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Posts Tagged ‘minimum wage’

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/

by Sheldon Richman

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.

https://fee.org/articles/mcdonald-s-response-to-minimum-wage-hikes-totally-undercuts-the-fight-for-15-new-study-shows/

Brad Polumbo
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. 

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. 

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:

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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Minimum Wage, Maximum Discrimination | Mises Wire

Posted by M. C. on February 27, 2021

So does history. As Princeton’s Thomas Leonard has demonstrated in his book Illiberal Reformers: Race, Eugenics, and American Economics in the Progressive Era, the early minimum wage advocates saw it as a prime tool to exercise “dominion and discrimination” over those they deemed ill-suited to reproduction. The minimum wage was well suited to perform the Progressives’ dirty work of discriminating against (what they considered) the least productive by making them unemployable.

It has been over a hundred years since the Progressive Era. But the laws of economics haven’t changed. The only question is: Have we? Author:

https://mises.org/wire/minimum-wage-maximum-discrimination

Caleb Fuller

Since the days of Adam Smith, economists have sought a set of social institutions which permit “neither dominion, nor discrimination,” to use Nobel Prize–winning economist James Buchanan’s phrase. In this, economists are joined by all people of goodwill—including those in the Biden administration, which has enshrined equity and inclusion as cornerstones of how they’ll govern.

What separates the economist from other social do-gooders, however, is an unflinching focus on the means used to achieve noble goals. It’s therefore with alarm that I consider the Biden administration’s dual focus on “diversity and equity” and its doubling down on the “fight for $15.” I’m alarmed because the minimum wage impedes our ability to foster a society genuinely built on “diversity and equity.”

Here’s the straight talk on the minimum wage that you probably didn’t learn in school: the minimum wage has been a powerful weapon in the arsenal of racists and bigots. Economists have illuminated the devastating effects of the minimum wage on minorities with empirical evidence and entire books on the subject, but to see one reason why the policy targets minorities, first consider a little basic economics.

Consider the demand side of the labor market. Firms will hire fewer workers if the government criminalizes voluntary agreements to work for less than $15 per hour. This is an uncontroversial point to make about virtually any other market. If the price of apples doubles, people buy fewer apples. They buy more oranges instead. Employers do the same thing. Under the minimum wage, they start buying more machinery, like the kiosks you see in Panera. The upshot: fewer jobs.

Now let’s consider the supply side of the labor market, where the higher minimum wage attracts new workers to the labor market—those, like college students, who might have sat on the sidelines otherwise. The upshot: more job seekers.

Fewer jobs plus more job seekers means that more people will be searching for jobs than there are jobs available—a labor surplus. In other words, the minimum wage creates a “buyer’s market” in labor, because it causes job seekers to line up in front of employers who have limited jobs to offer.

Suppose an employer receives a hundred applicants for a job opening. How does he choose whom to hire? Without the minimum wage, whoever wants the job most will outcompete other jobseekers by offering to work for less.

With a minimum wage, the employer can’t say: “Who will work for $14.95?” If he does, he’s a criminal; he literally violates the law. Since he can’t just pick the most eager job seekers, he needs some alternative way to select from his hundred applicants. When you have a surplus of labor in a market with a minimum wage, prices aren’t allowed to adjust, so the employer picks from that surplus based on personal preferences. These may include race, sex, gender, religion, or other personal characteristics that have little to do with productivity. In fact, in the past, it has included just that. Faced with more job seekers than there are jobs available, a bigoted employer bears little cost when he refuses to hire a member of a group he dislikes. He knows someone else in the applicant pool will be from his preferred group.

In a market without a minimum wage, when an employer turns down an applicant to satisfy his bigoted tastes, he doesn’t have ninety-nine other job seekers to choose from. There’s no labor surplus. If he chooses to indulge his bigoted tastes, the job remains unfilled for longer, which means less money for our racist employer. Consider that in the United States the African American teenage male unemployment rate was lower than the white teenage male unemployment rate through the late 1940s. The 1950s saw the single largest increase (in percentage terms) of the minimum wage. The reasoning I just gave explains why the African American teen joblessness rate then soared above that of whites. That gap remains to the present day. Like Adam Smith, James Buchanan, and the Biden administration, I too desire a society where the power of bad people to exercise “dominion or discrimination” is constrained, even eliminated. Presumably, my fellow Pennsylvanians do too. The fact that nearly two-thirds of them (and 89 percent of liberals) support a $15/hour minimum wage is therefore troubling. My fellow citizens should consider whether this policy facilitates or impedes the ability of bad men to do harm. Economics says it facilitates.

So does history. As Princeton’s Thomas Leonard has demonstrated in his book Illiberal Reformers: Race, Eugenics, and American Economics in the Progressive Era, the early minimum wage advocates saw it as a prime tool to exercise “dominion and discrimination” over those they deemed ill-suited to reproduction. The minimum wage was well suited to perform the Progressives’ dirty work of discriminating against (what they considered) the least productive by making them unemployable.

It has been over a hundred years since the Progressive Era. But the laws of economics haven’t changed. The only question is: Have we? Author:

Caleb Fuller

Dr. Caleb Fuller is assistant professor of economics at Grove City College. He has published papers in Public Choice, the International Review of Law and Economics, the European Journal of Law and Economics, the Review of Austrian Economics, and others.

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The High Cost of Using the Minimum Wage as a Form of Welfare | Mises Wire

Posted by M. C. on February 20, 2021

Another important finding is that employers often respond to higher mandated wages by replacing low wage workers with those who have more education, skills and experience which make them more productive. This adjustment may have little effect on the observable employment numbers, but the effect is devastating for those who are replaced. Employers can be forced to pay higher wages, but they can’t be forced to hire or retain employees whose contributions don’t match the higher wage.

https://mises.org/wire/high-cost-using-minimum-wage-form-welfare

Martin Jones

In recent years a number of economic studies have concluded that small to moderate increases in the minimum wage do not necessarily cause a discernible decline in employment. Social activists have seized on these findings to argue that there are no job losses and that it is possible to increase mandated wages by almost any amount without ill effects. The result has been a rush to raise the minimum wage to $15 in a number of states and cities and now at the national level.

The reality is that there is little consensus among economists about the effects of the minimum wage on aggregate employment. In their 2014 book What Does the Minimum Wage Do? Dale Belman and Paul Wolfson survey over two hundred minimum wage studies and conclude that moderate increases can raise the wages of low-income workers without significant employment effects. A 2019 paper by economist Jeffery Clemens is a shorter survey of many of the same studies. It concludes that the case for large increases (an increase from $7.25 to $15 would qualify) “is either mistaken or overstated” and adds that “[i]n contrast to the research emphasized by advocates, the broader body of work regularly finds that increases in minimum wages cause job losses for individuals with low skills.”

In a January 2021 study, economists David Neumark and Peter Shirley assembled “the entire set of published studies in this literature” and conclude that “there is a clear preponderance of negative estimates“ and that the evidence is particularly strong for teens, young adults, and the less educated—exactly the results economic theory would predict.

In the face of competing complex statistical analyses that may reach contradictory conclusions, voters and legislators should be aware that findings about the effects of wage increases on the unemployment rate often ignore or obscure other significant consequences. For example, small increases don’t always have a discernible effect on employment, because employers try to make other adjustments before laying off workers they are happy with and need. One of the first adjustments is to raise prices, the success of which depends on the competitive environment and the flexibility of demand for their products or services.

Along with price increases, employers may reduce hours, and Belman and Wolfson note that “[i]t has long been suggested that employers may respond to minimum wage increases by reducing spending on training, fringe benefits and working conditions valued by employees.”

Another important finding is that employers often respond to higher mandated wages by replacing low wage workers with those who have more education, skills and experience which make them more productive. This adjustment may have little effect on the observable employment numbers, but the effect is devastating for those who are replaced. Employers can be forced to pay higher wages, but they can’t be forced to hire or retain employees whose contributions don’t match the higher wage.

Some studies (see Clemens 2019) suggest that the pace of job creation slows when mandated wages rise. The increases also accelerate automation, which reduces the number of entry-level jobs and further penalizes those whom the increases are meant to help. In coming years, the combined effect of substitution, slower job creation, and accelerated automation is likely to be a growing core of workers, many of whom are young and poorly educated, who are unemployed and unemployable.

Social activists and progressive editorial boards now regard the minimum wage as another welfare program that can reduce the costs of programs like Medicaid and food stamps, and can reduce inequality. But the minimum wage is very poorly targeted for these purposes. The Congressional Budget Office estimates that “roughly 40 percent of workers directly affected by the $15 option in 2025 would be members of families with incomes more than three times the federal poverty level.” If the goal is to aid low-wage households, rather than teenagers and other part-time workers in middle-income and affluent families, expanding the Earned Income Tax Credit would be far more effective, because it is designed to aid the working poor.

The national minimum wage was established in 1938, and along with periodic increases has become widely accepted as desirable public policy. But it has also become a textbook example of the failure to think separately and equally about ends and means. If there is a public consensus that low-income families should receive additional aid, that policy should be paid for by the public, not by private businesses, many of which will try to offset the higher costs by raising prices to consumers and cutting employee hours and benefits, and some of which won’t survive with higher mandated costs that they can’t adequately offset.

The notion that third parties can pick the right starting wage for every employee, in every job, in every business, in every industry is folly. Those who support increases in the minimum wage do so with the best of intentions, but they should be aware of the substantial hidden costs and negative consequences which are often ignored in the public debate and should be aware that there are much better alternatives for helping those in need. Author:

Martin Jones

Martin Jones is a financial analyst and investment manager, and a former Senior Managing Director in the investment division of US Bank.

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Minimum Wage

Posted by M. C. on February 17, 2021

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Biden Seeks to Finish off Struggling Business Owners | Mises Wire

Posted by M. C. on February 3, 2021

Back in January of 2019, an article on the U.S. News website made this very point:

MORE THAN three-quarters of restaurants in New York City have reduced employee hours since the minimum wage was increased to $15 per hour.

In a survey by The NYC Hospitality Alliance, 76.5 percent of full-service restaurant respondents said they had to reduce employee hours and 36 percent said they eliminated jobs in 2018 in response to the mandated wage increase.

The minimum wage debate, although having been refuted time and time again, continues to be brought up by progressives and those who tend to lack a basic understanding of economics. While there’s nothing wrong about lacking any knowledge in economics, Rothbard put it best,

It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a “dismal science.” But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.1

https://mises.org/wire/biden-seeks-finish-struggling-business-owners

David R. Iglesias

If business owners were hoping to catch a break in 2021 after having been completely victimized by government lockdown procedures and left-wing rioting, they may want to brace themselves for another turbulent year as the Biden administration begins its reign in the White House. While revealing his new $1.9 trillion plan for combatting covid-19, Biden included raising the federal minimum wage to $15 an hour—one of the oldest and most debated topics in the subject of economics.

The minimum wage debate, although having been refuted time and time again, continues to be brought up by progressives and those who tend to lack a basic understanding of economics. While there’s nothing wrong about lacking any knowledge in economics, Rothbard put it best,

It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a “dismal science.” But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.1

It becomes even more irresponsible when we are talking about attempting to force business owners to raise their costs of production after having seen the enormous hit they took last year. The Washington Post reported that more than a hundred thousand small businesses closed forever back in May of 2020. In September, Yelp provided data showing that 60 percent of business closures were permanent—60 percent meaning 97,966 businesses. There’s no doubt that the remaining small businesses saw a major hit in both revenue and profits as they were forced by government officials to scale back operating capacity, increase costs for sanitization equipment, adapt to changes in consumer behavior during the covid-19 outbreak, or simply remain closed for extended periods of time. Now, many of those same politicians want to significantly raise the total cost of production for these struggling businesses by increasing their cost of labor to a minimum of $15 an hour.

Trust the Science

Even on its face, this is a bad idea. In fact, since everybody now believes in “following the science,” over 70 percent of economists surveyed in 2019 agreed that the federal minimum wage should not be raised to $15. Only 6 percent believe that “is a very efficient means to target individuals in poverty.” However, we don’t need to only rely on popular opinion to understand that this is a terrible idea. If one were to imagine a supply and demand curve, one could easily see that as the cost of labor increases, the quantity demanded decreases while the quantity supplied (or those seeking a job) increases. The equilibrium point is where the two curves cross. Placing a price floor doesn’t change the curves themselves but simply creates a new point at which the supply of labor does not meet the demand for labor: the gap between those points is the unemployment created by the wage policy. Anybody who has taken an econ 101 course has seen this.

It is frequently argued that minimum wage laws raise wages—this may be true for some, i.e., those who keep their jobs, but it is untrue for those who either become unemployed or are never able to be employed in the first place. In other words, the workers for whom the wage increase applies gain at the cost of those who lose out on their wages entirely. Another common scenario that the untrained eye misses is the change in hours that employees work. While they may get a raise in hourly wages, there is no guarantee that workers will still see an increase in total wages earned, i.e., in their actual paychecks. Back in January of 2019, an article on the U.S. News website made this very point:

MORE THAN three-quarters of restaurants in New York City have reduced employee hours since the minimum wage was increased to $15 per hour.

In a survey by The NYC Hospitality Alliance, 76.5 percent of full-service restaurant respondents said they had to reduce employee hours and 36 percent said they eliminated jobs in 2018 in response to the mandated wage increase.

People aren’t like blocks of wood that can simply be chipped away at by certain policies. They respond and react to situations as they happen. Whether the jobs become automated or hours are decreased, businesses will adapt so they can keep from operating at a loss and going under.

Biden’s plan to raise the federal minimum wage to $15 across the country is also treating the entire nation as if it were one homogenous entity. It treats states like California the same as states like Idaho. One-size-fits-all policies tend to be disastrous and dangerous, because they fail to take into account the countless factors that distinguish one individual or culture from another. Politicians in Washington, DC, are so disconnected with those living in states on the other side of the country. Trying to dictate how people do business with each other in a place that you spend little to no time in is absurd.

The Minimum Wage Law is Antithetical to Current Left-Wing Rhetoric

Additionally, the minimum wage law goes against some major points of concern that are found within current left-wing rhetoric. With the recent purging of Donald Trump along with many who fall even slightly to the right of Bernie Sanders or Alexandria Ocasio-Cortez from social media, it’s become fashionable for progressives and left-wing types to argue that Facebook and Twitter are “private companies so they can do what they want” against those who have been outraged by such deplatforming. It’s safe to say that nobody should expect this newly adopted principle of private property to be truly embraced by the Left and those who are happy to see the silencing of their enemies. However, despite the insincerity of those who are wielding this point, it does stand true that if we really believe in private property and self-ownership, it must therefore be acceptable for business owners to set the wages and rules for employment with their businesses. Just like Facebook can remove somebody from their platform, an employer should be allowed to hire whomever at whatever wage they both agree to.

Another rhetorical point is that of institutional racism. Justification for the left-wing destruction of cities and private businesses came from it being an act of antiracism. If we want to really stamp out racism and racist policies set forth by the government, minimum wage laws have to go. Thanks to the work of two indispensable economists, Thomas Sowell and the late, great Walter E. Williams, minimum wage laws have been exposed as some of the most racist and sinister policies. A popular tool used by white labor unions, minimum wage laws once helped keep black laborers out of jobs, protecting white workers. Those who have been the most negatively impacted by minimum wage laws—whether unintentionally or not—are young black teens.

A third issue that is continually brought up by progressives is the growing disparity between the rich and the poor. It is constantly pointed out that wealth is being transferred from the working class to the power elites. Ironically, they miss who really stands to benefit from raising the minimum wage: big businesses like Amazon and Google who can afford to pay such high wages. Massively successful firms are oftentimes at a greater advantage over smaller ones, because they are more capable of paying higher wages or offering more benefits. If the government demands that all employees be legally guaranteed a $15 minimum wage, small businesses like restaurants are going to take more of a blow than corporations like Amazon. This will put small businesses out of the marketplace, leaving only the big corporations to reap all the profits. If Biden goes through with his plan to federally mandate a minimum wage of $15, he will be showing small business owners that he either doesn’t have the slightest idea how disastrous his policies will be for them or that he simply doesn’t care.

Author:

David R. Iglesias

David Iglesias is a writer and undergraduate student majoring in Economics in Utah.

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EconomicPolicyJournal.com: More Evidence of Treasury Secretary Janet Yellen as a Simple Political Lackey

Posted by M. C. on February 2, 2021

https://www.economicpolicyjournal.com/2021/02/more-evidence-of-treasury-secretary.html

Janet Yellen

Last week, during her confirmation hearing, to become Treasury Secretary, Janet Yellen told the Senate Finance Committee that analysis of states that boosted the minimum wage showed that job losses are “minimal, if anything.”

“Very minimal,” Yellen added in reply to a question by South Carolina Sen. Tim Scott

She knows better than this.

A Wall Street Journal editorial points out that during a Congressional hearing in 2014 when she was asked about Barack Obama’s proposal to raise the federal minimum wage to $10.10, she said, “I think almost all economists think that the minimum wage has two main effects.”

One, she pointed out, is increasing pay for some low-paid workers, and the second is “there would be some amount of negative impact on employment.” How much is a matter of “considerable debate,” she said, adding that she “wouldn’t argue” with the Congressional Budget Office estimate that Obama’s hike would cost 500,000 jobs.

Now, she thinks job losses would be minimal if anything, yeah right.

The Journal editorial nailed what is really going on:

Ms. Yellen no doubt feels she has to sell her new boss’s economic policies, and on Tuesday she also endorsed his gigantic Covid relief bill of $1.9 trillion. The huge increase in the federal debt held by the public, which is already about 100% of the economy and rising, is no longer of much concern to America’s political class. But the main message of Ms. Yellen’s testimony is that she is no longer speaking as an economist. She’s a politician.

The big problem with all this is that 2021 is destined to be a year with one economic storm after another. Biden has named two weak economic advisers, one at the National  Economic Council and one at the Council of Economic Advisers. They are very quickly going to be in way over their heads. 

The only individual in the room during a crisis with any sense of how the economy works will be Yellen, but if she plays the role of the spineless lackey, and yields to the ideas of Senile Joe and his political controls, the economy could be driven off a cliff to the degree that 2020 might end up looking like the roaring ’20s compared to 2021. 

RW

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Erie Times E-Edition Article-Pennsylvania’s minimum wage is the lowest in the region. Advocates tell lawmakers an increase is overdue.

Posted by M. C. on January 22, 2021

‘Many of Pennsylvania’s most essential workers do not make enough to pay their basic living expenses, including people who care for our young children and elderly parents, those who keep our hospitals and stores clean, and so many more,’ Collett said.

Raising the expense to hire workers or just stay in business when at the same time the government is locking down people and hobbling or destroying existing businesses (except of the course the business of government).

This makes sense to government people.

Your favorite local small business guy will suffer the most. How many customers will pay a decent tip to someone making $15/hr at a business that just had to raise prices and decrease service?

https://erietimes-pa-app.newsmemory.com/?publink=04811986b

Chris Ullery Bucks County Courier Times | USA TODAY NETWORK

Democratic lawmakers heard from advocates, academics and business groups Monday on a renewed push to give minimum wage workers in Pennsylvania a raise to $15 an hour.

Over 100 people attended the Zoom hearing on minimum wage hosted by the Pennsylvania Senate Democratic Policy Committee, covering a broad range of topics over three hours.

The state has used the $7.25 per hour federal minimum wage since 2009, a wage that many lawmakers and advocates say is unlivable and perpetuates poverty.

‘It is unacceptable that Pennsylvania continues to allow its minimum wage to be the poverty wage of $7.25 an hour,’ Sen. Art Haywood, D-4, representing parts of Montgomery and Philadelphia counties.

‘We hold this hearing today on Martin Luther King, Jr. Day of service to continue the work that Dr. King started demanding dignity and respect for all workers, and that starts by paying workers a living wage,’ Haywood added.

Testimony from members of groups like the Pennsylvania Budget and Policy Center, Businesses for a Fair Minimum Wage and Bucks County Women’s Advocacy Coalition said a raise for low-income earners is needed now more than ever.

‘These wages have not changed for over 13 years, keeping thousands of workers living below the poverty level,’ said Jacqui Rogers, a living wage tracker and partner with the Bucks County coalition.

‘Over 60% of minimum wage workers are women, many of whom are primary wage earners in the household — they are not teenagers,’ Rogers added.

Democratic lawmakers have long supported increases to the minimum wage, the most recent push in the form of a renewed Senate Bill 12 introduced last year.

Originally introduced by Sen. Christine Tartaglione, D-2, of Philadelphia, the bill would immediately raise the state’s minimum wage to $12 an hour for all workers.

The bill would also increase the minimum wage to $15 an hour by 2027, and eliminate the $2.85 hourly tipped minimum wage for jobs like food servers in the commonwealth.

‘It’s time we break the cycle of poverty in Pennsylvania and make an investment in our economic future,’ Tartaglione said Monday.

Tartaglione was a primary sponsor of a 2006 bill that increased the minimum wage from $5.15 an hour to $7.15 an hour.

The increase appears to be the first time Pennsylvania had a minimum wage higher than the federal rate since 1968, data from the U.S. Department of Labor show.

That rate was short lived, however, as the federal wage began increasing annually the following year to transition into the current hourly wage.

At least 29 states in 2020 had a minimum wage rate higher than $7.25 an hour, including New Jersey, $11; Delaware, $9.25; Ohio, $8.70; Maryland, $11; and New York, $11.80.

Sen. Maria Collett, D-12, of Lower Gwynedd, joined others Monday saying that the COVID-19 pandemic has shown minimum wage workers are a vital part of society and should be paid accordingly.

‘Many of Pennsylvania’s most essential workers do not make enough to pay their basic living expenses, including people who care for our young children and elderly parents, those who keep our hospitals and stores clean, and so many more,’ Collett said.

While most were in favor of a wage increase, Gene Barr, president and CEO of the PA Chamber of Business and Industry, said the minimum wage increase is a ‘blunt instrument’ to solve a complex problem.

Small businesses and workers ‘with more limited skill sets’ would ultimately see staff reductions and fewer job opportunities in Pennsylvania with a $15 minimum wage.

‘We don’t believe it’s the most effective way of driving assistance to those who truly need it,’ Barr said.

Barr’s testimony saw pushback from both sides of the committee dais throughout the hearing.

Sen. Steve Santarsiero, D-10, of Lower Makefield, said he believed many minimum wage workers had multiple jobs, skewing claims of overall job loss.

Alissa Barron-Menza, vice president of Business for a Fair Minimum Wage, supported that claim, saying job loss from wage increases was more akin to a ‘consolidation’ to a single job.

One of the earliest versions of the country’s minimum wage laws came out of the National Industrial Recovery Act of 1933, part of President Franklin D. Roosevelt’s New Deal during the Great Depression.

Roosevelt had

described provisions of that act for salary standards as a ‘living wage’ as part of a goal that ‘nobody starve in this country.’

Across the region At least 29 states in 2020 had a minimum wage rate higher than $7.25 an hour.

New York

$11.80

New Jersey

11

Maryland

11

Delaware

9.25

Ohio

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EconomicPolicyJournal.com: Minimum Wage Hikes Kick in Across the Country—at the Worst Possible Time for Small Businesses

Posted by M. C. on January 10, 2021

Many of these same small businesses teetering on the brink of collapse are about to get slapped in the face with surging labor costs. A total of 20 states had minimum wage hikes take effect this month as part of scheduled ramp-ups.

These might not sound like massive hikes in absolute terms, but you have to think of it like this. Payroll is often one of the largest expenses small businesses have—and it may have just arbitrarily spiked by 5 to 15 percent.  

The timing here could not be worse. 

https://www.economicpolicyjournal.com/2021/01/minimum-wage-hikes-kick-in-across.html

By  Brad Polumbo

2020 was one of the worst years in modern American history for small businesses. And now, thanks to a wave of minimum wage legislation that kicked in on January 1, things are about to get even worse.

Make no mistake: small business owners are already seriously hurting. 

When state and local governments responded to the outbreak of COVID-19 in the spring with harsh lockdowns and restrictions, businesses were forced to shutter. Many in the restaurant and hospitality industry remain shut down many months later, or were briefly allowed to reopen then shut down again this fall. Meanwhile, much of the taxpayer-financed aid meant to help these businesses was instead captured by big corporations or lost to fraud and waste

To add insult to injury, thousands of small businesses were vandalized and looted during the summer unrest after the death of George Floyd. (No, insurance doesn’t eliminate the harm).

At least 100,000 small businesses that were forced to close in 2020 will not reopen, according to Yelp. In a recent survey, almost 60 percent of small business owners said that they don’t expect their enterprise to survive through June 2021.

Many of these same small businesses teetering on the brink of collapse are about to get slapped in the face with surging labor costs. A total of 20 states had minimum wage hikes take effect this month as part of scheduled ramp-ups.

“New Mexico will see the largest jump, adding $1.50 to its hourly minimum and bringing it up to $10.50,” the Hill reports. “Arkansas, California, Illinois and New Jersey will each increase their minimum wages by $1.”https://platform.twitter.com/embed/index.html?creatorScreenName=feeonline&dnt=false&embedId=twitter-widget-0&frame=false&hideCard=false&hideThread=false&id=1345953362878074881&lang=en&origin=https%3A%2F%2Ffee.org%2Farticles%2Fminimum-wage-hikes-kick-in-across-the-country-at-the-worst-possible-time-for-small-businesses%2F&siteScreenName=feeonline&theme=light&widgetsVersion=ed20a2b%3A1601588405575&width=550px

Additionally, many localities have enacted area-specific minimum wage hikes. For example, Flagstaff, Arizona just raised its minimum wage to $15 an hour while Belmont, California just upped its rate to $15.90 an hour.  

These might not sound like massive hikes in absolute terms, but you have to think of it like this. Payroll is often one of the largest expenses small businesses have—and it may have just arbitrarily spiked by 5 to 15 percent.  

The timing here could not be worse. 

“A dramatic increase in the minimum wage even in good economic times has been shown to be harmful,” Employment Policy Institute Managing Director Michael Saltsman said. “In the current climate, for many employers it could be the final nail in the coffin.”

And employees will suffer perhaps just as much as employers. Even though they’re ostensibly meant to uplift workers, increases in the minimum wage always and inevitably hurt more than they help.

Why? A wage is important for the living standards of the worker, but that isn’t its only important aspect. A wage is a price. Prices are essential for order in an economy, so price controls throw markets into chaos.

“By the simplest and most basic economics, a price artificially raised tends to cause more to be supplied and less to be demanded than when prices are left to be determined by supply and demand in a free market,” famed free-market economist Thomas Sowell explained in his book Basic Economics. “The result is a surplus, whether the price that is set artificially high is that of farm produce or labor.”

 “Making it illegal to pay less than a given amount does not make a worker’s productivity worth that amount— and, if it is not, that worker is unlikely to be employed,” Sowell writes. “Unfortunately, the real minimum wage is always zero, regardless of the laws, and that is the wage that many workers receive in the wake of the creation or escalation of a government-mandated minimum wage, because they either lose their jobs or fail to find jobs when they enter the labor force.” 

Thus, as free-market economist Murray Rothbard put it, the minimum wage amounts to outlawing jobs:

“In truth, there is only one way to regard a minimum wage law: it is compulsory unemployment, period. The law says: it is illegal, and therefore criminal, for anyone to hire anyone else below the level of X dollars an hour. This means, plainly and simply, that a large number of free and voluntary wage contracts are now outlawed and hence that there will be a large amount of unemployment. Remember that the minimum wage law provides no jobs; it only outlaws them; and outlawed jobs are the inevitable result.”

 So, it’s no surprise that the nonpartisan Congressional Budget Office projects that a national $15 minimum wage would destroy up to 3.7 million jobs. Of course, these hikes aren’t nationwide, and many aren’t quite up to $15 yet. Nonetheless, struggling small businesses already have so little wiggle room in their budgets and are on the brink of collapse. Thus the negative effect minimum wage hikes have on local economies will be severe.

Of course, there’s little doubt that the legislators who enacted these pre-planned minimum wage hikes hoped to help workers, not put them out of work amid an economic crisis. But the laws of basic economics are unmoved by compassionate hand-wringing—and good intentions never guarantee good results.

Brad Polumbo (@Brad_Polumbo) is a libertarian-conservative journalist and Opinion Editor at the Foundation for Economic Education. The above originally appeared at FEE.org.

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