Now Would Be a Terrible Time to Raise the Minimum Wage

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Minimum Wage Cost Me My Job

By Simone Barron

What happens when politicians decide they are in a better position than business owners to know how much workers should be paid? We don’t have to guess. Cities like Seattle and New York have already done so with their $15/hour minimum wage mandates. Simone Barron, a lifelong restaurant worker, recounts how “helping” her impacted her wallet, her career, and her life.

Please watch the VIDEO

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US City With Highest Min Wage Signals a ‘Tipping Point,’ Businesses Uncertain on How They’ll ‘Survive It’

The continued hike in the minimum wage in one California city — which has the highest in the U.S. — has local business owners worried.

The city of Emeryville, California, garnered the title of being the highest minimum wage city in the United States when the city saw a minimum wage hike in July from $15 to $16.30, according to The Wall Street Journal. Due to the city’s high cost of living in the Bay Area region, supporters of the wage hike saw it necessary.

Thomas White/Reuters

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Dem Lawmakers Push for $15 Minimum Wage Will Have Disastrous Consequences

By Rachel Greszler – Re-Blogged From Blabber Buzz

House Democrats are looking to double the minimum wage, with little eye to the consequences.

Led by Virginia Democrat Bobby Scott, House Democrats introduced the Raise the Wage Act, which would more than double the federal minimum wage from $7.25 to $15 per hour by the year 2024.

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High Minimum Wage Laws INCREASE Poverty Among the Already-Poor

By Kaylee McGhee – Re-Blogged From Liberty Headlines

‘Each $1 increase in the minimum wage has…increased poverty rates and the receipt of public assistance…’

Labor Force Participation Still Well Below Pre-Recession Levels

Photo by jronaldlee

(Kaylee McGhee, Liberty Headlines) Anti-poverty initiatives, like higher minimum wage laws and heftier welfare programs, have actually hurt poor and disadvantaged communities, according to a new studyby the Employment Policies Institute.

University of California, Irvine economists David Neumark and Brittany Bass, and Brian Asquith of the National Bureau of Economic Research, studied the long-term effects of these programs in struggling neighborhoods, looking at how minimum wage and welfare policies have impacted poverty rates over the past three decades.

They found that rather than improving impoverished communities — as they are designed to do — these policies have hurt poor areas.

“Neither a higher minimum wage nor more-generous welfare benefits have reduced poverty rates in the country’s most-disadvantaged neighborhoods. In fact, the authors find some evidence that poverty rates and the share of residents on public assistance have increased alongside a rising minimum wage,” the study reads.

The researchers said they found that the most common long-term outcome of higher welfare benefits was increased poverty and a higher number of people receiving public assistance.

“To put this in practical terms, it means that each $1 increase in the minimum wage has, in disadvantaged neighborhoods over the past three decades, increased poverty rates and the receipt of public assistance by roughly three percent,” the researchers wrote.

This study raises important questions about the effectiveness of the poverty-reduction programs leftist politicos tout.

“These findings cast serious doubt on whether the normal poverty-reduction policies — minimum wages and welfare programs — actually contribute to increased employment, reduced poverty, and higher household earnings,” the EPI wrote. “Indeed, this study should give pause to any level of government interested continuing or expanding such policies.”

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Argentina Joins Venezuela In The Currency Crisis Club

By John Rubino – Re-Blogged From Dollar Collapse

In interviews, whenever I try to make the case that US policies are leading to the kinds of currency disruptions common in developing countries, I say something like, “For a glimpse of America’s future, take a look at Argentina, where they’re eating cats and dogs because of hyperinflation … wait, no, I meant Venezuela.”

Mixing up countries kind of dilutes the power of the statement, but for some reason I can’t seem to help it.

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Minimum Wage Hikes Already Backfiring

Restaurant chain Red Robin is eliminating the “busboy” position at its 570 locations as a cost-saving measure to offset minimum wage hikes.

“We need to do that to address the labor increases we’ve seen,” Red Robin’s Chief Financial Officer, Guy Constant, told attendees at the ICR retail conference in Orlando, Florida, the New York Post reports.

1.4 Million Affected By Massive Power Outage In California, Arizona And Mexico

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Ontario Raised Its Minimum Wage to $14 Per Hour

By TRE GOINS-PHILLIPS – Re-Blogged From https://ijr.com/

Ontario just bumped its minimum wage to $14 per hour, but it is working families and consumers that will suffer.

A newly released study from the Bank of Canada suggests the Canadian province will lose some 60,000 jobs by 2019 as a result of the hike, the National Post reported. And local businesses are making other cuts, too.

Minimum Wage

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California’s $15 Minimum Wage Could Backfire and Cost the State 400,000 Jobs

A newly released longitudinal study on the effects of the rising minimum wage in California reveals it negatively affects low-income workers.

“[A]pproximately 400,000 jobs would be lost” by 2022 “as a consequence” of California gradually imposing the first statewide $15 minimum wage, according to a study from the Employment Policies Institute, a conservative nonprofit research organization. “This estimate is conservative, as it measures the impact of California’s state minimum wage but does not account for job loss in counties that had insufficient data.”

NYC Fast Food Workers Join Nationwide Protests Against Puzder Nomination

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Jobs, Wages, and Growth

   By Bob Shapiro

I posted an article wondering why wages haven’t been going up faster, considering that the Jobs picture looks so good. Though many of you may agree with the article, I’d like to offer an alternative point of view.

Have jobs been increasing dramatically? No, the official numbers are being misreported in news stories. What IS happening is that the US jobs market continues to lose full time workers while gaining a larger number of part time positions.

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Puerto Rico Faces Not Just Debt, But Depopulation

By Megan McArdle – Re-Blogged From Newsmax

“They owe a lot of money to your friends on Wall Street,” Donald Trump told Geraldo Rivera. “We’re going to have to wipe that out. That’s going to have to be — you know, you can say goodbye to that. I don’t know if it’s Goldman Sachs but whoever it is, you can wave goodbye to that.”

Bond markets didn’t appreciate the verbal wave. The territory’s bonds, already weak from the pounding of Hurricane Maria, fell another 31 percent. White House budget director Mick Mulvaney hastened to say the president didn’t mean what he said. “I wouldn’t take it word for word with that,” he said demurely. Nor should you; as debt expert Cate Long told CNN Money, “Trump does not have the ability to wave a magic wand and wipe out the debt.”

Image: Puerto Rico Faces Not Just Debt, But Depopulation

Seattle’s ‘Tax-the-Rich’ Measure Spurs Freedom Foundation Lawsuit

By Rob Williams – Re-Blogged From Newsmax

The Freedom Foundation, a conservative think tank, sued Seattle after its city council passed a measure in July that would place a 2.25 percent income tax on wealthier residents.

The tax was estimated to affect the 9,000, or 2 percent, of the city’s taxpayers – people who make more than $250,000, or $500,000 for couples filing jointly.

The lawsuit, filed on behalf of 19 Seattle citizens, alleges the proposed tax violates the state constitution and restrictions on cities to impose income taxes, The Wall Street Journal reported. Another group called the Opportunity for All Coalition, founded by Seattle venture capitalist Matt McIlwain, filed a lawsuit the same day, the newspaper said.

Image: WSJ: Seattle's 'Tax-the-Rich' Measure Spurs Freedom Foundation Lawsuit

Continue To Beware The Job Numbers (Is it The Bureau Of Labor Statistics Or Bureau of Lying Statistics?)

By David Haggith – Re-Blogged From http://www.Silver-Phoenix500.com

Applebee’s Franchise Owner Forced To Cut 1,000 Jobs After New York’s Minimum Wage Hike

By Andrew Kerr – Re-Blogged From Western Journalism

The CEO of Apple-Metro Inc., a company that operates about 40 Applebee’s restaurants in the New York metropolitan area, said he’s been forced to cut at at least 1,000 servers in the past year as a result of New York’s recent minimum wage hike.

“We have 1,000 less servers this time this year than we did this time last year,” Zane Tankel told Fox Business’ Stuart Varney on Monday.

That amounts a two-thirds reduction of his total workforce, Tankel said. Continue reading

Minimum Wage Hurts More Than it Helps

By Jeremy Frankel – Re-Blogged From iPatriot

There has been much discussion and debate over whether to raise the minimum wage, and this debate is still going strong.

The positions range from minimum wage advocates who are part of the #FightFor15 movement, claiming that everyone should make enough money to live on; to opponents of a minimum wage, who believe that minimum wages are counterproductive to both employees and businesses, in the sense that anyone whose work isn’t worth the minimum wage wouldn’t be hired, or that the business cannot afford the minimum wage and therefore, no one has a wage at all, since the business cannot operate.

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Harvard Study Shows Minimum Wage Increases Kill Businesses

By Keely Sharp – Re-Blogged From Eagle Rising

While there are McDonald fry cooks out protesting for $15 an hour to flip burgers and almost always get our orders wrong, some of us can actually see the harm in minimum wage hikes.

When wages are increased, then a business must then charge more for their product in order to cover the costs, due to inflation. For example, you may go from $7.25 an hour to $15 an hour, but now a gallon of milk jumps from $4 to $8. So you aren’t really able to afford anything more than you were in the first place, and it hurts the businesses.

A new Harvard Business School study found that minimum wage hikes lead to closures of small businesses. “We find suggestive evidence that an increase in the minimum wage leads to an overall increase in the rate of exit,” the researchers conclude.

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What Creates and Sustains Jobs?

By Dale Netherton – Re-Blogged From iPatriot

The politicians mutter the word “jobs” as if they understood where jobs come from and what conditions are necessary to sustain jobs.

First, without revenue to pay wages no job can exist or if created continue to exist.  The question then becomes, where will the revenue come from?  There are two sources of revenue for jobs.  One is the direct granting of revenue by the government which funds government jobs.  If there is funding available the job can continue until the funding disappears.  The other source of revenue is profit.  If a job is created to supply a good or service and it is sustained by paying for itself, this job is sustainable as long as it is competitive.  This is the only job that can exist that doesn’t rely on confiscation and redistribution.  Jobs that rely on “government funding” are not self sustaining since they must have confiscation and redistribution.  Government cannot create wealth, it has nothing it doesn’t confiscate or borrow.

All government created jobs are necessarily temporary.  Debt and eventual inflation destroys the foundation for government funding of jobs as the private sector that supports sustainable jobs shrinks under the regulation and taxes that eventually destroys the profit motive and therefore the only source of self sustaining jobs.  The CCC camps could not have been retained as permanent jobs.  The demise of the Post Office and Amtrak are examples of where government “jobs” must eventually falter.  The source of these two government jobs comes from the government subsidies.  Neither is self sustaining based on the income they generate.  This means a private sector is being taxed and the confiscation of their earnings is being channeled to the subsidy the government is supplying.

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Rules Still Matter

By Andy Sutton & Graham Mehl – Re-Blogged From Silver Phoenix

While economics is a science and should be treated as such, economic forecasting is both a science and an art at the same time. However, anyone can forecast. Just like anyone can forecast the weather. To do so accurately and furthermore to do so frequently is a true talent. We think of it along the lines of the ability to hit a major league fastball; a gift granted to maybe 1 in 500 or a thousand babies each year. Then add to that the ability to hit a major league fastball for an average of .300 over an entire career and we’re talking a few babies in an entire generation.

Economic forecasting is no different. Anyone can take the classes, read the textbooks by all the proper authors, write the research papers, the thesis, and the dissertation, and still muddle around in the dark for the entirety of a career, issuing bum forecast after bum forecast. We would surmise at that point that there might be a problem with the assumptions going into the exercise of forecasting. Think of the scientist who starts conducting chemistry experiments without knowing Boyle’s Law or the Ideal Gas Law, etc. Or maybe has no clue about Avagadro, let alone the number ascribed to him. Your scientist is going to waste a lot of time and produce nothing of value.

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Why Inflation Is Unlikely To Return

By Rick Ackerman – Re-Blogged From http://www.Silver-Phoenix500.com

Is it possible that wage inflation is re-emerging in the US after a 35-year hiatus? That’s what the experts seem to believe, but there are good reasons to think they will be wrong. Consider the substantial pay increase that minimum-wage workers received in many cities and states where this issue was on the ballot in November. In theory, they will have more money to spend, and this will push the prices of goods and services higher.  In practice, because their employers, particularly those in the fast food business and brick-and-mortar retail, are in a last-ditch fight for survival, it is far more likely that a vast number of low-wage jobs will be eliminated. Even now, we are seeing workers who received raises in 2017 ask their employers to reduce their hours so that they can continue to qualify for food stamps and Obamacaid.

This is the reality of the minimum wage world, and arbitrarily boosting hourly pay to $15/hour will only make things worse for employers and employees.  At best, the economic result will be a push with the broad benefits of higher wages offset by a reduction in entry-level and low-paying jobs. In any event, the day is surely coming when McDonald’s will be able to operate a busy franchise with just two or three employees behind the counter. Amazon is already making similar strides in the grocery-store business. And Uber, having already made taxicab medallions worthless in many cities, could someday displace half the taxi drivers in America with driverless fleets like the one they are testing in Pittsburgh.

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McDonalds Reacts To $15 Minimum Wage, Announces All U.S. Stores To Be Automated

By Jeff Dunetz – Re-Blogged From The Lid

This post comes from the “Department Of I Told You So.”  Back in August we reported that a Heritage Foundation study looked at the effect of the $15.00 minimum wage on a state by state basis the progressive program would put between 7 and 9,000,000 Americans out of work. The first indication that the unemployment wave may be happening is the latest news that McDonald’s is planning to expand its digital self-serve ordering stations and table service to all of its 14,000 stores in the U.S.

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Most People Want Price Controls

By Steve Saville – Re-Blogged From The Speculative Investor

Anyone with rudimentary knowledge of good economic theory can explain why government price controls are a bad idea. It boils down to the fact that the optimum price is the price that naturally balances supply and demand, and to the related fact that forcing the price to be above or below the level at which supply and demand would naturally be in balance will lead to either a glut or a shortage. However, even though most people are capable of understanding why price controls are counter-productive, they still want them.

To be clear, most people living in semi-free countries are undoubtedly against the general concept of price controls, but they will be in favour of specific price controls. In a remarkable display of cognitive dissonance, they will simultaneously understand why price controls must cause economic problems and advocate for price controls in certain situations.

They will be in favour of certain price controls due to political leanings or due to being direct beneficiaries of the controls. Here are some examples:

 

1) Anyone who understands how supply and demand inter-relate should understand that minimum wage laws are not only counter-productive on an economy-wide basis but also cause the most problems for the group of workers they have supposedly been put in place to protect. In particular, it is axiomatic that if government intervention forces the price of labour to be higher than it would otherwise be then the demand for labour will be lower, that is, more people will be unemployed, with the additional unemployment occurring mostly within the ranks of the lowest-skilled workers. For example, if the official minimum wage is $15/hour and someone, due to their lack of experience or skills, is only worth $12/hour, then that person will be out of work. He might be eager to work for $12/hour to gain the experience/training he needs to increase the value of his labour, but the government says: “No; you will either get paid $15/hour or you will be unemployed”.

There are countless people who understand all this and yet strongly support minimum wage laws, either because the laws mesh with their political beliefs or because they personally benefit from the laws.

2) Anyone who understands basic economics should be capable of figuring out that it makes no sense for one of the most important prices in the economy to be set by a banking committee or government agency, and yet most people involved in economics and finance believe that there should be a central bank.

3) It is obvious that “rent control” legislation will lead to a shortage of rental properties and lower average standards of maintenance for existing rental properties, but the current/direct beneficiaries of the legislation (the people who live in rent-controlled housing) will often be in favour of this form of price control.

4) Price caps on utility charges will generally seem like a good idea to the people who currently benefit due to having lower electricity or water bills. That will typically be so even if these people have given the matter enough thought to understand that the artificially-low current prices will lead to less investment in future supply and less maintenance on current plant, leading, in turn, to much higher prices and/or a lower level of service in the future.

5) So-called “anti-price-gouging” laws are invariably popular during disasters, but laws that prevent prices from fully responding to a sudden shortage also reduce the incentive to speedily address the shortage. They therefore prolong the supply problem.

6) Here’s an example that I wasn’t aware of until a couple of weeks ago when I read the article posted HERE. The article discusses a dispute between companies that drill for natural gas in the US and landowners who receive royalty payments in exchange for letting the companies drill on their land. The dispute is about whether the drilling companies are entitled to deduct certain expenses from the royalty payments, but what really caught my attention was the reference to a Pennsylvania state law mandating that a landowner must receive a royalty of at least 12.5 percent of the value of the gas produced on his property.

This law was undoubtedly put in place for the benefit of landowners and most landowners are probably in favour of it, but what it means is that if the price of natural gas isn’t high enough to enable the drilling companies to afford a 12.5% royalty then production will stop and the landowners will get nothing. There’s no scope for the royalty payments to be influenced by natural market forces, although it’s possible that the drilling companies are using deductions to get around the law and reduce the effective royalty rate to a level that is economic at the current gas price.

In summary, very few people are consistently opposed to government price controls. Even people who have enough economics knowledge to understand why price controls never work as advertised find reasons to believe in particular price controls. As a consequence, most of the price controls that are now in place have a lot of supporters among the voting public and are therefore likely to remain in place.

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Economists Report that a $15 Minimum Wage Only Hurts Low Wage Workers!

From the Daily Caller News Foundation:

The push by labor unions and activists to raise the minimum wage to $15 an hour may hurt young and less-educated workers the most.

In 2013, the Obama administration proposed an increase to the federal minimum wage from $7.25 to $9.00 an hour. President Barack Obama has continued to call for an increase in the federal minimum wage.

The fight focuses on $15 as the new minimum acceptable number to activists and labor leaders. Seattle raised its minimum wage to $15 in 2014, followed by San Francisco and Los Angeles. Gov. Andrew Cuomo signed into law a new $15 minimum wage for New York state in 2016, and the University of California has proposed to pay its low-wage employees $15.

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$15.00 Minimum Wage Would Put 7-9 Million People Out Of Work

By Jeff Dunetz – Re-Blogged From The Lid

A Heritage Foundation study examined what would happen to the workforce if Hillary Clinton and her progressive friends were able to enact the nation-wide  $15.00 minimum wage idea she stole from Bernie Sanders. And it ain’t pretty.

Heritage’s approach was different rather than look at it on a national basis, they examined what would change on a state by state basis. When the the state results are aggregated we learn that the progressive’s $15.00 minimum would put between 7 and 9,000,000 Americans out of work.

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Unemployment & Civil Unrest

cropped-bob-shapiro.jpg   By Bob Shapiro

In Summer 1965, the US suffered through much turmoil, including the Watts riots.

Today in the US, we again are having civil unrest, but with a major difference. Today’s unrest appears to be more organized, with police and other authorities as specific targets.

Even the “lone wolf” attacks seem to have a common thread tying them together – Islam. Now, I’m not saying that most American born muslims are set on destroying our country, but before you dismiss me as a racist, you might want to reread the current events of the last couple of years.

Most of the press stories seem to be placing the blame squarely on the Republicans – currently in office and hopefuls on the campaign trail. While many Republicans in Congress are complicit with the policies that are hurting all Americans – including poor blacks – for the most part, they aren’t the ones coming up with these stupid policies.

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Wendy’s Replacing Workers With Kiosks In Response to ‘Fight For $15’

By – Re-Blogged From Infowars

Wendy’s announcement leads to fully robotic restaurants. In response to recent minimum wage hikes, Wendy’s is now replacing fast food workers with robots.

The fast food chain announced it will start automating all of its restaurants by installing self-serve kiosks in 6,000 locations by the end of the year.

Although McDonalds has already been experimenting with kiosks, Wendy’s announcement is the largest roll-out to date and will likely spark a trend leading to fully robotic restaurants.

“Wendy’s President Todd Penegor said it will be up to franchisees to decide whether or not to adopt the kiosks in their stores, noting that many franchise locations have had to raise prices to offset wage increases,” Slashdot reported. “California’s decision to gradually raise the minimum wage to $15 by 2022 will impact Wendy’s 258 restaurants, all of which are franchise-operated.”

“About 75% of 200-plus Wendy’s restaurants are run by franchisees in New York, a state that is also on its way to $15.”

It’s simple economics: when labor costs are too high to stay in business, owners will look for alternatives – including burger flipping robots.

One such robot, developed by the San Francisco start-up Momentum Machines, can replicate a fast food worker by shaping burger patties from ground meat, grilling them, adding the specified amount of ingredients, and serving them to customers on a conveyor belt.

Many fast food chains may be forced to outsource jobs to these machines because they cannot afford to stay in business paying workers $15 an hour, given the number of restaurants that have already closed after Seattle enacted such a minimum wage.

“The businesses that couldn’t afford it either shut down or laid off workers, and the businesses that could afford it simply shifted some money around by eliminating benefits and putting those dollars toward wages,” Joshua Krause of the Daily Steeple reported. “What the supporters of a higher minimum wage just don’t get, is that it hurts poor unskilled workers the most.”

 

Former McDonald’s CEO Drops Hard Truths on What $15 Minimum Wage Does to People Who Need Work

By Katie Lapotin – Re-Blogged From Independent Journal

It’s no secret that Democrats (and labor unions) are clamoring for a raise the minimum wage in the United States to $15 per hour.

That vision is already a reality for workers in some cities nationwide — and soon will be for all workers across the state of state of California.

Cities in the United States with a higher-than-average minimum wage:

Image Credit: Screenshot/The New York Times

Image Credit: Screenshot/The New York Times

But not everyone’s in favor of the steep wage increase, given the hardships that higher wages place on businesses already struggling to stay afloat and the fact that jobs are often lost whenever minimum wages are raised.

Among those opposing the wage hike is Ed Rensi, the former president and CEO of McDonalds. He wrote about the effect that a $15 minimum wage would have on his old company in Forbes on Monday, suggesting that:

…a $15 minimum wage won’t spell the end of the brand. However it will mean wiping out thousands of entry-level opportunities for people without many other options.

He explained why:

The $15 minimum wage demand, which translates to $30,000 a year for a full-time employee, is built upon a fundamental misunderstanding of a restaurant business such as McDonald’s”

In truth, nearly 90% of McDonald’s locations are independently-owned by franchisees who aren’t making “millions” in profit. Rather, they keep roughly six cents of each sales dollar after paying for food, staff costs, rent and other expenses.

Then he does the math, which will leave entry level workers in a bad spot:

“A typical franchisee sells about $2.6 million worth of burgers, fries, shakes and Happy Meals each year, leaving them with $156,000 in profit. If that franchisee has 15 part-time employees on staff earning minimum wage, a $15 hourly pay requirement eats up three-quarters of their profitability. (In reality, the costs will be much higher, as the company will have to fund raises further up the pay scale.) For some locations, a $15 minimum wage wipes out their entire profit.”

Rensi isn’t the only current or former fast food executive speaking out about the push.

Last month, the CEO of Hardee’s and Carl’s Jr. told Business Insider that he is strongly considering moving toward opening automated restaurants because the cost of hiring manual labor has become too expensive.

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Minimum Wage Debate

By Andy Sutton – Re-Blogged From http://www.Silver-Phoenix500.com

There has been an incredible amount of posturing, debate and arguing over the minimum wage situation – particularly surrounding recent events in California and New York where legislation was recently signed into law that would effectively double the nominal minimum wage over the next several years – 6 years in California, and 3 in New York City. The rest of New York will see the changes phased in over a longer period of time.

Instead of diving headlong into the useless arguing and name-calling, I think it is important to take a step back from the dogmatic rhetoric we hear on television, from the media, our legislators, and those in academia and take a hard look at the economics behind the idea of having a minimum wage to begin with. This going to take a bit of a leap for pretty much all of us since we’ve either grown up with a minimum wage in place or have had a job that paid minimum wage at some point – myself included.

I also understand that it is a political season here in the United States and with an economy that is more congested than the sinuses of half the Northeast population, talking about people’s bottom line is going to elicit some serious responses. People are going to react emotionally instead of rationally. So I’m not going to give my opinion. I’m going to try to remove myself from the debate and present facts and positions on both sides and let you – the reader – decide.

I am prefacing this examination of the minimum wage situation with the admission that there are many variables involved – well beyond the scope of this paper. Entire textbooks could easily be written just on this topic. The purpose of this paper is to bring about a better general understanding of the minimum wage, the more salient arguments for and against it, and the application of the laws of economics to the subject.

The Arguments ‘For’ a Minimum Wage – and the Increase

One of the biggest arguments for a minimum wage over the past several decades was that it was intended to create a ‘living wage’. Someone should be able to go get a job that pays the minimum wage and run a household off the proceeds of their endeavors.

Using the ‘living wage’ doctrine, it is easy to see why the wage MUST be increased. With a 2000 hour working year, even a minimum wage of $10/hour pays $20,000. This is before federal, state, and local governments cut themselves in for a piece of that already small pie. According to H&R Block’s basic tax calculator, a single person in this situation is going to pay around $1000 to the federal government, another $604 if they reside in Pennsylvania like I happen to, and another $200 to the local government (again, assuming they live where I do in PA). In totality, that’s nearly 10% of their wages. So they’re down to $18,000. Renting any decent apartment will eat up at least a third of this. Throw in utilities, vehicle expenses, food, clothing and so forth and it is pretty easy to see how even $10 is really going to be falling short of being a ‘living wage’.

I will quickly grant that every area is different. There are tax breaks, etc. You throw a second breadwinner into the situation, get a roommate, live with family, etc. and $10 is doable. There are too many variables to properly cover every single scenario in a book, let alone an op-ed piece such as this one.  But the federal minimum wage is only $7.25/hour. Suddenly, that $20,000/year drops to $14,500/yr. Still tenable? Probably not. $7.25 certainly isn’t a living wage.

The “Value” of the Minimum Wage Keeps Dropping

The second major argument for hiking the minimum wage is that frankly, our money just doesn’t buy what it used to. The dollar has lost so much of its value that consumers need more and more dollars to purchase the same amount of goods and services as they had previously.

There are statistics galore about the erosion in the dollar’s purchasing power and most of them are invalid. Here’s an example. Most people like potato chips. Let’s say that back in 2006 a bag of plain old potato chips was $1.79. I don’t know what the price is and when you see where I’m going you’ll understand that the price is actually irrelevant. That bag was 16 ounces. Today, you’ll pay around $2.50 for a bag of chips on sale, depending again on where you are, etc. The problem is, you’re not buying the same bag of chips. Many of the bags that used to be 16 oz. are now 12, 11, or even 10 ounces. You’re paying more and getting less. But when the ‘value’ of the dollar is calculated they ONLY look at the price. $1.79 to $2.50 in 10 years isn’t that bad they’ll say. What they should look at is the cost per ounce. Ice cream is another big one. Orange juice another. If you do any amount of grocery shopping, you’ll know exactly what I’m talking about.

So where this interfaces with the minimum wage, is the data are distorted. The $7.25 is bad enough if you use the government’s measures of inflation. It gets even worse when you look at the actual purchasing power of the $7.25 – what it will actually buy.

Incidentally, this is the main reason the minimum wage needs to be raised periodically – our money is losing value. This is not my opinion, it is the main reason cited by economists and policymakers when arguing for minimum wage hikes.

Low Minimum Wages are Actually Subsidies for Business

I included this one because it came up on quite a few lists of arguments for raising the minimum wage, but in fairness, this is a two-edged sword and I’m going to cut with the other side in the next section of the article.

The premise behind this argument is that if our hypothetical worker discussed above makes less than a living wage, he or she is going to turn to the government for assistance. This is almost assuredly true. Something will have to be done. They’ll need a roommate, help from parents, credit cards, or help from the government. They’ll need assistance. Most likely it’ll end up being all of the above.

So our hypothetical worker applies for government assistance. The argument is that now the government is basically paying these people. If the minimum wage were a living one, the business owner(s) would be paying the person instead. Proponents of higher minimum wages will argue that having too low a minimum wage places a burden on the taxpayers. A recent UC Berkeley study stated that taxpayers pay around $243 billion each year to subsidize fast food workers alone. This money is paid because those people don’t make enough at their jobs and apply for government assistance. The argument is that raising the minimum wage will cut into that $243 billion in subsidies.

And the Rest…

The three arguments above were selected out of several lists because they were the ones that had merit. The remainder of the arguments for an increased minimum wage were of the variety of ‘So and so said it should be done’. Whether it was Nobel laureates, university professors, the government bureaucrats, churches, or politicians. The last is somewhat hilarious because this is an election year. It is well accepted by pretty much everyone that politicians will say whatever they think will get them elected. If they thought that legalizing goat racing in Honduras would pave a path to the Oval Office, they’d advocate it.

The bottom line is that ‘because I say so’ is not a valid argument for any policy, hence the discounting of many popular arguments for raising the minimum wage and the absence of those arguments in this piece.

Part II – The Arguments Against

After reading the above it might seem downright cruel that anyone would be against raising the minimum wage. It has already been demonstrated that $10/hour is not going to cut it, especially in areas where there is a high cost of living. Good examples of this would be New York, particularly in the 5 boroughs, California (oddly, where the recent legislation came from), and most other urban areas.

The Minimum Wage is a Price Control

At its barest level, the minimum wage is a price control. People don’t often think of it this way. They’ll understand the state minimum price on things like cigarettes or milk, but don’t understand that labor also has a price. The minimum wage is merely the price of labor, but understand that price and cost do NOT mean the same thing. The price of labor is what the company pays the employee. The cost is the total financial and economic burden of carrying that employee on the payroll. These are two very different concepts.

I am including a link to a paper I authored some time ago on partial equilibrium analysis because the minimum wage is a prime example of a situation where this analysis comes in handy. It’s a somewhat long read, but if you really want to understand what is going on economically, it’s well worth the time in my opinion.

In a free market, price controls are generally avoided because they create what is called a total welfare loss – somewhere. It might be the employee, the firm, the general public, or some combination of those actors. Anytime there is disequilibrium between supply, demand, and price, there is an inefficiency. Where there is inefficiency, someone loses. So, by definition, price controls create loss. This is a fact of economics and of nature. Now, great meandering by statisticians, economists, etc. has been done to move that loss around or to make it appear as though it is being shuffled, but the fact is it cannot be eliminated. The nice thing about advanced economics and mathematics is that we can quantify the amount of the loss; or at least attempt to. This is where the Berkeley study mentioned above was going. They attempted to quantify the amount of the subsidy paid out by the government (taxpayer) as a result of the price control.

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Take a look at the graphic above. If you look at the intersection of W0 and L0 you’ll see that represents equilibrium. Put more simply, supply=demand at a particular price level. Can there still be unemployment even if the price of labor as at equilibrium? Absolutely. Firms can still close, even if there is equilibrium with regard to the price of labor. There can be labor shortages too if new firms open. Keep in mind also that there is not just one equilibrium; there are many. The supply/demand dynamics for fast food workers are completely different than those of NASA rocket scientists. So, following the logic, there will be many, many equilibria. The point here is to convey a general understanding of how equilibrium works.

Now, pay particular attention to the W1 line that is parallel with the x-axis. This represents the price control: the minimum wage. In this case, it is above the equilibrium wage. If you have a good understanding of this concept, you’ll understand that there is no point to setting the minimum wage price control below the equilibrium. Such an exercise would be pointless. If such were the case, what we would see is there would be nobody making minimum wage; almost everyone would be making more. We’ll get back to this point a bit later.

Now, take a look at the above chart with the filled in red area. This represents the inefficiency or ‘welfare loss’ referred to above. This is the waste if you will, that is created by the price control. What is more important is that if you look at where the supply and demand lines intersect W1, you’ll notice that supply is greater than demand. This means the price control has created a labor surplus for this particular equilibrium. If we are talking about the fast-food worker, employers are not going to demand as much labor at the higher price. Given the same cohort of workers as before the price control, some will likely lose their jobs. In that case, the worker bears the brunt of the shaded in area of inefficiency or welfare loss. It is also important to note that supply and demand ‘curves’ are rarely linear as is shown. The straight lines are used for simplicity’s sake and to help illustrate what is going on.

Now let us go a level deeper into why the above is the way it is. Let us discuss price versus cost. For those of you with business backgrounds, think of the profit maximizing function where marginal cost equals marginal revenue. If we are talking about labor, an employer will only add another unit of labor (employee) when the revenue gained from adding that worker is at least the same as the cost the employer bears for employing that worker. If the revenue gained from adding that worker is greater than the cost, the employer may well hire yet another worker. Now, do all employers sit down and actually figure this out? Most definitely not. But from an efficiency standpoint it makes no sense to hire a worker when it’ll cost more to employ that worker than the revenue the worker will bring into the firm.

So again, looking at the minimum wage worker, we are talking about doubling their rate of pay. But what is the effect of doubling the price of labor on the total cost of employing that worker? It is generally accepted that the actual cost of having an employee is 125 to 140% of that employee’s wage. Studies at MIT and the Department of Labor are generally in agreement on this range. The range is so broad mostly because of the non-mandatory benefits that many employers provide like health insurance, vacation, bonuses, etc. and the cost of all of those items vary greatly. Put in the terms used thus far in the article, the cost of the employee is 1.25-1.4 times the price of the employee. Using the example of a $15/hour minimum wage for fast food workers and a 25% premium for the mandatory programs like FICA, Medicare, Unemployment, and Worker’s Compensation, the cost of carrying a worker is $18.75/hour. If the employee can’t generate that much revenue for the firm, then there is no point in having that worker.

Based on the above, one might ask the question – can anyone at McDonald’s or Burger King generate that kind of revenue at the current prices these establishments charge for their products? Remember that labor is only a portion of the cost of producing a Big Mac. There are raw materials costs, building rents, taxes, and general overhead as well. The point here is that just because the minimum wage doubles, the price of a Big Mac doesn’t need to double to cover the increase in wages paid, all else remaining the same.

The Minimum Wage Only Applies to a Small Percentage of Workers? Yes AND No

This is where things get interesting. According to the US Department of Labor, the number of workers earning the prevailing minimum wage (or less) in the US in 2014 was 3.9% of the workforce. There seems to be this perception that a huge proportion of workers are paid the minimum wage and that simply isn’t true. However, let’s take the person making $8/hr. How much better off are they than someone making the $7.25/hour statutory minimum wage? I know, 75 cents an hour, but really, they might as well be included in this group too. And you can run that logic up the flagpole to the $10/hour and even $15/hour levels and you’ll catch more and more folks.

This is where the whole ‘living wage’ doctrine falls short because it is very subjective. What exactly constitutes a ‘living wage’?  How much per hour? Nobody can really say because it is subject to perceptions and opinions. What one actually needs versus what one thinks they need comes into play. It is impossible to base any type of scientific study or experimentation on something so ersatz in nature.

The problem with doubling the minimum wage is now you’re not just talking about the 3.9% who currently make minimum wage, you’re talking about everyone up to $15/hour in the case of NY and CA. Obviously that is going to involve a lot more workers. Take the person currently making $14/hour. They’re making almost double the current minimum wage. When this goes into effect they’ll get a $1/hour ‘raise’. Keep in mind, the $14/hour worker might very well be the manager that supervises minimum wage workers and now they’ll be making the same amount of money. So the firm is going to have to bump the manger up accordingly. But now the manger makes more money than the district manager and so forth. What is likely to happen is that such a dramatic hike in the minimum wage over such a relatively short period of time will cause a wage-price spiral, especially if the federal minimum wage was raised, thereby affecting everyone. Firms will have to cover their increased costs somehow. The ability of firms to raise prices is going to be determined by the elasticity of demand for their products, among other factors such as regulatory inhibitions like those found in healthcare, etc.

Minimum Wage Jobs Are Not “Career” Jobs – The ‘Living Wage’ Argument Nullified

Many people who read this paper will be able to say that they started their first job as a teenager making minimum wage, your author included. While the argument can be made that someone needs to flip burgers, there are plenty of teenagers. Note the graphic below:

Please pay attention to the explanation of ‘near minimum wage workers’. These are folks who are essentially making less than $10.10/hour. Without passing judgment on anyone it must be noted that the vast majority of these workers are working jobs that are meant to be ‘starter’ jobs and that is the role these jobs have traditionally played in the economy. In fact, nearly half of all minimum wage workers are between the ages of 16 and 24 according to the Department of Labor.

The fact that there are people who are working in beginner’s jobs’ due to layoffs and the need for additional household income, etc. is more an indictment of the general health of the USEconomy and really has very little to do with the minimum wage situation at all. By and large, minimum wage jobs don’t exist to pay a ‘living wage’, they’re a place for young people to start out, learn the responsibilities of employment, save for college, and so forth, not to support a household.

3.9% is Telling Us Something Regarding the Minimum Wage

To elaborate from above, the fact that just 3.9% of workers are currently making the minimum wage, from a supply and demand perspective, demonstrates very strongly the fact that the wages for the vast majority of workers are already higher than the price control and are already in fact close to or at equilibrium. There is a perception that businesses are too frugal and don’t want to pay people and that this needs to be remedied by government interference via a price control. If that were really true, we’d expect to see a much, much higher proportion of the workforce trapped at the minimum wage level. Again, referring to the chart above showing the kinds of jobs in the $10.10 and less range, they are starter jobs for the most part. Or at least should be.

In fact, if the federal minimum wage ends up being increased to $15/hour, the proportion of people making minimum wage will go up dramatically. If business adjust proportionately and increase up their corporate food chains to compensate for this interference, something will have to give. Layoffs are a real possibility and in fact very likely. A switch from use of human workers to automation is another possibility. Increased prices are virtually guaranteed. Another point that needs to be mentioned is the increase in government tax revenues as a result of a doubling of the minimum wage in CA and NY. Obviously the federal government will benefit from this too and that reality probably accounts for many of the calls from Washington DC for dramatic increases in the minimum wage.

In Conclusion

In summary, probably the most important take-home from this discussion is there is a significant, but not overbearing, cohort that is trying to live off of jobs that were historically performed by young people and those looking for casual income. The loss of the majority of the manufacturing base in the United States needs to be included in this discussion. For the most part, this discussion is not taking place. The evisceration of the goods-producing base has been a national policy for nearly 30 years and it is long overdue that those responsible be held accountable. Another crucial piece of this discussion stems from the loss in purchasing power of the dollar. The policy of dollar devaluation has been systematically and publicly pursued by the federal reserve over the past 100+ years. This has been done without shame, regret, or accountability. If the United States were to return to a system of honest money (gold and silver or at least gold and silver backed), a minimum wage increase would not only be unnecessary, but the idea of a minimum wage in the first place would be pointless as well.

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The Minimum Wage

cropped-bob-shapiro.jpg   By Bob Shapiro

The push to raise the Minimum Wage refuses to die, both the Federal Rate and Rates in the various States. Supporters say that poor people need to earn enough to support themselves and their families, and nobody – certainly not I – can argue with that sentiment.

However, I think that it is valid to explore the actual effects of a Minimum Wage hike. I’d like to suggest three examples to consider in this quest – two may seem unrelated at first, while the third will use extreme numbers.

Example 1: Suppose you are considering the purchase of a new computer. In your locale, you find you have two choices. The first is a fully loaded, name brand PC with a selling price of $5000. The other choice is one assembled at a local shop to your specifications. For what you need, the price will be $1000.

The $5000 box is appealing, but your budget pushes you toward the $1000 option. Before you can make your purchase, the government (at whatever level) issues an order saying that “No computer may be sold for less than $4000.”

You still may opt for the lower cost choice, but relatively, the $5000 price is not so bad. Of course, your budget still is your budget, so you may just forget the purchase altogether.

Example 2: Your roof leaks. One contractor offers to repair your roof for $5000, while another will do only a full new roof, and the charge will be $50,000. Before you can choose, the government declares that roof work may not cost less than $40,000.

Once again, the law is discouraging the lower price option, while encouraging either the higher priced work or letting the leak continue.

Example 3: Putting food on the table, clothes on your back, and a roof overhead are serious needs. Nobody should have to make do with less than everything he desires. So, let’s raise the Minimum Wage to $100 an hour, so that every wage earner can afford to live in dignity. </sarc>

As it turns out, very few employment opportunities can repay the hiring business enough to be able to pay the $100 per hour tab. So, almost zero new jobs appear. Many previous tasks that people could do become automated. With less business competition, the few remaining companies are able to raise their prices to offset the higher Minimum Wage.

Existing jobs also are affected by the same burden of $100 per hour wages. Many (most?) existing jobs disappear and unemployment goes up. Jobs are traded in for automation where possible.

Image result for $100 minimum wage clipart

The net effect is that a few businesses, and a few people, benefit from the new $100 Minimum Wage. However, the business must pay more, many people become unemployed, consumers must pay more, and taxpayers now must support a larger population of out-of-work people.

So, how do these three examples apply to a raise only to $15 over several years? It’s all the same!

A few people benefit. The few who get hired benefit. The few who get a raise will benefit. And because of reduced competition, higher wage employees also may get a raise.

BUT!! Many more people will be unemployed. Taxpayers will have to pay more. And, consumers will have to pay more.

So, why would anybody support this nonsense?

As it turns out, Democrats are favored by several voting blocs, two of which are unions and poor people. We’ve seen that higher wage earners benefit from reduced competition, and indeed, unions are the driving force behind the push for a higher Minimum Wage.

Poor people will be hurt as their already high unemployment rate becomes even higher due to a higher Minimum Wage. But the socialist left which makes up the majority of the Democrats are telling the poor that they’ll get paid more – and yes, those who do get new jobs (and those not being fired from current jobs) will be helped.

But, the socialist left is committing a lie of omission by not telling the poor how the higher Minimum Wage will hurt them.

The Democrats had to choose between two constituencies – unions and the poor. They’ve made their choice and have thrown the poor under the bus. They’ve covered it up with the lie that they’re helping the poor.

Image result for unemployment clipart

It’s not like the ill effects of raising the Minimum Wage have been kept a secret. Anybody with average intelligence who has seen the kinds of examples I’ve laid out can understand the concept.

To me, the Democrats (and not a few Republican socialists) are doing evil. They are stabbing the poor in the back and then bragging how their stupid policies are helping the poor.

Seattle Wage Hike Off To ‘Pretty Bad Start,’ Kills 700 Jobs

By Connor Wolf – Re-Blogged From http://freedomforce.com

Seattle, which recently passed a $15 minimum wage, has seen the loss of 700 restaurant jobs despite the rest of the state seeing huge increases, according to a Wednesday report.

In its report, the American Enterprise Institute looked at restaurant job growth in both Seattle and the rest of Washington. The state itself has gained 5,800 industry jobs since January. Seattle, however, lost 700 jobs in the same time. The state minimum wage is $9.47. Back in June Seattle passed its own minimum wage of $15 an hour. The city ordinance is designed to phase in over the course of several years. It will reach $15 an hour by 2017 for most employers.

“One likely cause of the stagnation and decline of Seattle area restaurant jobs this year is the increase in the city’s minimum wage,” the reportspeculated. “It looks like the Seattle minimum wage hike is getting off to a pretty bad start. Especially considering that restaurant employment in the rest of the state is booming, and nearly 6,000 more restaurant workers are employed today than in January.”

Seattle was the first place to pass a $15 minimum wage measure and became the first major victory for supporters. San Francisco and Los Angeles followed not long after and now many cities have either enacted it or are considering it. Some states are also giving the $15 minimum wage serious consideration. Currently it has not passed on the state level.

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More Troubling Signs of Minimum Wage Damage on the West Coast, Part II

By – Re-Blogged From http://www.AEI.org

Preliminary results indicate that the increases in the minimum wage this year on the West Coast have had negative employment effects in Los Angeles (for hotel workers, see this CD post) and Seattle (for restaurant workers, see this CD post). There is now additional evidence that the minimum wage increase in San Francisco this year to $12.25 an hour (on the way to $15 on July 1, 2018) is having an adverse effect on the city’s restaurant employment, as Stephen Bronars reports today in Forbes (“Higher Minimum Wages in San Francisco and Seattle Mean Fewer Restaurant Jobs“).

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DOL vs the US Economy

cropped-bob-shapiro.jpg   By Bob Shapiro
The US Government is bloated. Who knew?
Most spending either is duplicative of what already is available in the private, productive sector of the Economy, is actually harmful to the US Economy, or just uses up capital for unneeded programs – capital which would be better spent on the investment which would make all Americans richer. Who knew?
The Department of Labor is just one example of this waste. It pays people to NOT work, so many people don't look for work as hard as they could. It prohibits unskilled workers from getting the jobs which might teach them skills, through the Minimum Wage.
Here is an introductory video from the CATO Institute on D.O.L. and its waste.

We need to get government back under control, and the Department of Labor is a good place to start.

$15 Minimum Wage in New York

By  – Re-Blogged From http://www.Mises.org

The state of New York has voted to raise the hourly minimum wage from $8.75 to $15 following fast food workers’ protests. Governor Andrew Cuomo and New York City mayor Bill de Blasio and their families will pitch in the additional $6.25 per hour to help support low-wage workers in the fast food industry. “This is just the beginning. We will not stop until we reach true economic justice,” Cuomo said. “As much as fast food workers need and deserve a raise – and we know they do – we must ensure that every worker gets a living wage,” de Blasio filled in.

Well, not really. The state will raise the minimum wage, but Cuomo and de Blasio do not expect to foot the bill. Instead, they’re happy to sign the dotted line because they are on the receiving end. The “raise” effectively buys them a lot of votes using other people’s (and corporations’) money. For this reason, it is no surprise that Cuomo considers the vote “one of the really great days of my administration.”

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US at War With Puerto Rico

cropped-bob-shapiro.jpg   By Bob Shapiro

The US is causing high unemployment, high and growing public debt, and an increasing reliance on handouts among the citizens of Puerto Rico. US federal laws are killing what could be a Free Market success in this territorial “possession.” Peter Schiff discusses below, the particulars of US stupidity on the island, making Puerto Rico another Greece waiting to happen, and he outlines easy solutions to the US caused socialistic destruction.

By Peter Schiff – Re-Blogged From http://www.Gold-Eagle.com

While Greece is now dominating the debt default stage, the real tragedy is playing out much closer to home, with the downward spiral of Puerto Rico. As in Greece, the Puerto Rican economy has been destroyed by its participation in an unrealistic monetary system that it does not control and the failure of domestic politicians to confront their own insolvency.

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Unions Seek Exemptions from Minimum Wage Laws

By Michael Greibrok & Logan Albright – Re-Blogged From Freedom Works

Since the first federal minimum wage went into effect in 1938, there have been people calling for an increase. Recently, there has been a push for a $15 hourly minimum wage at the federal level, as well as within various state and municipalities. Many of these calls for minimum wage hike have been led by, and funded by, unions. One in particular, Raise the Wage, called for a $15.25 minimum wage in Los Angeles and was funded by unions, including AFL-CIO.

While unions have been fighting for increasing minimum wages, they have also been fighting for unions to be exempted from the increased minimum wages. Rusty Hicks, Executive Secretary-Treasurer of the Los Angeles County Federation of Labor, AFL-CIO, argued why union members should be exempt from minimum wage requirements.

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NLRB Joint-Employer Cases

By Aloysius Hogan – Re-Blogged From Competitive Enterprise Institute

Your salary, purchasing power, and job are on the line as an independent federal agency takes the core American business concepts of franchising, temporary staffing, contracting, sourcing, and outsourcing to court.

Regular Americans stand to lose a lot as some franchises are regulated out of existence. Franchise businesses provide us food, tax preparation, day care, gasoline, and many other products and services. We all know someone who has worked in a temp agency. Businesses commonly outsource accounting and cleaning. Our cars are manufactured with parts sourced from smaller businesses. Our homes are constructed with subcontractors plumbing the bathrooms and wiring the fixtures. All are at risk.

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Research: The Minimum Wage and the Great Recession

(Note: The researchers look at the Minimum Wage hike in 2007 and its effects on unskilled labor employment. What they found was that the M.W. increase caused a 4% fall in employment of 25-54 year olds and an 8% fall of 15 to 24 year olds. – Bob)

By Jeffrey Clemens and Michael Wither – Re-Blogged From http://www.Cato.org

Between July 23, 2007, and July 24, 2009, the federal minimum wage rose from $5.15 to $7.25 per hour. Over a similar time period, the employment-to-population ratio declined by 4 percentage points among adults aged 25 to 54 and by 8 percentage points among those aged 15 to 24. Both ratios recovered slowly following the recession’s conclusion, and young-adult employment remains well below its pre-recession peak…. In our research, we analyze the minimum wage’s effects on the employment and income trajectories of low-skilled workers during the Great Recession and subsequent recovery.

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Greed – Good or Bad?

cropped-bob-shapiro.jpg   By Bob Shapiro

Most Americans are greedy most of the time.

If we own a business, we want as much profit as we can generate. If we buy stocks, we want the price to go way up. If we work, we want to be paid as much as we can get. If we sell a house or a car, we want to get as much as we can. Of course, when we buy a house or a car, we want to pay as little as possible.

In every single transaction, we want to get the better of the deal compared to the person on the other side of the table. Is this a good thing – or an evil we should strive to stamp out?

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Minimum Wage Madness

cropped-bob-shapiro.jpg   By Bob Shapiro

During the 1st third of the 20th century, the Minimum Wage was held to be Unconstitutional, since it violated the Due Process guarantee under the 14th Amendment. In 1937, during the Roosevelt Administration, the Supreme Court overturned their earlier, long-standing ruling, and the Minimum Wage was declared to be Constitutional.

An important consideration is that, in February 1937, FDR had legislation introduced which would “pack” the Supreme Court – potentially increasing the voting number to 15 Justices. FDR supported the Minimum Wage, and his attacks on the then current makeup of the high court likely influenced members’ votes.

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Civil Forfeiture for Labor Regulations

By Walter Olson – Re-Blogged From http://www.Reason.com

One reason for the public outcry over civil forfeiture is its unfairness as a matter of procedure: at a point when you’ve been convicted of nothing, law enforcement can seize your property and make you sue to get it back. And then if you want to challenge the government’s actions, the assets you need for a legal defense may themselves have been seized or frozen. So the pressure is to settle with prosecutors or police on unfavorable terms, perhaps getting back some of your bank account or of the value of your home or car but often without a practical chance to fight the case against you in court.

It isn’t just forfeiture law that can give the government this intimidating type of power. Under a provision of the 1938 Fair Labor Standards Act, the U.S. Department of Labor can seek what is known as a “hot goods” order, freezing the physical output of an employer that it suspects of having violated wage and hour law, all without having to prove its case at a trial.

In recent years — urged by such constituencies as labor unions, trial lawyers, and left-leaning academics — the Obama administration has greatly stepped up its enforcement of FLSA wage-hour law. Part of that enforcement has taken the form of a revitalized use of hot-goods orders, which even defenders of its approach concede had until recently been little-known. So far the most notable result has been a federal attack on blueberry growers in the Pacific Northwest — an onslaught high-handed enough to have been met with a stinging rebuke from a federal court last year, and which has now ended in humiliation with the dropping of charges against two growers and a refund of moneys extracted from them.

The case started in 2012 when the Labor Department told three Oregon farms it didn’t think the piecework rate system they used, which paid workers for pounds picked, resulted in high enough pay for field workers. Without spelling out exactly how it had arrived at this conclusion — an omission that would raise questions later — it obtained a hot-goods order against them, labeling an estimated $5 million worth of fresh blueberries as contraband forbidden to enter the channels of commerce for supermarket sale, processing, or any other use. And then it offered the growers a deal: if they wanted Washington to release their crop, they would have to not only fork over a demanded cash settlement but — this is the kicker — agree not to appeal.

It’s coercive enough to deploy the hot-goods power against a maker of steel ingots or knitted garments. But blueberries are a highly perishable crop that begins to lose value at once if not shipped. Indeed, no one could remember a case until the Obama years in which the hot-goods power had been used against agricultural produce at all, let alone one with a shelf life measured in days.

For the growers, of course, the proffered choice was no choice at all: rather than lose crops worth millions, they took the deal and agreed to pay $240,000. But outrage spread among farm groups, and the Oregon Farm Bureau offered to assist in a court case. The next year two of the growers went to court to challenge what had happened to them and undo the settlement. They told a federal court that the hot-goods order by its nature had prevented them from asserting their legal right to contest the department’s wage calculations or even find out what they were. One grower said the government’s tactics had amounted to “extortion.”

Making matters worse, the growers finally managed to uncover some of the department’s methodology in calculating wage underpayment. Here’s the Bend (Oregon) Bulletin in an editorial last month:

Do you know how the department determined some of the alleged labor violations? It guessed.

It determined that a picker could pick only a certain amount of blueberries in a day. [Since a larger amount had been picked than the number of reported workers would account for, it deduced that the farms must have used off-the-books time or laborers — W.O.] One farm hired a former Labor Department investigator to test that theory. He had workers pick blueberries on a field that had already been picked, and many picked well over that amount.

It’s hard — as in, really, really hard — to get a legal settlement thrown out on grounds of duress. But federal judges nonetheless sided with the growers and ruled that the Department had overstepped its powers. Federal district judge Michael McShane even wrote that the department’s conduct constituted “fraud.” Meanwhile, the U.S. House of Representatives

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Cargo Cult US Policy

cropped-bob-shapiro.jpg   By Bob Shapiro

Melanesia includes island countries like Vanuatu, the Solomon Islands, Fiji, and Papua New Guinea. During World War II and other colonization eras, there developed what is called the Cargo Cult.

One main idea of the Cargo Cult was that it was the building of runways for airplanes which brought all the planes, which brought all the riches from the outside world. They believed that the cause of the planes coming was the existence of the landing strips.

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Business Cycles and Government Decisions

cropped-bob-shapiro.jpg   By Bob Shapiro

Economic conditions tend to run in cycles. Pressures build, official efforts are made to contain any perceived bad effects, and at some point, the pressures overwhelm all opposition. The cave-in frequently, but not always, sets pressures in motion in the opposite direction.

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Which Way the US Economy?

cropped-bob-shapiro.jpg   By Bob Shapiro

There have been a lot of news items lately which will / could have an impact on the US Economy and the Jobs outlook. The US currently has about 140 million people working, a rise of 2 million over the last 7 years. At less than 24,000 rise per month, that doesn’t come close to satisfying the demand for jobs with roughly 120,000 Americans entering the job market each month. The US would have needed to create 10 million new jobs during the last 7 years to do that.

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20 States Raise Minimum Wage

Re-Blogged from www.CEI.Org By Ryan Young

The minimum wage is one of the most popular policies for fighting poverty, and proposed increases to it usually poll very well. The $7.25 per hour federal minimum wage hasn’t increased since 2009, so now many states are enacting their own minimum wage hikes. Twenty states are inaugurating 2015 with new increases.

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$15 Minimum Wage – Now?

cropped-bob-shapiro.jpg   By Bob Shapiro

The current US economic environment of continuing Great Recession makes me wonder what those pushing the $15 Minimum Wage are thinking. Here are a few of the numbers I see:

The BLS reported 321,000 new jobs in November. That sounds like good news, but since 317,000 old jobs were lost, there were only 4,000 more Americans working than in October. (Private firm ADP shows

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Stop the Minimum Wage Hike

cropped-bob-shapiro.jpg   By Bob Shapiro

One Law that I see validated constantly is the Law of Unintended Consequences.

Sir Isaac Newton said that for every action, there is an equal and opposite reaction, but it seems like our government leaders are not aware of this basic Law of physics.

Frederick Bastiat said almost 200 years ago in his book, The Law, that we should consider not only the seen effects, but also the unseen effects of any action.

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