September 9, 2017

Minimum Wage: Bad for Humans, Good for Robots

Filed under: Business, Economics, Government — Tags: , — Nicholas @ 04:00

Published on 7 Sep 2017

Jacking up the minimum wage sounds like a good idea, but it comes with disastrous consequences: low-skilled workers getting canned, employers cutting hours, and, of course, robots.

August 29, 2017

QotD: The power of unions

Filed under: Business, Economics, Quotations — Tags: , — Nicholas @ 01:00

Moreover, the ability of unions to raise the wages of some workers does not mean that universal unionism could raise the wages of all workers. On the contrary, and this is a fundamental source of misunderstanding, the gains that strong unions win for their members are primarily at the expense of other workers.

The key to understanding the situation is the most elementary principle of economics: the law of demand — the higher the price of anything, the less of it people will be willing to buy. Make labor of any kind more expensive and the number of jobs of that kind will be fewer.

Milton and Rose Friedman, Free to Choose, 1980.

August 24, 2017

Words & Numbers: Child Labor Was Wiped Out by Markets, Not Government

Filed under: Business, Economics, Government — Tags: , , , , — Nicholas @ 05:00

Published on 23 Aug 2017

In 1938 the US government passed the Fair Labor Standards Act mandating a forty hour work week, establishing a minimum wage, and prohibiting child labor. Because of legislation like this, government is often credited for making the American work environment safer and more fair. Yet, as Antony Davies and James Harrigan demonstrate with historical data, market forces were already making things easier on the American worker long before the FLSA.

Learn More:




See page 170 for average weekly work hours.
See page 134 for child labor rates.

August 3, 2017

Words & Numbers: Is UBI Better Than Welfare?

Filed under: Economics, Government — Tags: , , , , — Nicholas @ 03:00

Published on 2 Aug 2017

A viewer recently asked us what Words & Numbers thought of Universal Basic Income.

Antony Davies likes the idea of it, provided it’s done well, but doesn’t think it could ever possibly be done well. But what about a theoretical UBI? If we could actually figure out how to implement that well, would that work? And why wouldn’t that work in the real world? This week on Words and Numbers, Antony and James R. Harrigan tackle the issue that’s getting a lot of attention in Silicon Valley.

August 2, 2017

Some troubling early signs from Finland’s UBI experiment

Filed under: Economics, Europe, Government — Tags: , , , — Nicholas @ 03:00

Dan Mitchell says we can’t draw definite conclusions from these early (anecdotal) points, but that it may point toward UBI (universal basic income) not being the panacea it’s been touted to be:

Map of Finland (Suomen kartta) by Oona Räisänen. Boundaries, rivers, roads, and railroads are based on a 1996 CIA map, with revisions. (via Wikimedia)

The New York Times published an in-depth preview of Finland’s experiment late last year. Here’s a description of the problem that Finnish policymakers want to solve.

    … this city has…thousands of skilled engineers in need of work. Many were laid off by Nokia… While entrepreneurs are eager to put these people to work, the rules of Finland’s generous social safety net effectively discourage this. Jobless people generally cannot earn additional income while collecting unemployment benefits or they risk losing that assistance. For laid-off workers from Nokia, simply collecting a guaranteed unemployment check often presents a better financial proposition than taking a leap with a start-up.

For anyone who has studied the impact of redistribution programs on incentives to work, this hardly comes as a surprise.

Indeed, the story has both data and anecdotes to illustrate how the Finnish welfare state is subsidizing idleness.

    In the five years after suffering a job loss, a Finnish family of four that is eligible for housing assistance receives average benefits equal to 73 percent of previous wages, according to data from the Organization for Economic Cooperation and Development. That is nearly triple the level in the United States. … the social safety net … appears to be impeding the reinvigoration of the economy by discouraging unemployed people from working part time. … Mr. Saloranta has his eyes on a former Nokia employee who is masterly at developing prototypes. He only needs him part time. He could pay 2,000 euros a month (about $2,090). Yet this potential hire is bringing home more than that via his unemployment benefits. “It’s more profitable for him to just wait at home for some ideal job,” Mr. Saloranta complains.

So the Finnish government wants to see if a basic income can solve this problem.

    … the Finnish government is exploring how to change that calculus, initiating an experiment in a form of social welfare: universal basic income. Early next year, the government plans to randomly select roughly 2,000 unemployed people — from white-collar coders to blue-collar construction workers. It will give them benefits automatically, absent bureaucratic hassle and minus penalties for amassing extra income. The government is eager to see what happens next. Will more people pursue jobs or start businesses? How many will stop working and squander their money on vodka? Will those liberated from the time-sucking entanglements of the unemployment system use their freedom to gain education, setting themselves up for promising new careers? … The answers — to be determined over a two-year trial — could shape social welfare policy far beyond Nordic terrain.

The results from this experiment will help answer some big questions.

    … basic income confronts fundamental disagreements about human reality. If people are released from fears that — absent work — they risk finding themselves sleeping outdoors, will they devolve into freeloaders? “Some people think basic income will solve every problem under the sun, and some people think it’s from the hand of Satan and will destroy our work ethic,” says Olli Kangas, who oversees research at Kela, a Finnish government agency that administers many social welfare programs. “I’m hoping we can create some knowledge on this issue.” … Finland’s concerns are pragmatic. The government has no interest in freeing wage earners to write poetry. It is eager to generate more jobs.

As I noted above, this New York Times report was from late last year. It was a preview of Finland’s experiment.


Maybe I’m reading between the lines, but it sounds like they are worried that the results ultimately will show that a basic income discourages labor supply.

Which reinforces my concerns about the entire concept.

Yes, the current system is bad for both poor people and taxpayers. But why would anyone think that we’ll get better results if we give generous handouts to everyone?

So if we replace all those handouts with one big universal handout, is there any reason to expect that somehow people will be more likely to find jobs and contribute to the economy?

Again, we need to wait another year or two before we have comprehensive data from Finland. But I’m skeptical that we’ll get a favorable outcome.

July 27, 2017

Words & Numbers: Is Income Inequality Real?

Filed under: Economics, Politics, USA — Tags: , , , — Nicholas @ 05:00

Published on 26 Jul 2017

Income inequality has been in the news more and more, and it doesn’t look good. It’s aggravating to see people making more money than you, and we’re told all the time that income inequality is on the rise. But is it? And even if it is, is it actually a bad thing? This week on Words and Numbers, Antony Davies​ and James R. Harrigan​ talk about how income inequality plays out in the real world.

Learn more: https://fee.org/articles/is-income-inequality-real/

July 19, 2017

“The Economics of Trade” | THINK 2017

Filed under: Britain, Economics, USA — Tags: , , — Nicholas @ 04:00

Published on Jul 17, 2017

What exactly is Free Trade and is it always the best policy?

Professor Don Boudreaux of Cafe Hayek discusses the morality of capitalist exchange and its inherent advantages.

July 13, 2017

Each month in the United States—a place with about 160 million civilian jobs—1.7 million of them vanish”

Filed under: Business, Economics, Technology — Tags: , , — Nicholas @ 05:00

Deirdre McCloskey addresses the fear that technological change is gobbling up all the jobs:

Consider the historical record: If the nightmare of technological unemployment were true, it would already have happened, repeatedly and massively. In 1800, four out of five Americans worked on farms. Now one in 50 do, but the advent of mechanical harvesting and hybrid corn did not disemploy the other 78 percent.

In 1910, one out of 20 of the American workforce was on the railways. In the late 1940s, 350,000 manual telephone operators worked for AT&T alone. In the 1950s, elevator operators by the hundreds of thousands lost their jobs to passengers pushing buttons. Typists have vanished from offices. But if blacksmiths unemployed by cars or TV repairmen unemployed by printed circuits never got another job, unemployment would not be 5 percent, or 10 percent in a bad year. It would be 50 percent and climbing.

Each month in the United States — a place with about 160 million civilian jobs — 1.7 million of them vanish. Every 30 days, in a perfectly normal manifestation of creative destruction, over 1 percent of the jobs go the way of the parlor maids of 1910. Not because people quit. The positions are no longer available. The companies go out of business, or get merged or downsized, or just decide the extra salesperson on the floor of the big-box store isn’t worth the costs of employment.

What you hear on the evening news is the monthly net increase or decrease in jobs, with some 200,000 added in a good month. But the gross figure of 1 percent of jobs lost per month is the relevant one for worries about technological unemployment. It’s well over 10 percent per year at simple interest. In just a few years at such rates — if disemployment were truly permanent — a third of the labor force would be standing on street corners, and the fraction still would be rising. In 2000, well over 100,000 people were employed by video stores, yet our street corners are not filled with former video store clerks asking for loose change.

We could “save people’s jobs” by stopping all innovation. You would do next year exactly what you did this year. Capital as well as labor would perpetually be employed the same way. But then we would perpetually have the same income. That’s nice if you’re doing well now. It’s not so nice if you’re poor or young.

Job protections for the old have in fact already created a dangerous class of unemployed youths in the world — 50 percent among Greeks and black South Africans, for instance.

July 2, 2017

Minneapolis is going Seattle one better … and the results will be even worse

Filed under: Business, Economics, USA — Tags: , , , — Nicholas @ 05:00

Tim Worstall explains why, despite all the pious hopes that significant increases in the minimum wage won’t negatively impact employment or take-home pay, Minneapolis will have measurably worse outcomes:

Minneapolis has just passed an ordinance making the minimum wage in that fine city $15 an hour at some point in the near future — the effects of this will be worse than the effects of the similar Seattle ordinance raising the minimum wage there to $15 an hour. I agree that this is an unpopular prediction but it’s one that I’ll still stick with for the interesting bit is that I predicted the effect of the Seattle rise correctly. I even managed to get right why it would go bad. This is not, sadly, because I have a crystal ball, nor am endowed with super-powers, it’s just that I understand the basic economics of the minimum wage.

The details of which are that modest rises in the minimum wage don’t have much effect. They don’t have much effect on wages and thus they don’t have much effect upon employment. Changes which are at best “Meh, marginal” have effects which are at best “Meh, marginal.” The problem with Seattle’s minimum wage rise was that it wasn’t marginal, the problem with that in Minneapolis is that it is even less so.


But why isn’t it all going to be wondrous? If we just insist that poor people should be paid higher wages then why won’t it all become copacetic? Well, this was tried in Seattle. And the results weren’t that way. We have the actual academic study of why and it’s just as conventional economics predicts. Modest rises in the minimum wage have modest effects, immodest rises have immodest. Which leaves us with trying to define immodest.

As I’ve been saying for some yeare now that definition of immodest seems to be 45 to 50 % of median wage in that labour market. We don’t usually have median wages by city, only by a rather larger economic unit. But Seattle’s area median is higher than that of Minneapolis. When we look at the cities, the mean is higher in Seattle than in Minneapolis.

We already know that $15 an hour is too high a minimum wage for Seattle, it leads to lower incomes for low wage workers. The Minneapolis $15 an hour minimum wage is higher compared to local wages–the effects will be worse.

June 28, 2017

QotD: How “Jim Crow” laws were brought in to suppress competition

Filed under: Economics, History, Quotations, USA — Tags: , , , — Nicholas @ 01:00

Lebergott’s historical account – which reinforces the important findings of Robert Higgs about the postbellum economic trajectory of blacks in America – reveals the equalizing powers of economic competition. Contrary to popular myth, even racist southerners put their own economic well-being ahead of their irrational prejudices by competing with offers of higher wages for blacks’ labor and with offers of low prices for blacks’ business. This competition, in turn, increased blacks’ geographic and economic mobility and raised their incomes. The reason southerners – whether racists or rent-seekers (or both) – turned to government to get Jim Crow legislation is that market forces were undermining their racist preferences and competing away their uncompetitively high profits, rents, and wages.

Lebergott’s account also further reveals the utter implausibly of the claims of those who assert that today’s market in America for low-skilled workers is infected with monopsony power. While this market isn’t textbook perfect (no real-world market is), and while this market would be improved by making it even freer (for example, by eliminating occupational-licensing statutes and zoning restrictions), the ability of low-skilled workers today throughout the U.S. to move from job to job is surely better than was the ability of low-skilled blacks 150 years ago throughout the American south to move from job to job. And yet, as Lebergott documents, low-skilled American blacks of 150 years ago in the American south did indeed enjoy such mobility that economic competition raised their wages. Similarly, the ability today of entrepreneurs and business owners to discover and compete for under-priced labor is surely greater than was the ability of employers 150 years ago to do the same – and yet, again as Lebergott documents, such competitive initiative by employers was common 150 years ago and served to increase low-skilled workers’ mobility and wages.

Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2017-05-22.

June 27, 2017

Seattle sees some negative effects from their latest minimum wage hike

Filed under: Business, Economics, Politics, USA — Tags: , , — Nicholas @ 05:00

Ben Casselman and Kathryn Casteel report for FiveThirtyEight on initial reports from Seattle after their most recent increase in the city’s minimum wage rules:

In January 2016, Seattle’s minimum wage jumped from $11 an hour to $13 for large employers, the second big increase in less than a year. New research released Monday by a team of economists at the University of Washington suggests the wage hike may have come at a significant cost: The increase led to steep declines in employment for low-wage workers, and a drop in hours for those who kept their jobs. Crucially, the negative impact of lost jobs and hours more than offset the benefits of higher wages — on average, low-wage workers earned $125 per month less because of the higher wage, a small but significant decline.

“The goal of this policy was to deliver higher incomes to people who were struggling to make ends meet in the city,” said Jacob Vigdor, a University of Washington economist who was one of the study’s authors. “You’ve got to watch out because at some point you run the risk of harming the people you set out to help.”

The paper’s findings are preliminary and have not yet been subjected to peer review. And the authors stressed that even if their results hold up, their research leaves important questions unanswered, particularly about how the minimum wage has affected individual workers and businesses. The paper does not, for example, address whether displaced workers might have found jobs in other cities or with companies such as Uber that are not included in their data.

Still, despite such caveats, the new research is likely to have big political implications at a time when the minimum wage has returned to the center of the economic policy debate. In recent years, cities and states across the country have passed laws and ordinances that will push their minimum wages as high as $15 over the next several years. During last year’s presidential campaign, Hillary Clinton called for the federal minimum wage to be raised to $12, and she faced pressure from activists to propose $15 instead. (The federal minimum wage is now $7.25 an hour.) Recently, however, the minimum-wage movement has faced backlash from conservatives, with legislatures in some states moving to block cities from increasing their local minimums.

June 20, 2017

“Licensing … is now one of the biggest labor problems facing California”

Filed under: Bureaucracy, Business, Government, USA — Tags: , , , — Nicholas @ 03:00

In the Orange County Register, Dick Carpenter outlines how many jobs in California are now closed off to anyone who doesn’t have a license:

Whether it’s brick-and-mortar restaurants fighting to outlaw food trucks, or taxicab associations suing Uber and Lyft, examples abound for this type of anticompetitive lobbying. One of the more blatant instances comes courtesy of the California Landscape Contractors Association. In 2014, the association supported a bill that made it even easier for regulators to crack down on contractors operating without a license. Their stated reasons were revealing: “Unlicensed persons unfairly compete,” because they can “significantly undercut licensed contractors when pricing projects to consumers.” The cost of compliance is quite substantial, as it “typically adds 15 to 20 percent to the cost,” the association estimated. Not only does licensure jack up consumer prices, it also keeps out aspiring entrepreneurs who ask for nothing more than the opportunity to work hard and prove themselves by the sweat of their brow.

Licensing goes well beyond contractors and is now one of the biggest labor problems facing California. In the 1950s, about 5 percent of Americans needed a government-issued license to work. Back then, government-mandated licensing was limited to a handful of trades, such as medicine and the law. But over the years, bottleneckers — often through self-serving professional associations — successfully persuaded governments to adopt new licenses that are difficult or practically impossible to obtain. This restricts opportunities for would-be entrepreneurs trying to break into the marketplace and provide new or better services.

Today, more than one-fifth of California’s workforce is licensed. When it comes to low- and middle-income occupations, which are often a gateway for upward mobility, California is the second-most extensively and onerously licensed state, according to a study by the Institute for Justice. In fact, there are so many licensing bottlenecks that when the bipartisan Little Hoover Commission began examining the issue, it reported that “No one could give the commission a list of all the licensed occupations in California.”

These restrictions are great for the bottleneckers, but they are bad for consumers. A report by the Brookings Institution summarized many of the academic findings on occupational licensing. Licensure can boost wages for licensed workers by as much as 15 percent, while increasing the cost for consumers by anywhere from four to 33 percent. As a result, one study even estimates that pervasive licensing leads to “up to 2.85 million fewer jobs nationwide, with an annual cost to consumers of $203 billion.”

Bottleneckers typically claim the costs of licensing are necessary to protect the public, but the reality is quite different. In California, barbers, cosmetologists, tree trimmers and many construction contractors all must complete far more training for their licenses than is required for emergency medical technicians — who hold people’s lives in their hands. Manicurists need 400 hours of coursework and training for their licenses, which can costs thousands of dollars; EMTs require less than half the amount of training at only a 160 hours.

The introduction of licensing to a previously unregulated field typically benefits the existing workers in that field and severely disadvantages anyone hoping to enter that field — existing workers and businesses restrict competition by keeping out new entrants, and create an artificial shortage which allows them to boost their prices. The consumer generally does not benefit in any measurable way from the introduction of licensing, and ends up paying more for the services offered.

June 8, 2017

Life As A Railroad Engineer. What it is like to work for a railroad

Filed under: Railways — Tags: — Nicholas @ 02:00

Published on 20 Apr 2014


This is MY story about MY experience as an engineer for CSX. The views are not of that of CSX, nor anybody else but mine.

June 1, 2017

Words & Numbers: Is Your College Degree Worthless?

Filed under: Economics, Education — Tags: , — Nicholas @ 04:00

Published on 31 May 2017

A lot of people assume that any degree increases your income over the course of your life, but it actually seriously depends on what major you choose and what career you go into. This week on Words & Numbers, Antony Davies​ and James R. Harrigan​ breakdown the numbers on what your college degree is actually worth.

May 25, 2017

Dangerous railway practices of the past

Filed under: History, Railways, USA — Tags: — Nicholas @ 04:00

On Facebook, the New England, Berkshire & Western (“an HO scale layout created by the Rensselaer Model Railroad Society, which is a student club on the campus of Rensselaer Polytechnic Institute in Troy, NY”), posted a link to this fascinating — eventually banned for obvious safety reasons — method of moving railway cars on parallel track to the locomotive:

Raymond Breyer shared this video link on the pre-Depression page, about poling. […]

I always assumed they would move slowly and the trainman would have to hold the pole the entire time. Guess I was quite wrong! – JN

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