Category Archives: Economics

Affordable Housing – Durham, NC

Affordable Housing

I’ve said time and time again that I don’t begrudge the Liberal her intentions – noble to be sure.  Rather, I begrudge her policies:

Residents said 85 to 100 affordable apartments should be put on the site, and many held up signs expressing frustration with the high cost of living downtown, where rents often top $1,000 a month.

The reason rents are so high is that supply hasn’t been able too keep up with demand.  And the reason for THAT is almost always restrictive zoning laws.

If we allow builders  more flexibility is how and what they build, the more building that will take place allowing housing costs to come down.

See Houston vs San Francisco.

According to Stan Humphries, chief economist of Zillow, local regulations are at the root of the supply problem. “Zoning, parking minimums — these inadvertently drive up the fixed cost,” Humphries said at the Atlantic’s summit on the economy.

And when fixed costs go up, builders have an incentive to create more expensive housing, he said.

“That’s why places like Houston don’t have the same housing crisis that San Francisco does,” he said. San Francisco is known for its strict building rules, while Houston doesn’t have a zoning code at all.

Econ 101 – though you may not find that offered in a “Comparative Arts” major.

Bernie Sanders And Economics

Bernie Sanders

There is no doubt that Bernie Sanders is not alone when it comes to inconsistencies in his world view.  But he’s such an interesting character, at least he honestly identifies as socialist, that it’s impossible not to find humor in his policies.

Bernie feels that certain economic laws apply to conditions while believing, seemingly randomly, that others don’t.

For example, Sanders feels that open trade agreements move work over seas; the idea being that corporations will flow where the less expensive labor exists.  A concept that I whole heatedly agree with – YEAH Bernie!  On the other hand Mr. Sanders does NOT feel that raising the minimum wage will have much the same impact on marginally skilled workers – BOO Bernie!

All this came to mind when I discovered Mr. Sanders’ objection to open borders:

“What they are talking about is completely opening up the border,” Sanders responded. “That was the question. Should we have a completely open border so that anyone can come in the United States of America? If that were to happen, which I strongly disagree with, there is no question in my mind that that would substantially lower wages in this country.”

Good for Bernie.  He’s right, of course, that allowing unskilled workers in from our neighbors to the south to bid on and compete for jobs will reduce the rate at which employers will need to pay.  Further, it will erode the most marginal, the less educated and least skilled, workers.  So yeah, he’s right – and I’m surprised.

Further, Mr. Sanders continues and is able to point out exactly who those folks might be:

“When you have 36-percent of Hispanic kids in this country who can’t find jobs and you bring a lot of unskilled workers in the country what do you think happens to that 36-percent of kids of today who are unemployed? 51% of African-American kids [are unemployed],” Sanders said.

“I frankly do not believe we should be bringing in significant numbers of unskilled workers to compete with those kids,” Sanders made clear.

In addition to pointing out that Bernie is right, I would also like to point out two other facts.  One – Bernie is supporting an unpopular position because he cares about the folks most in need.  He gets the fact that it won’t be high tech jobs impacted.  Two – Bernie is supporting a position because he CARES about the people most likely to be impacted.  This is a very similar situation that conservatives find themselves in when we offer support for lower taxes, reduced government dependency programs and oppose the minimum wage.

Is Walmart Evil

Walmart

There is always talk about the evils of Walmart.  Low wages being one.  The other is that they put mom and pops out of business.

I worked at a number of those mom-n-pops – pizza joint, gas station and local newspaper.

None could have afforded me this:

Minimum Wage – Minnesota Style

Minimum Wage Another post from one of my favorite blogs, Coyote Blog, has a great illustration on the impact to businesses that an increase in the minimum wage results in.

First, his experience in camping fees in Minnesota:

Labor and labor-related costs (costs that are calculated as a percentage of wages, like employment taxes) make up nearly 50% of our costs.  The Minnesota minimum wage is set to rise from $7.20 to $9.50 in the next two years, an increase of 31%.  Since wages and wage-related costs are half our expenses, the minimum wage increase raises our total costs by 15.5%. This means that all by itself, without any other inflation in any other category of expenses, the minimum wage increases will drive a $3.10 increase in our camping fees (.155 x $20).  Note that this is straight math.  The moment the state of Minnesota passed their minimum wage increase, this fee increase was going to be required.

This in response to angry customers who saw their costs rise for their favorite camping sites in the parks managed by Mr. Coyote.

Now, fortunately for his sake, he is able to raise the prices for camping in his market, but how about businesses that can’t?

In November, San Francisco voters overwhelmingly passed a measure that will increase the minimum wage within the city to $15 per hour by 2018.  Although all of us at Borderlands support the concept of a living wage in [principle] and we believe that it’s possible that the new law will be good for San Francisco – Borderlands Books as it exists is not a financially viable business if subject to that minimum wage.  Consequently we will be closing our doors no later than March 31st.  The cafe will continue to operate until at least the end of this year.

While I absolutely hate the destruction of capital due to the political process when it otherwise could have been avoided, I must admit to a degree of schadenfreude with respect to the bookstore owner.

NOTE:

Since the Coyote story is a bit old I went to check and see what happened to Borderland Books:

Last month it announced its impending closure – until the idea of crowdfunded “sponsorships” was floated. On the bookshop’s website, its owners announced:

Starting immediately we will be offering paid sponsorships of the store. Each sponsorship will cost $100 for the year and will need to be renewed every year. If we get 300 sponsors before March 31st, we will stay open for the remainder of 2015.

Our goal is to gather enough paid sponsors to cover the projected shortfall in income that will be the result of the minimum wage increase in San Francisco. At the beginning of next year we will again solicit sponsors. If next year we again reach our goal by March 31, we will remain open through 2016. This process will continue each year until we close, either because of a lack of sponsorship or for other reasons.

Just two days after launching the initiative, Borderlands’ Jude Feldman announced that they had hit their target – 300 people had offered up sponsorships of $100 apiece, enabling the store to stay open for a further year.

Good on them.

Minimum Wage in Europe

European Minimum Wage

I’ve been meaning to write a larger post with the data above that I found at Carpe Diem, but I just haven’t gotten around to it.  Instead I’ll pass it along with some comments.

  1. I am VERY surprised that the Nordic countries have no minimum wage.
  2. I would never have guessed the youth unemployment rates would be so high in Finland and Sweden – darlings of the big-nanny state fan boys.
  3. The average youth unemployment for the nations with a minimum wage is higher than the highest value for those nations without such a wage.

 

What Other System Would Pope Francis Recommend?

Capitalism.2

I get it – I do.  I get the disdain for that human condition that causes otherwise good people to act in dishonorable ways in order too accumulate wealth.  In fact, as part and parcel to that dishonor is the fact that people and their feelings are ‘hurt’.  It is most often described as ‘greed’ – though I would propose that the word ‘greed’ is often misused.

THAT is different.  That type of behavior IS not desired and can be considered immoral.  But just as that is true is the fact that capitalism is a powerful force for the general improvement of the lot of the average man.

Consider this chart, courtesy of Mark Perry over at Carpe Diem:

Decline of World Poverty

In the words of of Arthur Brooks:

It turns out that between 1970 and 2010 the worst poverty in the world – people who live on one dollar a day or less – that has decreased by 80 percent (see chart above). You never hear about that.

It’s the greatest achievement in human history, and you never hear about it.

80 percent of the world’s worst poverty has been eradicated in less than 40 years. That has never, ever happened before.

So what did that? What accounts for that? United Nations? US foreign aid? The International Monetary Fund? Central planning? No.

It was globalization, free trade, the boom in international entrepreneurship. In short, it was the free enterprise system, American style, which is our gift to the world.

I will state, assert and defend the statement that if you love the poor, if you are a good Samaritan, you must stand for the free enterprise system, and you must defend it, not just for ourselves but for people around the world. It is the best anti-poverty measure ever invented.

Think of that – how much money would the ‘do good nanny state liberal leftist’ have been willing to spend in order to accomplish this feat?  There is no end to that amount.

So, I ask the good Pontiff – ‘If not capitalism, what then?”

His answer can only be – “The continuation of the abject poverty experienced by billions of Christians previously in the care of the Catholic Church for 2,000 years.”

Poverty or Wealth – It’s a Choice

Wealth

Choices matter.  Decisions matter.

We are who we are largely due to the choices we make.  WHY we make those decisions is an interesting discussion, but we are who we make ourselves.

Consider:

  1. 72% of the wealthy know their credit score vs. 5% of the poor
  2. 6% of the wealthy play the lottery vs. 77% of the poor
  3. 80% of the wealthy are focused on at least one goal vs. 12% of the poor
  4. 62% of the wealthy floss their teeth every day vs. 16% of the poor
  5. 21% of the wealthy are overweight by 30 pounds or more vs. 66% of the poor
  6. 63% of the wealthy spend less than 1 hour per day on recreational Internet use vs. 26% of the poor
  7. 83% of the wealthy attend/attended back to school night for their kids vs. 13% of the poor
  8. 29% of the wealthy had one or more children who made the honor roll vs. 4% of the poor
  9. 63% of wealthy listen to audio books during their commute vs. 5% of the poor
  10. 67% of the wealthy watch 1 hour or less of T.V. per day vs 23% of the poor
  11. 9% of the wealthy watch reality T.V. shows vs. 78% of the poor
  12. 73% of the wealthy were taught the 80/20 rule vs. 5% of the poor (live off 80% save 20%)
  13. 79% of the wealthy network 5 hours or more per month vs. 16% of the poor
  14. 8% of the wealthy believe wealth comes from random good luck vs. 79% of the poor
  15. 79% of the wealthy believe they are responsible for their financial condition vs. 18% of the poor

There is this belief in America that if we just gave more money to folks who find themselves in poverty their lives would just ‘be better’.

It isn’t true.

Why Capitalism Is Good

Wal MartSo much is said regarding ‘greed’ and ‘corporations’.  Let’s not forget that until the advent of free trade and individual property rights – the common peasant was destined to farm the same land with the same tools as their ancestors.

The benefits of free trade:

NEW YORK (MarketWatch) — Wal-Mart Stores Inc. pushed down prices for some generic prescription drugs to just $4 eight years ago, setting a new industry standard. Now it is trying to do the same for seeing a doctor.

On Friday, a Walmart Care Clinic opened in Dalton, Ga., six months after Walmart U.S., the retailer’s WMT, +0.27%   biggest unit, entered the business of providing primary health care. It now operates a dozen clinics in rural Texas, South Carolina and Georgia and has increased its target for openings this year to 17.

An office visit costs $40, which Walmart U.S. says is about half the industry standard, and just $4 for Walmart U.S. employees and family members with the company’s insurance. A pregnancy test costs just $3, and a cholesterol test $8. A typical retail clinic offers acute care only. But a Walmart Care Clinic also treats chronic conditions such as diabetes. (Walmart U.S. also leases space in its stores to 94 clinics owned by others that set their own pricing.)

“It was very important to us that we establish a retail price in the health-care industry because price leadership matters to us,” said Jennifer LaPerre, a Walmart U.S. senior director responsible for health and wellness, in an interview.

Health Care is just another commodity that, when subjected to the free market, will bend to the advantage of the consumer.

The Demand Curve Is Not Optional

Demand CurveWe will find ways to meet the supply:

 

More than half of the cigarettes for sale in New York are smuggled into the state illegally – the highest percentage in the country, according to a recent report from the Tax Foundation.

According to the non-partisan research group, increased excise taxes on cigarettes to discourage smoking have, in fact, created lucrative incentives for black market trafficking between states.

According to the report, 56.9 percent of the cigarettes sold in the Empire State are brought in from other states. New York state has the highest cigarette taxes in the country – a whopping $4.35 a pack. If you live in New York City, it’s another $1.50 per pack, bringing taxes to $5.85 per pack, with the overall cost of a pack in the city in the $12 to $15 range.

 

The Impact Of Obama’s Policies On Job Creation

Wanna see how politics in DC can impact job creation?

From IBD via Care Diem:

Proponents of a large minimum-wage hike have ignored its potential interaction with ObamaCare’s employer mandate, which the CBO suggested may result in a bigger near-term job loss than a wage hike by itself.

Firms that do offer coverage, even of the skimpy variety, would face a fine of $3,000 per full-time worker who receives exchange subsidies. This penalty is nondeductible, so for profitable retailers facing a 39.2% federal and state tax rate the fine would equate to $4,930 in wages. That comes to $2.37 an hour for a 40-hour-per-week, year-round worker.

Coming on top of a federal minimum-wage hike of $2.85 an hour, ObamaCare fines could mean a 70% increase in compensation costs for a low-wage worker.

Obama’s message to his base:  “Were here to help you find a job by making you 70% more expensive to hire.”

This is the devastating impact of populism vs. reality.  The brutal reality is that Obama’s base doesn’t understand the basic economics of his policies.

How did the six ideological groups do overall? Here they are, best to worst, with an average number of incorrect responses from 0 to 8: Very conservative, 1.30; Libertarian, 1.38; Conservative, 1.67; Moderate, 3.67; Liberal, 4.69; Progressive/very liberal, 5.26.