Tag Archives: Minimum Wage

Biden’s proposes $15 minimum wage…what should we really do about that?

So let’s talk about Biden’s $15 an hour minimum wage proposal.

I could talk about how this doesn’t need to be in a bill about COVID relief, but those who believe that this is an important issue will take the ‘take advantage of any opportunity opening.’ And since both sides have foolishly engaged in that behavior, there is no chance of arguing for not doing it again because no one wants to be rational and seek polite behavior that will make politics more stable right now.

I could talk about how this will make a moderate increase in inflation and probably a massive increase in the amount of unemployment for those who do not have higher education while also negatively affecting minority groups across the board. But economists have been banging that drum for years, and if you’re not going to listen to their facts in all those previous times, then why would you now.

I could talk about how this will even further increase incentives to mechanize and automate as much as possible as the machines will be so much more attractive as they now have to be worth $14.99, not the $13.49 set by the highest state minimum wage in Washington. Because again, you’re not concerned with economics…or apparently that Biden’s plan doesn’t have nearly enough investment in education to counter the fact this will put a lot of people out of jobs.

I’m also not going to point out that this will kill the economies in all those red states that still are at the national level of $7.25…meaning that vast numbers of those people in those red states are going to move to places that have better economies…meaning the MAGA idiots are going to move into other states and this will probably shift the electoral college map a little more to the red, which, right now, is a terrible idea. (I may have no deep abiding love for the Democrats, but right now, the opposition is a bunch of Nazis, so I have to throw in with the liberal idiots until the opposition can stop being evil).

No, what I’m going to point out is the continual problem all opponents of minimum wage increases have. They don’t come up with better ideas.

Let’s go over how all problems go—housing, minimum wages, unions, health care, climate change. One side identifies a problem. They then blow it out of proportion, making something that is a serious problem only for a small segment of the population for a period of time and makes it seem like it affects almost everyone for perpetual periods of time. This works because people are, regrettably, easily susceptible to fear. People fear they won’t have enough, so they fear they won’t have income or healthcare, They’re afraid of what they can’t control, and the weather is always the thing that none of us can control. They fear they won’t be needed anymore, so they fear an economy that requires constant change and growth. And, of course, there is the fear of the other that dominates the mental processes of too many people. They then suggest a solution that makes the situation worse. The opposition to this lousy proposal then does two things that don’t work (and I certainly have been guilty of this) they either try to argue that the problem isn’t that big. We shouldn’t freak out, and they argue that we shouldn’t do anything because what the other side suggested is a bad idea. The problem here is that if people are afraid, they’re not going to listen to reason. It took me too long to realize this, but at least I have realized it…unlike so many. You can’t reason with a person who is afraid, and if you try, you’re going to lose. And if you suggest that we shouldn’t do anything about the situation they’re afraid of, then you’re going to lose.

However, better would be to propose something that addresses the small issue that people were afraid of and deal with serious issues, and not only soothe people’s fears but fix the real problems.

For instance, when Obama suggested a terrible, bloated, pork-filled monstrosity of a healthcare plan that just exacerbated the problems it was meant to fix, the right should have come out with a that would have solved the existing problems…like every citizen in the country gets sent a voucher for $3000. Every private insurance company to stay in business has to offer a plan covering all major medical, long-term care, and emergency medical costs for $3,000. If you want better coverage, you can pay for it. If your employer wants to negotiate a group deal that employees can sign over their voucher and get a more robust plan through the company policy, they can. And Medicaid, Medicare, and a dozen smaller bureaucracies in the state and federal budget can just be disbanded. Everyone gets coverage, less government, costs less, and no forcing people to buy things (if you don’t want to use your voucher, that’s your call, it would be a stupid choice, but it’s still your choice). But no, they just said, let’s not do that.

And the same with minimum wage.

We could argue why the minimum wage is a terrible idea, why it will hurt economies and growth, and most importantly, the people it is most claims to want to help. But those people who are afraid won’t be comforted by the idea that is remaining with the status quo they’re afraid of.

So what should those who know the minimum wage is a terrible idea be proposing?

We’ll it may sound like beating a dead horse on this website but, the Universal Basic Income.

Unlike a minimum wage that will only benefit some for a tune of about $20K a year (taxed at the federal and state, with social security and Medicare also taken out) with still all the fear that comes with the possibility of losing your job…we could give EVERY adult citizen $1,200 a month, free of all taxes, and relieve not only the fear of not having a safety net but there are so many other benefits. People wouldn’t waste time filling out forms for unemployment or welfare, which can take over forty hours a week and leaves no time to find a job or get the education you might need to get a new job. We could eliminate the boondoggles of Social Security, SNAP, unemployment benefits, or the fear that comes that if you earn too much, you will be thrown off welfare. There would no longer be the incentives in the current welfare programs not to get married or get a promotion—just the security of knowing that no matter what, you will have a safety net.

And as a net bonus, because we would have a Universal Basic Income, that would mean we could eliminate the minimum wage. You know all those reasoned arguments on how raising the minimum wage hurts employment numbers and prevents people from getting experience…well, the reverse is true too. With no minimum wage, employers would be more willing to hire low-skilled workers at younger ages meaning that more people would necessary job experience and opportunities to be promoted earlier in life at lower education levels. If the positive effects of that aren’t apparent, then I think you oppose a minimum wage increase not because it makes good economic sense but because one party promotes it. And that is the worst reason ever to oppose something.

So your options are (A) oppose a minimum wage increase and lose (B) support a minimum wage increase and have ill economic effects (C) support a UBI which would eliminate vast swaths of government interference in the economy, promote growth, and reduce people’s worries about instability. And reducing that fear is one of the key reasons we have a government in the first place because when those fears are left unchecked, you have a second French Revolution.

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Filed under Budget, Government is useless, UBI, Welfare

Basic Math for Liberals

I am tired of arguing with idiots about unemployment numbers.  Stupid people (liberals) seem to think that so long as the unemployment numbers drop that this shows the economy is growing. Now I know those of you who know something about economics and statistics are about to have an aneurism over how stupid that is, but let me go over the basics of how we get unemployment numbers…and what you should really be looking at.

Minimum WageNow I’m going to try and use round numbers to help make this as simple as possible (and I’m going to gloss over a few complexities so we can get to the heart of the matter).

Let’s say you have a population of 200,000 people.

100,000 people want a job.  That means you have a job participation rate of 50%.

Now let’s say that 95,000 of those people looking for a job have a job, and 5,000 of those people don’t have a job.  That means your unemployment is 5%.  And let’s say of those 95,000 employed, 5,000 (5% of the those in the work force) of those are working at part time jobs but want full time jobs.  These people are called underemployed. The underemployment rate is the unemployment rate plus those who are underemployed.  (Under employment is usually calculated as the percent of underemployed plus the rate of unemployment, but to keep the numbers separate and simple we won’t add them together here).

Now, what idiots look at is the unemployment rate.  This is dumb, and let me explain why.

Let’s say the government does something monumentally stupid (so, status quo) like raise the minimum wage.  This will cause employers to pull back on hiring.  The first thing that will happen is that employers will either through firing the most inept or through simple attrition (when somebody leaves you don’t fill their position).  This will cause the unemployment numbers to go up.  Let’s say that there are now only 94,000 jobs, or an unemployment rate of 6%.  And idiots will be rightfully concerned…but not for long.

Why?  Because the first ones hit by minimum wage increases are young people who, without experience aren’t worth the higher wage the employer has to pay, and older people. Those who have a business are not willing to put in the money for training as it will not work as a long term investment.  And since these groups know they can’t get a job they will either continue living with mom and dad or go live with their kids and just stop looking for work.  Let’s say 2,000 people just give up looking for work. So that now means you have 98,000 looking for work, and 94,000 with a job.  Guess what unemployment is DOWN TO 4.1%  !!!! Isn’t that great! Raising the minimum wage lowered unemployment from 5% to 4.1%!!!  Of course since the participation rate dropped form 50% to 49%, that means that 1,000 fewer people are employed now, but the unemployment number dropped!

And then it gets worse. The rise in minimum wage causes inflation (as it always does) and that means companies that aren’t employing minimum wage positions will have to lay off employees or use attrition practices.  So they lay off 1,000 employees. Now we’re at 98,000 looking for work and 93,000 employed.  Back to 5.1% unemployment.  But don’t worry those 1,000 will soon find minimum wage jobs and kick out 1,000 other less qualified people from those jobs. So now you instead of 5,000 people underemployed, you now have 6,000. Underemployment has jumped from 5% to 8.8%!  But don’t worry because another 1,000 people are probably going to give up looking for work (probably more actually but let’s keep the numbers nice and round).  So now only 97,000 want to be employed.  Oh look unemployment back to 4.1% and underemployment is now only 6.1%.  It’s a miracle the unemployment numbers and underemployment numbers dropped.  Things must be doing great!

But no.  In this situation while the unemployment rate started at 5% and dropped to 4.1%, that masks the fact that there are 2,000 fewer jobs. And a 1,000 more people are earning less than they would like.  (And let’s ignore the inflation that’s going on and the fact that most of the other employed people probably aren’t getting raises – but their personal costs just went up.)

So we can see the unemployment rate is very misleading and what is important, first and foremost is the participation rate and followed by that the underemployment rate.

So when Obama touts the unemployment numbers are down keep in mind a few things.

The participation rate is at its lowest level since 1978! From a peak of just over 67% we are down to just over 63% (a 4% drop, keep in mind my example only included a 1% drop).  And this drop in participation does not seem to have come anywhere near to an end. 

 

Second keep in mind that underemployment (this is the calculation of both those underemployed and those unemployed) has gone from 7.0% in 2000 () to 17.4% (a 10% increase, and my example only had 1.1% increase).

So don’t tell me that the economy is doing well because the unemployment number is down. It’s not.  It’s doing terribly.

And it’s not just raising minimum wage that does this (and yes raising minimum wage always does this)…it’s regulations and taxes and oversight and red tape.  All government action increases the factors that make employers want to hire fewer employees. And this may be not so great for depriving people of income, hope, and jobs….but as we’ve seen it can be great for getting the unemployment numbers down. I mean if everyone would just give up looking for work, we could have 0% unemployment.

 

 

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Filed under Capitalism, Conservative, Economics, Government is useless, Long Term Thinking, politics, Unions