Tunisian police clash with al Qaeda supporters over banned rally. South Africa’s NUM seeks 15-60 percent wage hikes from gold, coal producers. Syria’s Assad Says Peace Talks Likely to Fail
South Africa’s NUM seeks 15-60 percent wage hikes from gold, coal producers. Union leads march in Rome calling for job creation. Will Boy Scouts accept gay youth? Vote is imminent
Obama dismisses Benghazi talking points controversy as a ‘sideshow’
Activists call on Obama to stop deportations
Bangladesh to end search for collapse victims
Obama Lays Out Case for Israel to Revive Peace Talks. New York state budget deal includes minimum wage hike, tax cuts. House Passes Plan to Avert Federal Shutdown
Reason 1,299,379 why Liberals and especially minority leader Nancy Pelosi know nothing about economics or how our economy works. Just yesterday I wrote “Last week it was “the US doesn’t have a spending problem” this week it’s “Tax Cuts Are Spending” and today Nancy Pelosi is demanding a $10.10 per hour minimum wage.
“This week, we saw something quite remarkable — the stock marking soaring to record heights,” she said, Raw Story reported. “At the same time, we see productivity keeping pact. But we don’t see income for America’s middle class rising. In fact, it’s been about the same as since the end of the Clinton years.”
So, she suggests, why not raise the current minimum wage from $7.25 per hour to $10.10 per hour — even more than the $9 per hour proposed by the president?
As a poverty program, raising the minimum wage is like killing flies with a shotgun, not very well targeted. About 60% of the officially poor don’t work, so the only thing raising the minimum wage does for them is to make it harder for them to get a job if they ever decide they want one. Workers must bring at least as much value to the firm as they are paid or the firm will fail and all jobs will be lost (no GM bailouts are available to our 6 million small employers that employ half of our private sector workforce). Raising the minimum wage raises the hurdle a worker must cross to justify being hired.
It is estimated that less than 15% of the total increase in wages resulting from an increase in the minimum will go to people below the poverty line and less than a third of those receiving the minimum wage are families below the poverty line. Most minimum wage workers are from above median income families. So, most of the people benefiting from the minimum wage are not the intended targets of the “anti-poverty” aspect of raising the minimum wage.
As a jobs program, raising the minimum wage is a real loser. Congress raised the minimum wage 10.6% in July, 2009 (know of anyone else getting a raise then?). In the ensuring 6 months, nearly 600,000 teen jobs disappeared, even with nearly 4% growth in the economy, this compared to a loss of 250,000 jobs in the first half of the year as GDP growth declined by 4% Why? When you raise the price of anything, people take less of it, including labor. The unemployment rate for teens remains unacceptably high. Workers of all ages that are relatively unskilled are adversely impacted by this policy.
Another argument in favor of the minimum wage is that it is a stimulus, introducing new income and spending into the market. But was there more income to spend in 2009 when nearly 600,000 teen jobs were lost? Common sense says that every dollar a minimum wage worker receives must have come out of somebody else’s pocket, either small business owners or their customers. The money for a higher minimum wage does not come from thin air.
Likewise, Mark Wilson’s essay The Negative Effects of Minimum Wage Laws written for the Cato institute also illustrates this point:
The federal government through the Department of Labor has imposed a minimum wage since 1938. Nearly all the state governments also impose minimum wages. These laws prevent employers from paying wages below a mandated level. While the aim is to help workers, decades of economic research show that minimum wages usually end up harming workers and the broader economy. Minimum wages particularly stifle job opportunities for low-skill workers, youth, and minorities, which are the groups that policymakers are often trying to help with these policies.
There is no “free lunch” when the government mandates a minimum wage. If the government requires that certain workers be paid higher wages, then businesses make adjustments to pay for the added costs, such as reducing hiring, cutting employee work hours, reducing benefits, and charging higher prices. Some policymakers may believe that companies simply absorb the costs of minimum wage increases through reduced profits, but that’s rarely the case. Instead, businesses rationally respond to such mandates by cutting employment and making other decisions to maintain their net earnings. These behavioral responses usually offset the positive labor market results that policymakers are hoping for.
This study reviews the economic models used to understand minimum wage laws and examines the empirical evidence. It describes why most of the academic evidence points to negative effects from minimum wages, and discusses why some studies may produce seemingly positive results.
Some federal and state policymakers are currently considering increases in minimum wages, but such policy changes would be particularly damaging in today’s sluggish economy. Instead, federal and state governments should focus on policies that generate faster economic growth, which would generate rising wages and more opportunities for all workers.
Supporters of minimum wages might believe that these laws mainly help to boost the incomes of full-time adult workers in low-income families, some of whom are supporting children. However, the data generally do not support that view. Most workers earning the minimum wage are young workers, part-time workers, or workers from non-poor families.
According to the Bureau of Labor Statistics, 1.8 million paid-hourly employees were paid the federal minimum wage of $7.25 in 2010.5 These 1.8 million employees can be broken down into two broad groups:
- Roughly half (49.0 percent) are teenagers or young adults aged 24 or under. A large majority (62.2 percent) of this group live in families with incomes two or more times the official poverty level.6 Looking just at the families of teenaged minimum wage workers, the average income is almost $70,600, and only 16.8 percent are below the poverty line.7 Note that the federal minimum wage applies to workers of all ages.8
- The other half (51.0 percent) are aged 25 and up.9 More of these workers live in poor families (29.2 percent) or near the poverty level (46.2 percent had family incomes less than 1.5 times the poverty level).10However, even within this half of all minimum wage employees, 24.8 percent voluntarily work part-time, and just 34.3 percent are full-time full-year employees.11
Only 20.8 percent of all minimum wage workers are family heads or spouses working full time, 30.8 percent were children, and 32.2 percent are young Americans enrolled in school.12 The popular belief that minimum wage workers are poor adults (25 years old or older), working full time and trying to raise a family is largely untrue. Just 4.7 percent match that description.13 Indeed, many minimum wage workers live in families with incomes well above the poverty level.
Should we raise the minimum wage? The editors at Bloomberg think so. They maintain that low-wage jobs are expanding and that a minimum wage hike would boost the economy. Despite these notions, hiking the minimum wage remains a bad idea.
Bloomberg first laments that low-wage jobs are becoming the norm: “It’s also becoming clear that many Americans are being forced to take lower-paying jobs and that a low-wage bias is creeping into the economy.”
However, the percentage of minimum wage jobs has declined. According to the Bureau of Labor Statistics, just 5.2 percent of all hourly paid workers in the U.S. make the minimum wage, which is a smaller percentage than in 1979:
The proportion of hourly-paid workers earning the prevailing Federal minimum wage or less declined from 6.0 percent in 2010 to 5.2 percent in 2011. This remains well below the figure of 13.4 percent in 1979.
Even fewer adults work in minimum-wage jobs full time. Most minimum-wage workers are 25 or younger, and 69 percent work part time. The typical minimum-wage employee is a high school or college student with a part-time job, a major reason so many have attended—but not completed—college.
The primary value of these jobs is not the low wages they pay today. It is the on-the-job training they provide. Minimum-wage jobs teach inexperienced workers basic employability skills such as taking directions from a boss and working with co-workers. Acquiring these skills makes minimum-wage workers more productive and enables them to earn raises. Two-thirds of minimum-wage workers earn raises within a year. More
Looking at the title of this post, you might think that was a quote from the Perry Campaign or maybe from the National GOP contrasting a controlled GOP low regulation state like Texas to a high tax and regulation state like California. That would be the natural reaction.
Hearing this, you might then think: “Well MSNBC must be talking about the advantages the Rick Perry has over Barack Obama if he is the nominee.” Amazingly you would be wrong again. This was part of an explanation why Governor Perry would have trouble selling his job creation record nationally with Mitchell saying (and I’m paraphrasing): This isn’t something that you can apply nationally.
Really? We can’t take nationally the equation:
Less regulation + low taxes = more jobs
as a national message? Do I actually hear Andrea Mitchell and MSNBC saying this?
Even funnier was their complaints about the number of minimum wage jobs created. We now have a situation where millions upon millions of Americans have burned through both 99 weeks of unemployment AND savings and reserves and Mitchell is actually complaining that the jobs created in Texas aren’t paying enough?
I’m reminded of a quote from an old comic book Jon Sable Freelance about a children’s author who moonlights as a mercenary. He is negotiating the price for his services to recover a stolen item with a potential client:
Sable: My finders fee is 30%
Client: That’s pretty steep!
Sable: Depends on how you look at it, I’ve always thought 70% of something is worth more than 100% of nothing.
Mitchell and company completed their trifecta of cluelessness by complaining about the possibility of the Gasoline Tax expiring and what a bad thing it would be for the environment.
Yup with 9% unemployment and fuel prices raising the cost of everything from food to lumber MSNBC is complaining about a potential drop in gas prices for consumer’s nationwide.
Bottom line MSNBC may think a lot more of the Arianna “AOL lost 800 million last year and all I got was this lousy $315 mil“ Huffington method of wealth and job creation but outside of the MSM bubble where real people pay their bills and business’ struggle to stay open, that train of thought has not only left the station, the station has been closed and replaced by a liqueur store.
I’ll give the last word to Erica Douglass, she may not be as chic with the inside crowd as the esteemed Ms Huffington but I think Mitchell learn a thing or two she heard this:
California just isn’t worth it. My priorities have changed. I value income freedom and flexibility more than I value living near the beach. I value having a paid-off house I can call “home” more than I value having a half-million-dollar noose around my neck that declines in value by the day…
…I’ll go run my business, create jobs, and continue to advocate for less government, fewer laws, and the freedom for us all to create more small businesses…from my new home in Austin, Texas!