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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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Determined To Kill Businesses That Survived Lockdowns, New York Plans Minimum Wage Hike Later This Month

Posted by M. C. on December 18, 2020

I might buy some moving company stock.

Determined To Kill Businesses That Survived Lockdowns, New York Plans Minimum Wage Hike Later This Month

Eric Boehm

In an apparent effort to finish off the businesses that survived the nightmare that was 2020, New York will go ahead with a planned minimum wage increase at the end of the month.

The New York Department of Labor announced Wednesday that it will move forward with plans to hike the state’s minimum wage on December 31. Under the state’s phased-in minimum wage increase that started in 2016, businesses in New York City are already required to pay workers a minimum of $15 per hour. On December 31, the minimum wage in Long Island and Westchester County will increase by $1 to $14 per hour, and the minimum wage across the rest of the state will jump from $11.80 to $12.50 per hour.

The Labor Department had considered postponing the minimum wage hikes in light of the COVID-19 pandemic and associated government-mandated shutdowns that have crushed businesses across New York. The unemployment rate in New York state has been above 10 percent nearly every month since March, and as many as one-third of New York City’s small businesses may have permanently closed due to the pandemic. With new statewide economic lockdowns announced in recent weeks (and Gov. Andrew Cuomo threatening even more in the near future), those figures are likely to get gloomier before they improve.

Seems like a great time to make it more expensive to employ people, right?

Greg Biryla, New York director of the National Federation of Independent Business (NFIB), told the Rochester Democrat & Chronicle that the Cuomo administration’s reasoning for approving the minimum wage hike “defies logic.” Even with assistance from the state and federal governments, 39 percent of NFIB members say they could be out of business in the next year.

The infuriating thing is that the state is well aware of the additional burden it is creating—the Cuomo administration just doesn’t seem to care. A report commissioned by the labor department to review the potential costs of hiking the state’s minimum wage in the middle of a pandemic and economic crisis notes that “COVID-19 has dramatically changed the economic landscape, casting doubt on whether the capacity to absorb minimum wage increases without adverse impact can continue over the near-term.”

But the analysts add that “Anecdotally, our research has found examples of job openings upstate offering wages well above $12.50,” and conclude that “these examples could be interpreted as evidence that upstate businesses are able to offer the wages necessary to attract the workers they need.”

Yes, they discard piles of actual economic data because they found anecdotal evidence that businesses can afford to pay higher wages—and so all must.

F. A. Hayek famously wrote that politicians and bureaucrats will always lack the necessary knowledge to run the economy as well as the market can. That’s often true. But here’s an example of bureaucrats having all the information necessary to make what should be a very easy decision to postpone a minimum wage hike until the pandemic passes and unemployment falls—and the amount of knowledge doesn’t matter as long as Cuomo’s administration is determined to ignore reality.

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Indications Are That a Biden Administration Would Require the Fed to Adopt a Black Lives Matter Monetary Policy

Posted by M. C. on July 22, 2020

The reason black unemployment lags is because of high minimum wage laws, which no doubt would be boosted by a Biden administration. The only way the Fed could counter that is by creating higher price inflation. That is, there would be a new kind of inflation, blackflation, price inflation created by the Fed at higher rates to raise nominal low-skilled wage rates above the minimum wage rate.

How nutty can you get?

https://www.economicpolicyjournal.com/2020/07/indications-are-that-biden.html

From a Wall Street Journal editorial:

As old-fashioned as it sounds, we’re thumbing through Joe Biden’s economic plan on the theory that someone somewhere might want to know what’s in it. And what should we find, hiding like a presidential candidate in a Delaware basement, but a promise to politicize the Federal Reserve in a whole new way.

Mr. Biden wants to create a third mandate for the Fed. Recall that the current two are price stability and full employment. But, as the policy blueprint Team Biden cooked up with Bernie Sanders’s economic advisers argues, “the Black unemployment rate is persistently higher than the national average, which is why Democrats support making racial equity part of the mandate of the Federal Reserve.” The Fed chairman would be required to collect data and report on “the extent of racial employment and wage gaps” and what the Fed is doing about them.

The Journal notes:

Black employment tends to lag behind other ethnic groups, for complex reasons. This means the economy generally needs to run hotter for longer before lower-skilled black workers start to benefit from more employment and higher pay. That’s an argument for sound economic policies. But this proposal would bake in a bias in favor of ultraloose monetary policy, with racial justice furnishing a formal excuse to overlook inflation risks.

The reason black unemployment lags is because of high minimum wage laws, which no doubt would be boosted by a Biden administration. The only way the Fed could counter that is by creating higher price inflation. That is, there would be a new kind of inflation, blackflation, price inflation created by the Fed at higher rates to raise nominal low-skilled wage rates above the minimum wage rate.

How nutty can you get?

Well, as it turns out, even nuttier.

The Fed could make sure money is pumped into businesses that hire blacks, regardless of skills.

The Journal again:

The Biden monetary mandate also would open the door to regulatory mischief, which is the real prize for the progressive left. Under a diversity mandate, the Fed could require the banks it regulates to collect detailed data about the racial make-up of employees, and their pay, at companies applying for loans.

That data could then form a basis for enforcement action against banks that didn’t do enough to reduce racial pay gaps via their lending decisions, whatever “enough” means in the wilds of social-justice Twitter or a Treasury run by Elizabeth Warren. This would be a back-door way to impose through regulatory pressure various wage and diversity rules that otherwise couldn’t pass Congress or survive the Supreme Court. Such a data trove would provide bottomless fodder for grandstanding politicians on Capitol Hill…

 Under a race mandate, the Fed will have no choice but to obey whatever dictates Congress and a Biden Administration send its way in 2021.

There is a serious group of radical central planners surrounding Biden. A Fed Black Lives Matter monetary policy would be bad enough but it wouldn’t stop there.

–RW

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Left and Right, Many Are Turning toward De Facto Secession—and That’s Not a Bad Thing | Mises Wire

Posted by M. C. on March 14, 2020

Fewer Americans feel at home in this country now. On the national scale, not even commercial events like the Super Bowl can unite us at the most superficial level.

In less than eight months, the presidential election cycle ends. That used to signify a day of national relief, no matter who won. Our political warring was over at last.

Anyone remember that country?

Murray Rothbard points out that the federal minimum wage law is a “protectionist device” weaponized by northeastern industrialists against their southern competitors, who have access to cheaper labor. He also cites “safety” regulations from the central government that essentially block the transportation of goods from one region to another.

https://mises.org/wire/left-and-right-many-are-turning-toward-de-facto-secession%E2%80%94and-thats-not-bad-thing?utm_source=Mises+Institute+Subscriptions&utm_campaign=0c62c6ecbc-EMAIL_CAMPAIGN_9_21_2018_9_59_COPY_01&utm_medium=email&utm_term=0_8b52b2e1c0-0c62c6ecbc-228343965

Secession is less of a dirty word these days, but how it might actually work is a mystery. Fortunately, unless you’re a politician, there’s almost no downside. It’s a win for nationalists, open-borders advocates, and, most especially, for everyone in between.

New York splitting into two or three states, Illinoisans ditching Chicago, West Virginia welcoming in Virginia’s conservative counties, and northern Californians establishing their own State of Jefferson are a few recent campaigns.

These aren’t radical proposals, but rather a leveling up of what’s already common practice in the US. Mass exoduses from California, Illinois, Louisiana, and New York draw attention to the problems of these particular states, but why relocate if enough of your neighbors support simply redrawing state boundaries?

Immigration, abortion, gun rights, healthcare, and all the other issues that 330 million Americans bitterly fight over can be worked out in a decentralized fashion. Even the economy stands to improve if states partition into smaller units or even if they leave the US.

Aside from the frenzied “but this will cause another civil war” nonsense, the most unfounded concerns surround the economy. The fussbudgets are afraid that states will erect trade barriers, whether they ostensibly remain in the union or not.

Certainly some states will prefer different immigration policies, but barriers to trade among the states are mostly made possible by the federal government.

Murray Rothbard points out that the federal minimum wage law is a “protectionist device” weaponized by northeastern industrialists against their southern competitors, who have access to cheaper labor. He also cites “safety” regulations from the central government that essentially block the transportation of goods from one region to another.

Ryan McMaken observes why immigration restrictionists may be inclined to favor free trade:

If goods and services can’t move across borders, then people are more likely to move in order to reach those goods and services.

Plus, as free trade raises the standard of living for both sides, economic migration is that much less likely.

An increase in smaller states and more representatives in Congress threatens to effectively nullify much of the federal government’s unconstitutional activities. And for those concerned about the nation-state’s integrity, a leaner Washington, DC, may be a factor in newly formed states deciding to stay attached to the union.

However, the future of America could also be a collection of hybrid state-nations, as opposed to a large nation-state.

States running their own immigration systems apart from any national policy is now the norm, as sanctuary cities and states such as California show. States are also encroaching on foreign and monetary policy with efforts to withhold their national guard troops from unconstitutional wars or proposing that gold and silver be legal tender.

This decentralization of society may be necessary considering the deeper implications of this newfound, widespread interest in secessionist solutions.

Fewer Americans feel at home in this country now. On the national scale, not even commercial events like the Super Bowl can unite us at the most superficial level.

In less than eight months, the presidential election cycle ends. That used to signify a day of national relief, no matter who won. Our political warring was over at last.

Anyone remember that country?

We don’t live there anymore, and we won’t this November 3, either.

However, the losing side can be expected to push talk of secession to an all-time high. Thankfully, centralization is losing popularity among some rising demographics, including Hispanics, who support secession at a rate of 36 percent, and those aged 18–29, 47 percent of whom favor decentralization.

At a time when polarization is leading to radicalization on the left and right, it’s reassuring that so many are now open to a strategy that offers compromise.

Although secessionists may generally talk of “taking back” some rights or way of life, they follow this up with willingness to let others go their own route, even to the point of giving up geographical reach for their new state or nation.

Social cohesion is declining under the status quo, as institutions that traditionally hold the social fabric together are failing, from traditional churches to civic community centers. Under centralization, politics freely usurps these cultural vacancies.

Tragically, that leads to violent street clashes between activists, many hopelessly seeking a sense of purpose from the mob.

The year 2021 offers a political environment in which frustration at national politics can be positively directed toward local officials. Over a dozen major cities will hold mayoral elections, and countless other municipalities and neighborhoods will be holding elections or hearings in which nullification and secession can be raised, not to mention that there are state legislatures taking most of their action in the early months of the year, when secession talk may be trending on social media.

Public discussion need not be charged with partisanship. In fact, issue-based campaigns and coalitions can transcend ideologies, so this could be a great opportunity for someone not attached to a political identity to lead the charge.

Good fences make good neighbors, Robert Frost wrote. Americans are more severely divided than ever before, but redrawing some boundaries just might help form a more perfect reunion.

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