehow “speak for themselves“—when in reality, empirical data are useful only in the way they are interpreted by thinking, choosing, acting human beings. Author:
Peter G. Klein is Carl Menger Research Fellow of the Mises Institute and W. W. Caruth Chair and Professor of Entrepreneurship at Baylor University’s Hankamer School of Business.
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Posted in Uncategorized | Tagged: credibility revolution, Economic Thinking, minimum wage, model-based approach, natural experiments, Nobel Prize | Leave a Comment »
The Left Will Tell You That Raising the Minimum Wage Will Boost Productivity – Don’t Let That Fallacy Fool You
Posted by M. C. on June 28, 2021
In any case, if this Ford fable were true, as per The New York Times, it would undercut its support for minimum wage laws and organized labor. These would not be needed if we could rely on employers voluntarily paying increased wages so as to boost productivity.
According to this fallacy, Henry Ford raised wages so as to increase productivity
The “newspaper of record” trots out this economic fallacy: “Perhaps the most famous illustration of the benefits [of higher wages stoking the sputtering engine of economic growth] is the story of Henry Ford’s decision in 1914 to pay $5 a day to workers on his Model T assembly lines. He did it to increase production — he was paying a premium to maintain a reliable work force. The unexpected benefit was that Ford’s factory workers became Ford customers, too.”
Who says so? What is the evidence that he did this so as to increase productivity? His own claim? Why believe him?
Were his workers starving and feeble before this great generosity of his? Of course not. And, even if this were true, it by no means follows that this is the royal road to profits.
From an economic point of view, even if this were the result, it would have been in spite of this “decision” of his, not due to it.
The best estimate of productivity, indeed the only one, is actual wages paid.
Of course, there are always errors in any market comprised of flesh and blood human beings. But the incessant hunt for profits and to avoid losses ensures that there is a continually operating tendency for productivity and wages not to diverge too greatly.
See the rest here
Walter E. Block is the Harold E. Wirth Endowed Chair and Professor of Economics at the College of Business, Loyola University New Orleans, and senior fellow at the Mises Institute.
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Bernie Sanders’s case for raising the minimum wage falls apart – American Thinker
Posted by M. C. on June 3, 2021
Bernie doesn’t seem to realize that before the advent of this vicious legislation, in the 1930s, the unemployment rate of whites and blacks, youngsters and the middle-aged was about equal; all were within a few points of each other. But due to the minimum wage law, the unemployment rate of teens is double that of adults, and blacks suffer twice the rate of unemployment of whites. Black young people suffer from quadruple the unemployment rate of middle-aged whites!
Why is this? It is due to the fact that wages are not determined by employer generosity, as socialists like Bernie seem to believe. Rather, these levels are predicated upon productivity. LeBron James earns a large remuneration not because the Lakers are nice guys. The person who pushes a broom or washes dishes is at the bottom of the economic pyramid not due to skinflint bosses. Those just starting out in the labor force have lower productivity than others with more experience. The point is that black teens are priced out of the market by this malicious legislation Sanders is supporting.
“[I]n my view, it all comes down to this. Are you on the side of the working people in America who desperately need a raise? Or are you on the side of the wealthy and the powerful who want to continue exploiting their workers and paying starvation wages? It ain’t more complicated than that.”
This is a comment from my high school fellow track team buddy, the junior senator from Vermont.
Bernie Sanders is wrong; it is quite a bit more complicated than that. If it were that simple, why, oh, why do advocates of this pernicious legislation merely call for a stinking, lousy, cheap-skatey $15 per hour? Wouldn’t an hourly $25, or $50, or $150 show even more support for the working class? The senator from Vermont is forever waxing eloquent about a “living wage.” Surely these other figures are more “livable” than his $15!
But even with regard to that niggardly $15, Bernie says this: “I am offering an amendment today with Majority Leader Schumer, Senator Patty Murray, Senator Ron Wyden, and many others in this Chamber to gradually increase the minimum wage to $15 an hour by 2025.”
But why gradually? According to his lights, the poor are suffering, grievously, by presently being underpaid. Why, oh, why do they have to wait until 2025 to be completely rescued?
Senator Sanders says: “Nobody in America can survive on $7.25 an hour, $9 an hour, or $12 an hour. We need an economy in which all of our workers earn at least a living wage.” How does he square this with his espoused gradualism?
If there were someone in need of a full dose of penicillin, Dr. B. Sanders would administer it to him right away, this minute. He would not do it gradually, bit by bit, more each year until the full dose finally reached the patient in, of all years, 2025. Enquiring minds want to know about this present postponement.
In Bernie’s recent Senate speech, he also said this: “For too long, Congress has responded to the needs of the wealthy and the powerful. Now it is time to respond to the needs of working families — black and white, Latino, Native American[.]”
Bernie doesn’t seem to realize that before the advent of this vicious legislation, in the 1930s, the unemployment rate of whites and blacks, youngsters and the middle-aged was about equal; all were within a few points of each other. But due to the minimum wage law, the unemployment rate of teens is double that of adults, and blacks suffer twice the rate of unemployment of whites. Black young people suffer from quadruple the unemployment rate of middle-aged whites!
Why is this? It is due to the fact that wages are not determined by employer generosity, as socialists like Bernie seem to believe. Rather, these levels are predicated upon productivity. LeBron James earns a large remuneration not because the Lakers are nice guys. The person who pushes a broom or washes dishes is at the bottom of the economic pyramid not due to skinflint bosses. Those just starting out in the labor force have lower productivity than others with more experience. The point is that black teens are priced out of the market by this malicious legislation Sanders is supporting.
Suppose I were to pass a law saying black kids had to be paid at least $10,000 per hour. Would I be doing them a favor? Surely, people with even a modicum of common sense can see that none of them, ever, would be added to any payroll.
Bernie favors foreign aid to poor countries, right? Why not end this on humane grounds and just tell them to institute, or raise, their minimum wage levels? Evidently, he does not have all that much confidence in this nostrum of his.
All men of goodwill should use their best efforts not to raise the level of the federal minimum wage from its present $7.25, nor even to stand pat on this, nor even to lower it. Instead, they should call for its total elimination. At present, it ensures that those with productivity levels of less than that are forever unemployable. Why would anyone pay this amount to someone with a productivity level of $5? He’d lose $2.25!
Bernie has shown courage in not backing away from socialism when this policy was far less popular than at present and at calling for voting rights not only for ex-cons, but for those presently incarcerated. He should show some moxie now! His voice on this issue is so powerful that he alone can turn the tide and end the permanent unemployment of the least skillful in our society.
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TGIF: That Old Minimum-Wage Magic | The Libertarian Institute
Posted by M. C. on March 7, 2021
So someone whose productivity is below $15 won’t be hired, and those with jobs may well be fired and replaced either by people with higher skills (which is why unions support the minimum wage) or machines.
The machines are already here. The elimination of sub $15 jobs has already started. You are speeding it up when you punch in your order and use the self checkout (with no discount). Will the only hope for the low skilled worker will be local small business. How many can afford to pay inflated wages with mind boggling regulation for low/no skilled labor?
https://libertarianinstitute.org/articles/sheldon/that-old-minimum-wage-magic/
You don’t have to actually think that legislating and raising the minimum wage will help low-skilled workers earn more money. That’s not the point. The point is to display your correct political religion. Today favoring stepping the minimum wage up to $15 an hour is part of the so-called progressive dogma, or civic religion. Progressives who oppose $15 would likely have their credentials questioned or yanked. They would be branded heretics on Twitter. And religiously minded people, even if the religion is secular, rarely like heretics. They must be rooted out, shamed, and if possible, induced to recant.
What gives force to this take on the subject is that the case against legislating a minimum wage is nothing like rocket science. It’s rather simple logic. If someone can’t produce something like $15 worth of goods or services in an hour, why would a law forbidding any wage below $15 help that person? Common sense would tell almost anyone that it will be of no help whatever, and studies bear this out. You may ask how wages and productivity are determined, and the answer lies in the competitive market process. Arbitrariness is driven out by rivalry among entrepreneurs trying to maximize their profits. (More on this below.)
So someone whose productivity is below $15 won’t be hired, and those with jobs may well be fired and replaced either by people with higher skills (which is why unions support the minimum wage) or machines. Either way, that’s not good for the stated beneficiaries of the law. It wouldn’t be the first time that the stated beneficiaries of a policy turn out not to be the same as the actual intended beneficiaries. Many lies go into policy-making. Remember Bismarck’s insight that it would be better if the people didn’t see how laws and sausages are made. Better for whom?
Okay, maybe not every low-skilled worker will lose the job. Employers have avoided firing people (not necessarily a pleasant experience or good for morale) by cutting other aspects of a job. Maybe, in firms’ efforts to cut their losses, the workers will have their hours reduced so that total payrolls don’t change, or workers may lose other on-the-job opportunities and noncash benefits, such as formal training for advancement and other amenities. That’s not necessarily an improvement for low-skilled workers.
Depending on particular market conditions, companies may be able to pass a wage increase on to consumers through higher prices. But let’s not forget that many consumers also have low incomes, so where is the general gain in welfare? If people eat fast food less frequently because of the price hike, how does that help workers? One thing we can predict is that the least-efficient firms may be driven out of business, killing jobs for more than the unskilled.
The point is that Adam Smith’s invisible hand will continue to operate. Companies will find ways to avoid losing money. They aren’t charities after all; they’re businesses. If they go out of business, all their employees will lose jobs. People who want to help low-skilled individuals should find other, peaceful, ways that don’t impose requirements on others, especially when they harm the vulnerable in the process. If you really want to help, find a charity that assists the low-skilled to gain the skills they need to make higher wages. When the competition (including from small-scale self-employment and cooperative management) is free, wages tend to correspond to productivity, so the key is to improving low-skilled workers’ wages is to increase their productivity. Mucking with the price system is the wrong way to go because prices, including wages, are indispensable signals that guide our activities in a world of scarcity. If government distorts the signals (which it does in many ways), it misleads individuals as they try to improve their situations. (It’s a sobering thought that our well-being hinges on people learning to appreciate something as so seemingly boring as price theory. It’s not really boring.)
The government can help low-income by removing the myriad barriers to improvement, starting with the monopoly schools, which give no more than crumbs to kids growing up in lousy circumstances. Also on the policy hit-list should be occupational licensing, zoning and other land-use controls, intellectual property laws, and anything else that bars or impedes free-lance competition against vested business and labor interests.
This assumes the minimum wage is well-intentioned. While I’m willing to assume that most people who favor it do mean well, can that really be said for organized labor, whose members make far more than even $15 an hour? Maybe labor organizations are willing to spend so much on lobbying for the wage because they anticipate that when low-skilled workers are let go, higher skilled workers, potential union members, will take their place. We should also understand that in early days, progressives caught up in the eugenics movements favored the minimum wage as a way to keep undesirables out of the workforce.
Some defenders of the minimum wage will insist economic theory is on their side. But when will they explain how a worker who is worth $15 an hour persists in being paid less than $15? Even in our government-saturated economic system competition exists for low-skilled workers; the fast-food industry is just one example. If workers really do produce $15 worth of value in an hour, why hasn’t the wage been bid up simply through competitive hiring among all the fast-food rivals? It has not been explained why alert fast-food entrepreneurs haven’t offered a wage somewhat higher than the prevailing wage to lure the best workers. That competitive move would set in motion a rivalrous process that would culminate in $15, if that is indeed the magic number under current circumstances. It seems unlikely that every fast-food owner and manager in the country once met in a room somewhere and agreed not to pay more than, say, $10. So what’s the theory? Keep in mind that many fast-food and other low-skilled workers already earn more than the legislated minimum, $7.25. Ask yourself why.
There is no theory. Rather, as I said at the top, it’s a religious creed and nothing more. Questioning it is a sin. But obviously it’s not harmless. As one economist put it, the minimum wage has the same effect as a law banning low-skilled people working. Who would support that?
TGIF–The Goal Is Freedom–appears on occasional Fridays.
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McDonald’s Response to Minimum Wage Hikes Totally Undercuts the ‘Fight for $15,’ New Study Shows – Foundation for Economic Education
Posted by M. C. on March 3, 2021
This is exactly the mistake made by minimum wage advocates. They see only the nominal rise in workers’ weekly paychecks that a government mandated wage increase can bring. Yet they fail to see beyond that. They fail to consider the future workers who will not be hired at all and the millions of minute price increases that would largely erase nominal wage gains regardless.
Brad Polumbo
The push for a $15 federal minimum wage continues across the country. But new research shows that if the “Fight for $15” wins, the biggest loser may just be your wallet next time you want to chow down on a Big Mac or Egg McMuffin.
A recently-released study reveals that past minimum wage hikes resulted in much higher menu prices for consumers.
Princeton economist Orley C. Ashenfelter and Czech economist Štěpán Jurajda studied price and wage data from almost every McDonald’s restaurant in the US. They found a “full or near-full price pass-through of minimum-wage-induced higher costs of labor.” In English, this means that by vastly increasing production costs, minimum wage hikes resulted in an equivalent increase in menu prices.
A Nominal Minimum Wage Increase Doesn’t Actually Mean Workers Are Better Off
What does this mean?
Well, minimum wage hikes are intended to help workers. Proponents say that everyone deserves a “living wage” and argue that a government-mandated wage increase will mean higher wages for workers. In contrast, the most common counterpoint against minimum wage increases is that they lead to unemployment. This is indeed true, and the nonpartisan Congressional Budget Office estimates that a $15 federal minimum wage would eliminate at least 1.4 million jobs.
However, the McDonald’s example reminds us that there’s another angle to this debate as well. Even if minimum wage hikes didn’t shed jobs, they would still cause harm in other ways.
Supporters of hiking the minimum wage point to workers’ nominal wages and argue, correctly, that some workers would see higher numbers on their checks every week. However, nominal figures aren’t actually what matter. A worker’s real income and standard of living is best measured by the purchasing power of their wages.
If a McDonald’s cashier’s take-home pay increases 20% after a minimum wage hike, but the prices for the food and other things they spend their wages on increase by a similar amount, they aren’t actually any better off.
This would happen throughout the economy, not just in fast food.
One poignant example comes courtesy of the Heritage Foundation’s Rachel Grezler, who studied how minimum wage hikes would impact the cost of childcare; an enormous expense for many working-class families.
“Childcare costs would increase by an average of 21 percent—an extra $3,728 per year for two children—and up to 43 percent, or more than $6,000, in some states,” Heritage reports. “The impacts would be greatest in lower-cost areas; in Louisiana, Oklahoma, and Mississippi, costs would surge between 37 percent and 43 percent.”
So, much to the chagrin of progressive legislators hawking minimum wage hikes, working parents wouldn’t actually be helped by a nominal rise in their weekly paycheck, because it would simply lead to higher prices for the goods and services they rely on.
Minimum Wage Advocates Obsess on the Seen and Ignore the Unseen
So why do proponents of minimum wage hikes continue to push the policy despite these realities? It’s simple: They fall victim to the tragically widespread fallacy, first identified by economist Frederic Bastiat, of focusing on the seen and ignoring the unseen.
In explaining Bastiat’s theory, economist Henry Hazlitt decried the “persistent tendency of men to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups.”
Hazlitt called this “the fallacy of overlooking secondary consequences.”
This is exactly the mistake made by minimum wage advocates. They see only the nominal rise in workers’ weekly paychecks that a government mandated wage increase can bring. Yet they fail to see beyond that. They fail to consider the future workers who will not be hired at all and the millions of minute price increases that would largely erase nominal wage gains regardless.
As McDonald’s response to minimum wage hikes clearly shows, there’s no such thing as a free lunch. That’s why the “Fight for $15” would hurt most the very same working Americans it’s meant to help—who’d be stuck paying more for their next Big Mac, McFlurry, or (overrated) McDonald’s french fries.
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EconomicPolicyJournal.com: Biden’s Chief Economist at the Department of Labor Appears to Have No Understanding as to What Causes High Black Unemployment
Posted by M. C. on February 27, 2021
And there you have it, Biden’s pick for chief Labor economist, confused about the basics of how minimum wage laws cause damage.
https://www.economicpolicyjournal.com/2021/02/bidens-chief-economist-at-department-of.html
Joe Biden has appointed 36-year-old Janelle Jones as the Department of Labor’s chief economist.
Bloomberg reports:
For more than a decade in government and research organizations, Jones has focused on finding out why Black people were falling behind in the labor market. She coined the phrase “Black Women Best” to drive home the idea that if policies are crafted to help this historically disadvantaged group, they would help all workers.
“When I see that it’ll take four to five years for the economy to return to full employment, what I’m thinking is that it’ll take Black workers 10 or 12 years,” Jones said. “My role here will be to think about those sorts of things, to give a lens to union workers, low-wage workers, different types of workers who aren’t usually centered.”
But her writing appears to chiefly focused on reporting on new data studies on the differences between black unemployment and white unemployment.
There are these, for example:
- Black unemployment is at least twice as high as white unemployment at the national level and in 12 states and D.C.
- Despite overall unemployment under 4 percent, black unemployment exceeds 6 percent in 14 states and D.C.
- Unemployment of black and Hispanic workers remains high relative to white workers
Again, these are all collections of data without any discussion of what causes high unemployment among blacks. There is never a mention, for example, of the high minimum wage as a factor which makes it difficult for black teenagers to get that all important first job.
Bizarrely, one of her few writings which go beyond data collection reports is an essay supporting increased minimum wages—which causes higher black unemployment!:
At the beginning of 2018, 18 states will increase their minimum wage, providing about $5 billion in additional wages to 4.5 million workers across the country. In a majority of these states, minimum wage increases (ranging from $0.35 in Michigan to $1.00 in Maine) are the result of legislation or ballot measures approved by voters in recent years. Eight of these states (Alaska, Florida, Minnesota, Missouri, Montana, New Jersey, Ohio, and South Dakota) will have smaller automatic increases that adjust the minimum wage to keep pace with price growth. This automatic inflation adjustment preserves the buying power of the minimum wage, which has steadily eroded over time.
And there you have it, Biden’s pick for chief Labor economist, confused about the basics of how minimum wage laws cause damage.
As Thomas Sowell put it:
The minimum wage law is very cleverly misnamed. The real minimum wage is zero – and that is what many inexperienced and low-skilled people receive as a result of legislation that makes it illegal to pay them what they are currently worth to an employer.
Most economists have long recognized that minimum wage laws increase unemployment among the least skilled, least experienced, and minority workers. With a little experience, these workers are likely to be worth more. But they cannot move up the ladder if they can’t get on the ladder.
For a full discussion of how the minimum wage hurts everyone, including those who receive the nominal pay wage, see: Understanding the Numerous Problems With Minimum Wage Laws.
–RW
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