Category Archives: Economics

Happy May Day

Yesterday was May Day around the world – the one day when the world’s most social/commun-ist minded people celebrate the forms of government that renders the common man so much worse off than they otherwise would have been.

Consider two neighbors and their divergent paths:

While both Chile and Venezuela are democratic republics with mixed economies, Chile has a far greater level of market integration. HumanProgress.org’s ranking of economic freedom (based on the level of government intervention) lists Chile as the 10th freest economy in the world, leading South America. Venezuela, however, ranks last in the world.

Venezuela and its Chaveznistas have been so successful that the oil industry is in shambles, people are starving and even toilet paper is scarce.

Never to be ones to be satisfied with their poor reputation, these gentle souls of the people continue to make news:

A May Day march in Portland, Ore., “devolved into a full-scale riot with random acts of vandalism” by anarchists late Monday, police say. Attacks on police and emergency personnel resulted in 25 arrests.

Molotov cocktails, smoke bombs and other items were thrown at police, according to member station Oregon Public Broadcasting.

“Various fires were set in the street and in garbage cans, a police car was spray-painted and vandalized, and there were attempts to set at least one business on fire,” according to Portland Police. “Numerous projectiles were thrown at or launched at police and firefighters including rocks, bottles, ball bearings, fireworks, smoke bombs, and road flares.”

I leave you with The Sage:

 

Raising the Minimum Wage – Harming the Under Privileged

I’ve said it before and I’ll say it again – I do NOT doubt the nobility of the liberal.  From food stamps to public schools – from Medicaid to minimum wage.  The liberal is earnestly striving the raise the standard of living for the less fortunate.

They’re just wrong.

They are wrong due to two critical errors:

1.  They don’t understand economics.
2.  They assign the moral benefits of personal charity to voting for a larger state.

Take for instance the minimum wage.

Businesses run on margin – profit.  Often that margin is razor thin.  So, if wages equate to X% of your expenses and those wages are going to go up by 40% it only stands too reason that costs need to go up by 40% of X or  some other expense is going to go down by 40% of X.

That ‘other’ expense?  Wages.  Either fewer wage earners or fewer hours worked.

And guess who is the first guy shafted?  The least productive – often the least experienced, the youngest, the poorest and the most in need of a job.

The cold hard fact of the matter.  If you want to increase the gap between my kids and kids born to a single, minority, uneducated, poor woman, you simply increase the minimum wage.

Period.

Not only do her kids not get the same jobs my kids get – they never benefit from the ‘On The Job Training’ that my kids get.

Data bears this out:

In the summer of 1995, more than half of teens age 16 to 19 worked in the summer; today, less than a third do. The drop has been especially steep for boys, who are now less likely than girls to work during the summer. Experts attribute the decline to a variety of forces: the disappearance of many entry-level jobs, the rising share of young people spending their summers in school or other educational activities and, at least recently, a rising minimum wage. (Employers may not see teen workers — especially those with less experience or fewer skills — as worth $10 or more per hour.)

Two of the three reasons are direct responses to increased cost of labor – automation and worth.

Young Americans from low-income families have been especially hard-hit by the decline in summer employment. According to data from the Current Population Survey, teenagers whose families make less than $20,000 per year are now less than half as likely to work as those from families who earn at least $100,000, and, unlike their wealthier peers, low-income teens have seen hardly any rebound in employment since the recession ended. (Black and Hispanic teens, too, have far lower employment rates than whites.)

Unfortunately, low-income teens are also the ones who most need summer jobs. They need the money, of course — a job that might provide pocket-money to a middle-class teen could be a key source of income for someone from a poorer family. But they also need the experience.

My son is soon going to hit the job market.  And I’ll find him a job.  I’ll either make one or or find one or buy one.  I won’t do this so that he has money for more Pokemon cards or Xbox games.  I’ll do this so that when he hits high school he’ll know how to:

  • Show up on time
  • Complete tasks
  • Take coaching
  • Earn money
  • Work a shitty job in the hopes of one day not

The tragedy, the REAL tragedy, is that the minimum wage liberal is doing more damage to the population they hope to help than any capitalist ever could.

On Immigration, Bans and Executive Power – Part One

 

A conversation:

Hebes:

My brother lost his job last week.  They moved the work to a contracting house staffed with laborers accepting lower wages.  I think  we need to seriously consider our immigration policy to limit foreign workers to our country.

They are stealing our jobs.

Callidus:

Consider the shop your brother was working in – the cabinet maker’s shop.  Do you believe that the workers in that shop were offered more money to work down the street but turned that wage down to work there?

Hebes

Why, Callidus, that would be madness!  Why would a craftsman turn down a stronger wage only to work for less?

Callidus

Exactly my point.  A man is entitled to negotiate the terms of employment to the best of his ability and expertise.

Let me ask you, when the cabinet builder takes his lunch, is he obligated to pass the sandwich shop offering a  higher quality meal to instead walk to the more expensive stand?

Hebes:

Of course not!  A man would be a fool to buy the more expensive lunch of equal or lower quality.  What does this have to do with my brother?

Callidus:

What, Hebes, should he not consider the character of the sandwich shop owner?  What if the man’s brother had just lost his leg?  Should that not play into his decision to buy the more expensive sandwich?

Hebes:

Callidus, what OF the man’s brother.  If he requires charity, so let it be.  But a man ought buy a sandwich without such concerns.

Callidus:

What if the foolish sandwich shop bought meat from a vendor who charged more – so he in turn could care for his mother?

Hebes:

Callidus, stop with this man’s brother, this man’s mother.  If the shop keeper is foolish and purchases meat at too high a price, he should not expect me to make him whole in the price of the sandwich.  If he is charitable, then he may enjoy his charity!  But that he might force the burden  on me?  No way.

Callidus:

So you would agree that a man may negotiate terms of his wage?

Hebes:

Yes.

Callidus:

And the terms of his purchase of goods?

Hebes:

Yes.

Callidus:

And the nature of his charity?  But not that of yours?

Hebes:

Most certainly yes!

Callidus:

Then why do you hate the furniture shop keeper?

Hebes:

Callidus!  Why would you say such a thing?

Callidus:

Well, you tell me a man is free to negotiate his wage yet you deny the same liberty of the wage payer.  In the next breath, you condemn the sandwich monger as foolish for paying too much for his commodities.  Even then you blame him for high prices to support his brother.  Or that man’s mother.  Yet you praise the worker looking for a fairly priced meal.

Why do you hate the furniture maker for paying less for his workers?  Certainly the wife of the sandwich man might enjoy less expensive cabinets?

Hebes:

Ahh Callidus, you are clever!  I will console my brother, cook him a meal and help him find another job.

You have changed my mind.  We should let every man of any country into our own!  We might all enjoy less expensive meals with even less expensive cabinets!

Callidus:

Hebes, you do not listen to any of my words.

Trump’s China Fallacy

trump-china

One aspect of Trump’s victory was his campaign of economic nationalism – that China was stealing our jobs and he was going to bring them back.  Of course, China wasn’t alone in his analysis – Mexico and Ford played a part as well.

The fact is, labor is a commodity and purchasers of labor will buy it at its cheapest.

If we want people to purchase American labor inn greater quantities, we have to make our labor cheaper.

Coyote lists but a few of the ways that we increase, needlessly, that price:

  • minimum wage laws, rising to $15 an hour in many parts of the country, and increasingly draconian overtime rules, both of which substantially raise the cost of hiring someone.
  • minimum benefit laws, including expensive health care requirements in Obamacare and a myriad of other state-level requirements such as mandatory paid sick leave or family leave
  • payroll taxes that act as sales taxes on labor  — we understand that cigarette taxes are supposed to reduce cigarette purchases but don’t understand that payroll taxes reduce purchases of labor?
  • employment regulations, such as chair laws and break laws in California, that make employing people more expensive and risky
  • employer liability laws, that make employers financially responsible for any knuckleheaded thing their employees do, even when these actions violate company policy (e.g. making racist or sexist statements)**
  • laws that make hiring far more risk, including those that limit the ability to do due diligence on potential employees (e.g. ban the box) and those that limit the ability of employers to fire poor performing employees.

We have yet to see how a President Trump will work to try and make the cost of American labor more equitable.

The Persistent Wage Gap Myth

women-stem

I was discussing pay inequality between men and women the other day.  I absolutely don’t know what to do with someone who won’t acknowledge that men and women work different jobs.

Another point of interest:

In 2014 4,454 men died on the job.  The number of women who perished?

367

Blink.  Blink.

Interesting Wage Gap Insight

Gender Pay Gap

The article in whole is great – read the whole thing.  But this was interesting:

There’s something importantly different between a job in science and a job in business — and that matters more than you might think in explaining the wage gap

Think of your prototypical businesswoman. She has a standard 9-to-5 schedule so she can meet with other businesspeople or clients.

Maybe she’s a venture capitalist. Maybe she’s an accountant. Either way, her clients want to deal with her specifically. Her employers won’t think she’s doing a good job if she isn’t there at the hours others need her.

Now think of your prototypical scientist, lab coat and all. Most of her work is self-directed. She has experiments she needs to run — but it doesn’t really matter to her lab when, exactly, she does them. So long as she’s getting the work done, her supervisors will think she’s doing a good job.

This is, of course, a simplification. But it speaks to something important about the situations where women earn less.

Certain hours are more important than others in some jobs — and those jobs have especially high wage gaps

Goldin’s research has found that workers in the industries with large wage gaps are more likely to say their jobs value those who “develop constructive and cooperative working relationships” and that their company generally determines their “tasks, priorities, and goals.”

Workers in these industries often face steep penalties for any interruption to their career. One study estimates that among lawyers, a year out of the labor force causes an 8.4 percent salary reduction.

Now, is this fair?    Yes.  Yes it is.  It is not the corporation’s role to determine what social norms are, or are not, more valued or valid.  If you think that this woman should earn more money, then you should remove the time constrains that limit her hours and/or flexibility.

 

California – The Land Where They Hate Poor People

Job Line

It’s simple econ 101:

Put a ceiling on the price of a commodity, you get less supply of the commodity.

Put a floor on the price of the commodity, you get less demand for the commodity.

Rent control – a ceiling – results in fewer rental units.

Minimum wage – a floor – results in reduced demand for workers.

Politicians ignore this:

In December, The Federal Reserve Bank of San Francisco released a paper examining the current research on the impact of minimum wage increases. It stressed that the “most important” policy consideration was whether there would be “fewer jobs for the least skilled workers” because “they are the ones the minimum wage is intended to help.” It found that the “most credible” research showed minimum wage increases resulting in “job losses” for these workers and “with possibly larger adverse effects than earlier research suggested.”

Or worse, they acknowledge AND ignore:

In January of this year, Gov. Jerry Brown agreed, stating that raising “the minimum wage too much” would put “a lot of poor people out of work.” His conclusion: “There won’t be a lot of jobs.”

I’ll include the math, though it likely won’t help the average minimum wage earner supporting a family [they don’t speak math]:

Take a typical quick service restaurant employing 25 people with annual sales of $1.25 million. The National Restaurant Association’s annual Operations Report states that the average pre-tax profit margin for such a restaurant is 6.3 percent, or $78,750. While more experienced employees typically contribute more to a business’s bottom line, for this example let’s assume that each of these 25 employees contributed an equal amount to the business’s success of $3,150.

According to the Bureau of Labor Statistics, restaurant sector employees work an average of 26 hours per week. Increasing California’s minimum wage from $10 an hour to $15 for such an employee results in an annual cost increase of $6,760, or more than double what the employee contributed to the business’ success – resulting in a loss of $3,610 per employee per year.

I recently went to see “Captain America: Civil War” and had the pleasure of waiting in line for concessions.  Agonizing.  Lines forever, employees that couldn’t remember “a beer, medium buttered popcorn, duds and a water” and the idea of making change was foreign.  Not a whiff of customer service much less mastery of task at hand.

Fifteen an hour?  Hardly worth the job.

Shrinking Middle Class – Good News?

Share Middle Class Pew

Listen to Bernie and all you hear is that the Middle Class is taking it on the chin.

“One of the major reasons why the middle class is collapsing is because of the greed, recklessness, and illegal behavior on Wall Street.”

True?  Well, the data from Pew in the chart above seems to indicate so.

From 1971 through to 2015, the share of adults living in the Middle Class dropped from 61% to 50%.  That’s 11 points or 16%.

Horrible!

But where are they going?

Well, if you look at the lowest income tier their ratio grew from 16% to 20%.  That’s 4 points and 25%.

The lower tier also grew from 9 to … wait.  It didn’t grow.

So, the Middle Class shrank 11 points since 1971 and only 4 – FOUR – of those points moved to the lowest tier.  Where did the remaining 7 points go?

Well, the higher income tier grew from 10 to 12 points; 25%.   And the highest?  It grew from 4 to 9 points.  The highest tier grew by 5 points; 125%!

Yes – there is a ‘war’ on the Middle Class – but the winners are those folks in the Middle Class!

Why Men Make More Than Women – Part 1,782,873

Income Inequality

Going through some old material on wage gaps between men and women when I came across this article from The Atlantic:

Though headway has been made in bringing women’s wages more in line with men’s in the past several decades, that convergence seems to have stalled in more recent years. To help determine why,  Francine D. Blau and Lawrence M. Kahn, the authors of a new study from the National Bureau of Economic Research parse data on wages and occupations from 1980 to 2010. They find that as more women attended and graduated college and headed into the working world, education and professional experience levels stopped playing a significant role in the the difference between men and women’s wages. Whatever remains of the discrepancy can’t be explained by women not having basic skills and credentials. So what does explain it?

Simple, but huge.  Try telling a liberal that women make less for reasons other than sexism and watch the reaction.  And yet, right here in The Atlantic we have progress.  People are willing to admit that there might be other reasons behind a difference in pay.

The largest factor in the persistent wage gap is the dearth of women in specific jobs and industries, the researchers found. That means that narrowing the wage gap further requires making high-paying, male-dominated industries like STEM fields and tech companies more enticing and welcoming to women. And even before that, encouraging women and girls to take advantage of opportunities to explore and learn about fields like coding and science that remain male-dominated at both the professional and college level.

The proof in this can be seen by simply looking up ‘work place mortality’.  There you will see a dramatic difference in the sexes.  While not explaining the gap in pay – it does show a difference, a significant difference, between the jobs that men and women take and work.

The study also points to … wait for it … culture, which continues to favor men’s participation in the workforce and women’s participation on the home front. “Current research continues to find evidence of a motherhood penalty for women and of a marriage premium for men,” the report finds. “The greater tendency of men to determine the geographic location of the family continues to be a factor even among highly educated couples.”

Again, absolutely true – and NOT a sign of sexism.

When marriage and kids come around, more women tend to want to stay closer to home and family while men want [are forced] to work and provide.  While I would never say that being a stay at home mom is easy, it surely ranks VERY high on the ‘best job in the world’ scale.  Highly rewarding to say the least.

And your humble corespondent happens to be married to a more capable human than he.  My wife is a far superior corporate warrior than Ii am, and has been rewarded accordingly,  But she has turned down multiple opportunities because the trade off isn’t worth it to her.  The sacrifice to family would be too high.

However, had I ever been offered as such – I am sure she would have supported me in my new role.

Why the Left can’t just nod and pass the beer nuts here is perplexing.  And their insistence on forcing culture to shift to accommodate a condition that no one is fighting is even more perplexing.

But – War on Women and all.

Capitalism – Not Bernie – Reduces Poverty

Global Poverty

With Bernie Sander’s most recent campaign it would be easy to believe that we are poor and getting poorer.  And that the only salvation available to us is to beg government to save us.

Let us never forget – the natural state of man is poverty and the only cure to date, the ONLY condition where the lot of the everyday man has improved, is freer and more open markets:

Despite the recent recession in the West, absolute poverty is continuing to retreat in fast-growing developing countries. The escape from poverty that was once limited to the industrialized countries of the West is also happening in “the rest.”

Unfortunately, many people remain unaware of the dramatic decline in global poverty, let alone the reasons for it.

According to an announcement released this week by the World Bank, “less than 10% of the world’s population will be living in extreme poverty by the end of 2015.”

The bank has “used a new income figure of $1.90 per day to define extreme poverty, up from $1.25. It forecasts that the proportion of the world’s population in this category will fall from 12.8% in 2012 to 9.6%.”

Now, to be sure, 9.6% is still high  – higher than it should/could be.  So whence came you?

Grinding poverty was the norm for most ordinary people throughout human history. As recently as 1980, the World Bank estimated that 50% of the global population lived in absolute poverty.

Even in the most economically advanced parts of the world, life used to be miserable until relatively recently.

At the end of the 18th century, to give one example, France had the fourth highest standard of living of any country in the world, behind the U.S., Great Britain and the Netherlands.

Yet, 10 million of France’s 23 million people relied on some sort of public or private charity to survive, and 3 million were full-time beggars.

All of this occurred, of course, with not a single Commissar in charge of this phenomenal growth.

Cast off the chains of regulation and throw open the doors of the freer market!