Quotulatiousness

July 16, 2024

Real world economic experiment to test Card & Krueger’s minimum wage theory

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

Tim Worstall points out that the California state government is — intentionally or not — running an interesting economic validation of the Card & Krueger study in New Jersey that seemed to show raising minimum wages didn’t have a negative impact on overall employment:

“Fast food” by Daniel Barcelona is licensed under CC BY 3.0 .

For think back to that New Jersey minimum wage study, Card and Krueger. That showed that acshully, employment in fast food joints rose when the minimum wage went up. Now, I’ve been saying for a long time now that I think there’s a fallacy of composition there.

“Fast food” isn’t “fast food”. There are — at least — two sectors here. There’re those big national chains, lots of advertising, franchisees, MaccyD’s and the like. Then there’s a vast hinterland of Mom and Pop places. The financial structures are entirely different. The chains are capital intensive. I think I’ve seen that buns for burgers come in pre-cut. Salad definitely arrives in bags, already shredded. There’s no prep – not even prep areas in those kitchens. Mom and Pop run differently. One reason I know is because I’ve owned and run one. There’s an awful lot of labour that goes into turning blocks of stuff into those sandwiches. Stuff is sliced, diced, soups are cooked on site, from identifiable ingredients, bread is sliced and on and on.

No, this isn’t to try and riff off The Bear. But there is a difference in economic structure between those who are large corporates vending fast food and not-large corporates vending fast food.

And I think — think, me, I do — that the problem with the Card and Krueger study was that it didn’t account for this. A change in the general labour rate might push people to the capital intensive end of this market. Certainly could do, it would be possible to model it that way. Which means that using only the data from the fast food chains, as C&K did, would pick up only part, perhaps half, of the reaction. The Mom and Pops shed labour, the capital intensive chains modestly pick it up, the net effect is — well, the net effect could be anywhere actually.

Which is what makes this CA minimum wage change so interesting. Because the $20 an hour applies only to those working for the big national chains — or their franchisees.

Mom and Pop have to pay the normal CA minimum wage, not the $20. So, the labour intensive part of the overall system has just been handed a competitive advantage against the capital intensive end of it. We would expect, could possibly measure, that the overall employment outcome is positive.

No, really. I’d be willing to defend the idea that it could be, certainly. Note that “could”. So, we’ve two sectors, capital intensive, labour intensive. We’ve just said that the capital using guys now have to pay more — much more — for their labour than the labour intensive guys. The capital intensive guys can only respond by higher prices or worse service (ie, fewer labour hours). The labour intensive sector might end up picking up so much of the traffic that they expand employment — expand employment so much as to actually increase overall fast food sector employment. By shifting from the capital to the labour intensive sectors.

This should be studied, right? Now, my actual economic skills — rather than ruminations — are zero so it’s not going to be me checking this out. But I recommend it as something for someone looking for a PhD subject to think about. Possibly even someone more senior than that looking for a point upon which to make their bones.

Does a higher minimum wage that only — only — applies to the capital intensive portion of an economic sector like fast food actually increase employment? By shifting the sector over to the more labour intensive sector not subject to that higher minimum wage?

Logically, it could, significant empirical work would be necessary to show it though.

June 25, 2024

In all places and at all times, the true minimum wage is zero

Filed under: Business, Economics, Food — Tags: , , , — Nicholas @ 03:00

Tim Worstall explains why fast food restaurants like McDonalds and Burger King are reported to be introducing new low-priced value meals to try and attract and keep more customers in the current economy:

“McDonald’s restaurant, Toledo OH, 1967” by DBduo Photography is licensed under CC BY-SA 2.0 .

It’s terribly unfashionable to say that minimum wage rises have any effects — other than that the minimum wage workers earn more, of course. It’s supposed to be one of those areas where only good things can come from poking a stick in the market. The justification is that the only jobs these folks can get are slinging fries (If that is the case then I’d probably start with education system reform so that grievance studies graduates are skilled enough to do something else but maybe that’s just me), therefore MaccyD’s and the like have a monopoly on employing them (a “monopsony”) and so omniscient and caring politicians and bureaucrats can correct this market error without there being any side effects.

Hmm. Seems unlikely but that is the story.

[…]

The standard economics of a minimum wage rise is — well, was before the progressive smokeblowing about monopsony — that the money’s got to come from somewhere. It could be that profits fall and therefore there’s less investment — even a move away from having invested in — that activity and so employment falls. Or, wages are higher for those fewer people employed and some lose their jobs — also known as rising productivity and also known as fewer jobs. Or, customers get to pay higher prices, fewer now buy the item and so employment falls as the sector shrinks.

Hmm, well, we can get all serious about monopsony but that one doesn’t work to my mind either as even if profits were excessive a fall in them will still lead to less investment in the sector and we’re back at option 1) above. But, many have convinced themselves.

But here we’ve got a general agreement that Americans are eating fast food less. They’re eating at home more. The only thing that’s changed in the varied cost structures is the price of fast food labour. Sorry, the only thing that’s changed in the *relative* cost structures is that labour as the minimum wage is pushed up. Whatever food inflation has been it’s been no better or worse for MaccyD’s than it has been in Albertsons or King Super. It’s also true that US real incomes have been rising so it’s not a general retreat on the part of consumers. The price of fast food relative to home prepared has risen, people are buying less fast food. The only cost pressure causing this is the pushing up of the minimum wage in recent years (for chains, in California, it’s now $20 an hour).

Myself I take that as being proof of the original and base minimum wage argument in standard economics. Trying to recoup that fall in sales is what is leading to these special offers — and don’t forget they’re special, not for all time and so should be considered advertising, not a long term change in price levels.

As a larger lesson I take it to mean that we should be very wary indeed of those claiming that there’s some special little economic trick that makes what they want to do anyway such a good idea. Why, yes, that does include any special little tricks I might want to claim. But many really did convince themselves that fast food wages were different, that pushing them up would have only good, not ill, effects.

Seems it ain’t so.

Over the weekend, there were a few stories about a small fancy coffee chain whose employees had successfully unionized to get better wages, only for the owners to shut down all three stores because even before the workers unionized, they were losing money on the business. Rather than the higher wages the employees were expecting (while keeping their unusually generous benefits for such entry-level jobs), all their jobs were lost and nobody won. Small businesses like restaurants operate on a far smaller profit margin than most people believe … according to Statistics Canada, the average restaurant of all types made a 4.3% profit in 2022.

April 16, 2024

QotD: Binding and non-binding rules

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

Describing situations in which violating a sound rule will make the world a better place is surprisingly easy. The reason for this ease is that the very purpose of rules – “the reason of rules” – is that they are tools to better enable us always-imperfectly informed human beings to successfully navigate a world filled with uncertainty. All that such descriptions require is the assumption that we human beings know more than we know.

An omniscient being would be foolish to bind itself to rules.

When we adopt a rule, we wisely admit our ignorance. For a clever assistant professor or ambitious politician to then describe situations in which violating this or that rule will make the world a better place is to achieve absolutely nothing. Although such descriptions often appear to be ingenious discoveries of means for improving the human condition, such descriptions are nearly always nothing but trite demonstrations that if we knew what we do not and cannot know, then acting in disregard of the rule would bring about a state of affairs better than the state of affairs that would be brought about by following the rule.

Well duh.

As a rule, whenever you encounter someone peddling a scheme for improving the world by giving the state discretion to act in violation of well-established rules – for example, to make workers better off by blocking the operation of the price system with minimum wages, or to enrich residents of the domestic economy by substituting free trade with “strategic trade policies” or “optimal tariffs” – recognize that these scheme peddlers arrogantly assume that they or those who will carry out their schemes possess knowledge and information that human beings, as a rule, do not and cannot possibly ever possess.

Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2019-08-20.

April 3, 2024

QotD: Optional economic reality

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

A majority of politicians and pundits believe that economic reality is optional. Of course, they don’t express this belief in any manner so direct. But one can logically infer this belief from their policy proposals.

Take, for example, support for rent control. Having the state keep the monetary prices of rental units below the values that would arise in free markets is believed by many pols and pundits – and by nearly all “Progressives” – to effectively keep the actual market values of rental units at whatever low prices the state sets. In this reality-is-optional world, when the state pushes down nominal rental prices, the quantity of rental units supplied not only does not fall, it increases to match the increase in the quantity of rental units demanded.

    Want more housing for folks with modest incomes? No problem! We’ll just push the rental prices lower to increase ordinary folks’ access to housing. See, the world is such a simple place!

Similar reality-is-optional “solutions” are minimum-wage statutes (for increasing the pay of low-skilled workers) and mandated paid-leave (for increasing the welfare of all workers).

Pondering this strange notion that the state can make market values be whatever the state wants them to be merely by dictating changes in the names of market values – that is, changes in nominal prices – I wondered what the world would be like if miracles more broadly could be worked merely by changing nominal designations. […]

Of course, all such scenarios are ludicrous. Reality isn’t changed merely by reporting that reality is other than what it is. In fact, reality is made worse by false reports because, unable to learn the truth about reality, people act in ways that are inconsistent with reality, thus worsening their situations.

Yes – but why, then, do so many people believe that economic reality is optional? Why do so many people believe that economic reality can be made to be whatever the state wants it to be merely by having the state order that reports of economic reality lie about that reality? All state-imposed price controls – rent control, minimum wages, you name it – are state-dictated lies about reality.

Don Boudreaux, “What if All Reality Were Optional?”, Café Hayek, 2019-09-13.

March 21, 2024

Minneapolis rejects Uber (and economic reality)

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

Jon Miltimore is upset that he won’t be able to use Uber or Lyft ridesharing services in the Twin Cities after the Minneapolis City Council voted to make the business uneconomical:

“UBER 4U” by afagen is licensed under CC BY-NC-SA 2.0

The ride-hailing services Uber and Lyft announced last week that they are pulling up stakes in the Twin Cities because of a new ordinance designed to raise driver pay.

The Minneapolis City Council voted 10–3 to override the veto of Mayor Jacob Frey, passing a policy that will raise the pay of drivers to the equivalent of $15.57 per hour.

In response to the plan, Uber and Lyft announced that they will cease offering rides beginning May 1 throughout the entire Twin Cities, the 16th largest metro in the United States, saying operations were economically “unsustainable” under the plan.

“We are disappointed the Council chose to ignore the data and kick Uber out of the Twin Cities, putting 10,000 people out of work and leaving many stranded,” Uber said in a statement.

As a resident of the Twin Cities suburbs, I find this news a bit alarming. In fact, I find it infuriating.

City Council supporters say they simply want drivers to earn the minimum wage, but if that’s the case, they passed the wrong ordinance. The Star Tribune reports that council members “seemed oblivious” to a recent Minnesota Department of Labor and Industry study that concluded drivers could be paid $0.49 per minute and $0.89 per mile and make the minimum wage.

“By contrast, the plan approved by the City Council guarantees a floor of $1.40 per mile and 51 cents per minute,” the newspaper reports.

In other words, the wage plan the council passed doesn’t appear remotely close to the minimum wage. But this ignores the larger problem: Neither the Minneapolis City Council nor the state of Minnesota should be setting the wages of Uber or Lyft drivers.

Nobody is forcing drivers to give rides. The arrangement between ride-share companies and drivers is an entirely voluntary one. This is the beauty of gig work. It allows people flexibility and choice about how they’d like to spend their time.

May 1, 2022

QotD: How Thomas Sowell abandoned Marxism

Filed under: Bureaucracy, Business, Economics, Government, Politics, Quotations, USA — Tags: , — Nicholas @ 01:00

The brilliant Thomas Sowell, when in college, considered himself a Marxist. Asked what changed him, Sowell said, “Evidence.”

After completing undergrad at Harvard and obtaining a master’s in economics, Sowell landed a summer internship with the Department of Labor. While there, he researched the impact of minimum wage law on employment. Sowell learned two things, both of which he found startling. First, minimum wage laws create job loss by pricing the unskilled out of the labor force. Second, Sowell discovered that “the people in the labor department really were not interested in that, because the administration of the minimum wage was supplying one-third of the money that was keeping the labor department going. … I realized that institutions have their own agendas and their own incentives.” In short, Sowell found that the Department of Labor did not care about the real-world effects of the minimum wage law. He credits this experience, this search for evidence, with having the “biggest” impact on his thinking.

Larry Elder, “If $15 Minimum Wage Is Such a Good Idea, Why Did AOC’s Bar Close Down?”, TownHall.com, 2019-03-21.

January 28, 2021

The economic impact of a US national minimum wage of $15 per hour

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

I missed this post by Warren Meyer last week, but it’s still very topical:

I have talked a lot about the negative effects of higher minimum wages on low-skill workers. Two good example background posts are here and here. I covered how a broad range of labor regulation hurts unskilled workers in a cover story for Regulation magazine a few years back. Unfortunately, in a country where the average American buys about $1000 in lottery tickets each year, the willingness to believe we can get something for nothing is strong.

But I want to talk specifically about a Federal minimum wage increase, where one other problem emerges. The best way to state this is — how can one possibly set the same minimum wage for San Francisco at the same rate as one does for rural Mississippi? Here is one source for comparative state cost of living. Doing this by county would make the curve even wider.

Cost of living in Hawaii is more than 2x that of Mississippi. CA and NY are not far behind. A minimum wage that might comfortably be accommodated in San Francisco (and note even there the rise to $15 was ending service jobs in that city long before COVID), would be an economic disaster for rural Alabama. I don’t tend to think primarily along racial lines as seems to be the case on the Left today, but basically this is a policy driven by rich white tech guys in San Francisco that is going to devastate the employment prospects of rural blacks.

Whatever one’s misgivings about minimum wages, it is certainly true that allowing states to take the lead on setting minimum wages (counties would make even more sense) makes a lot more sense that trying to take action at the national level. Even with state action there are disparities.

November 9, 2020

Maine conducts brave and daring experiment with an $18 per hour minimum wage

Filed under: Business, Economics, Politics, USA — Tags: , — Nicholas @ 03:00

It’s a bold move, says Jon Miltimore, let’s see if it pays off:

While Florida, which on Tuesday passed a $15 an hour minimum wage referendum, was the only state to have the minimum wage on the ballot in 2020, some localities also voted on the issue.

One of those cities was Portland, the largest city in Maine. The referendum sought to increase the minimum wage from $12 an hour to $15 by 2024. The measure also mandated that workers receive time and a half during a civil emergency (like, say, a pandemic).

Despite opposition from the city’s mayor, seven members of the city council, and dozens of Portland businesses, the measure passed with 60 percent of the vote. That means as early as next month the minimum wage will be $18 an hour, since Maine has declared a civil emergency. (The time-and-a-half will kick in on the $12 minimum wage.)

Businesses already ravaged by stay-at-home orders from the coronavirus have expressed worry about how they will manage to stay in the black.

“In the last 7 months business has dropped from 30 to 50 percent and food costs have skyrocketed. This added increase on a business already depressed due to the pandemic is tough,” one Portland business owner who declined to speak on camera told WCSH, an NBC-affiliate. “We may have to either cut employee hours or cut back on business hours.”

Cutting employee hours is just one of the ways employers negatively respond to laws that artificially raise the price of labor. Other responses include cutting other forms of compensation, such as health care or 401k benefits, replacing workers with robots, and simply assigning employees to do more work.

These are hardly the only unintended consequences. For example, economists David Neumark and William Wascher found that higher minimum wages decrease the number of teens enrolled in high school because they encourage high-skilled teens to drop out; this in turn displaces low-skilled workers.

September 15, 2020

QotD: Racism and the minimum wage

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

During South Africa’s apartheid era, racist unions, which would never accept a black member, were the major supporters of minimum wages for blacks. In 1925, the South African Economic and Wage Commission said, “The method would be to fix a minimum rate for an occupation or craft so high that no Native would be likely to be employed.” Gert Beetge, secretary of the racist Building Workers’ Union, complained, “There is no job reservation left in the building industry, and in the circumstances, I support the rate for the job (minimum wage) as the second-best way of protecting our white artisans.” “Equal pay for equal work” became the rallying slogan of the South African white labor movement. These laborers knew that if employers were forced to pay black workers the same wages as white workers, there’d be reduced incentive to hire blacks.

South Africans were not alone in their minimum wage conspiracy against blacks. After a bitter 1909 strike by the Brotherhood of Locomotive Firemen and Enginemen in the U.S., an arbitration board decreed that blacks and whites were to be paid equal wages. Union members expressed their delight, saying, “If this course of action is followed by the company and the incentive for employing the Negro thus removed, the strike will not have been in vain.”

Our nation’s first minimum wage law, the Davis-Bacon Act of 1931, had racist motivation. During its legislative debate, its congressional supporters made such statements as, “That contractor has cheap colored labor that he transports, and he puts them in cabins, and it is labor of that sort that is in competition with white labor throughout the country.” During hearings, American Federation of Labor President William Green complained, “Colored labor is being sought to demoralize wage rates.”

Walter E. Williams, “Minimum Wage and Discrimination”, Creators Syndicate, 2017-02-08.

September 13, 2020

QotD: Price controls versus reality

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

Economic reality is not optional. Government-imposed price ceilings and price floors — although believed by those who view prices as arbitrary results of bargaining or of “power” relationships as merely changing the distribution of economic gain or pain — distort people’s view of economic reality. Price controls prevent people as consumers (including as employers of workers) and as producers (including as workers) from seeing economic reality as clearly as possible. Blinded by minimum-wage commands and other price controls, people act in ways that are the opposite of the ways that those who support the price controls ostensibly want people to act. Rent control, for example, prompts landlords and potential landlords to offer fewer rental units on the market. Minimum-wage commands lead employers to employ fewer low-skilled workers.

Non- (and poor) economists, seeing only that which is in front of their noses, observe the government-controlled prices and conclude that the results of these controls must be just what the government publicly proclaims it wishes these results to be. “Look! Rents are lower with rent controls! Wages are higher with minimum wages! We have helped the poor!”

Those who fall for such superficial appearances, of course, do not grasp the nature of market forces and the role of prices. But the naiveté of such people runs much deeper: they are the sort of people who believe that if the messenger is forced to lie, the underlying reality changes, with the lie thereby converted into truth. Such people, in other words, believe in miracles. They believe that state officials performing incantations can miraculously change economic reality.

Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2018-05-16.

August 27, 2020

QotD: Racism and the minimum wage

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

Minimum-wage laws can even affect the level of racial discrimination. In an earlier era, when racial discrimination was both legally and socially accepted, minimum-wage laws were often used openly to price minorities out of the job market.

In 1925, a minimum-wage law was passed in the Canadian province of British Columbia, with the intent and effect of pricing Japanese immigrants out of jobs in the lumbering industry.

A Harvard professor of that era referred approvingly to Australia’s minimum wage law as a means to “protect the white Australian’s standard of living from the invidious competition of the colored races, particularly of the Chinese” who were willing to work for less.

In South Africa during the era of apartheid, white labor unions urged that a minimum-wage law be applied to all races, to keep black workers from taking jobs away from white unionized workers by working for less than the union pay scale.

Some supporters of the first federal minimum-wage law in the United States — the Davis-Bacon Act of 1931 — used exactly the same rationale, citing the fact that Southern construction companies, using non-union black workers, were able to come north and underbid construction companies using unionized white labor.

These supporters of minimum-wage laws understood long ago something that today’s supporters of such laws seem not to have bothered to think through. People whose wages are raised by law do not necessarily benefit, because they are often less likely to be hired at the imposed minimum-wage rate.

Thomas Sowell, “Why racists love the minimum wage laws”, New York Post, 2013-09-17.

August 20, 2020

QotD: Manipulating minimum wage laws to harm your competitors

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

I would be very surprised if careful research of the history of this Oregon statute did not reveal a producer group — or producer groups — who benefitted materially from the minimum-wage-induced stifling of competition.

The logic of such rent-creating legislation is plain: producer group A competes for many of the same customers against producer group B. Producer group A, however, uses for its production a mix of inputs (most importantly, capital and labor) that differs from the mix used by producer group B. Also, producer group B might compete most effectively against producer group A not by producing outputs as nearly identical as possible to that of A but, instead, by producing “substitute” goods or services that sell at prices lower than those charged by producer group A.

For example, producer group A might consist of locally owned restaurants with tablecloths and serving food freshly prepared by skilled chefs, while producer group B consists of chain restaurants serving food less exquisite but priced much lower. Members of producer group A are upset that producer group B is competing successfully for some diners who would likely otherwise eat more frequently at the restaurants of producer group A. What are the members of producer group A to do?

They could accept the fact that competition is not tortious — indeed, that economic competition is healthy for the economy at large — and do nothing other than compete harder to win more consumer patronage. That’d be the honest and honorable path to take. But government is in the picture, standing ready to escort those with little interest in honesty and honor down the rent-seeking path.

“So just pass legislation outlawing chain restaurants in our state,” suggests the leader of producer group A.

“Wish I could,” responds Sen. Slimey, “but that’s too blatant. Plus, it might not pass muster with the courts. But I’ve got an alternative plan that’s just as good.”

“Do tell!” exclaims the leader of producer group A.

“Well, I understand,” replies Sen. Slimey, “that the restaurants run by producer group B use many more low-skilled workers in their kitchens than your restaurants use.”

“That’s correct. We serve only fine food, so we hire experienced, high-skilled chefs, whose market wages are high.”

“So,” observes Sen. Slimey, “let’s enact a statute that raises the minimum wage above the average wage now paid to the average worker in producer group B’s restaurants, but lower than the average wage paid to workers in your — producer group A’s — restaurants.”

“Brilliant!” declares the leader of producer group A, who sees immediately that, while the minimum-wage legislation will on its face — de jure — apply to all restaurants, it will in fact have a differentially harsh effect on the restaurants in producer group B. The minimum wage will artificially raise producer group B’s costs of operation, causing them to reduce their outputs. One consequence of producer group B’s reduced outputs will be artificially increased demand for meals served at producer group A’s restaurants.

Sen. Slimey smiles, knowing that the news media, as well as most of the intellectuals in town, will applaud him for his apparent humanity and “Progressive” values. It’s a win-win for Sen. Slimey and for members of producer group A. And too few people will pay close-enough attention to the members, workers, and customers of producer group B to suspect that Sen. Slimey is anything other than a socially conscious public servant.

Don Boudreaux, “Doing Bad By Pretending to Do Good”, Café Hayek, 2018-05-13.

July 7, 2020

L. Neil Smith on the Progressive agenda

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

His latest article in the Libertarian Enterprise:

For the full length of the last century, Western culture has been commanded by the blind, deaf, but never speechless entities who see things stubbornly as they prefer to see them, and “dream the impossible dream”, rather than see them as they really are. This mental habit has led to various messes that we find ourselves in today. To any extent that it might help us to get out of those messes, it might help to understand how we got into them.

Don’t look to the wrong assistance. Psychology, for example, is nothing at all like a science and those who practice it are nothing at all like scientists. Mostly they’re hyper-opinionated liberals. No two shrinks ever agree on a diagnosis, and official definitions of various mental illnesses are a grammatical and logical laugh riot. The great truth of life is that understanding character is an art, best left to master novelists and story-tellers.

Although they’ll seldom admit it, even to themselves, so-called Progressives know by now that they are wrong, that they have always been wrong. You might say that their wrongness has stood the test of time. So what is it that they really want? Their high-flown theories and values having failed them embarrassingly — a good example of that is the minimum wage, which destroys employment for entry-level and minority youth — rather than seeking new theories and values that might serve them and everybody better, they have turned to a kind of bitter nihilism. They hate and fear the society that has stubbornly refused to bend to their wills, and so it must die. Every single policy recommendation that they make — like the $15 minimum wage, for example, or defunding the police — is directed to that purpose.

Another good example would be “gun control”, which its opponents correctly label “victim disarmament”. As unconstitutional political pressures on private gun ownership increased, and self-defense culture was forced to organize itself (contrary to liberal belief, gun companies and the National Rifle Association were followers in this, not leaders) existing gun laws were gradually weakened. It became easier to obtain and carry a weapon — and necessary, in the view of those of us “delorables” who were constantly being threatened by left-wing political figures. During the Obama-Biden regime, at least 100 million guns were sold. And as they were, violent criminality began to decrease in double digits.

Today, except for many liberal-dominated hell-holes like Chicago, New York, San Francisco, Atlanta, Baltimore, Detroit, and a dozen others, Americans are headed to 19th century crime levels. Did Progressives ever notice or admit that crime had diminished? They did not. The process conflicted with their erroneous belief system, so they still call today for various measures punishing firearms manufacturers and retailers, and disarming individuals who have solved the problem that the politicians and the police have only made much worse for decades.

And so it goes, in all such matters as economics, education, the environment, nutrition, and everything else. Psychologists (who, like a broken clock, are right just this once) call the phenomenon projection: if Progressives can’t run their own lives (and very largely, judging from the kids they raise, they can’t), naturally that makes them and the rest of the bizarre menagerie that was typical of the Obama-Biden Administration qualified to run everybody else’s lives. And because Progressive policies are (at least one hopes) unconsciously suicidal, the rest of us are in for a rough ride.

February 10, 2020

QotD: Welfare programs as a form of subsidy to employers

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

A final line of argument is that these public assistance programs have become de facto subsidies for low-wage employers. For a program to be a subsidy for an employer, it needs to lower wages. Is this plausible for the public assistance programs considered? I think it is for the EITC [Earned Income Tax Credit], but not for other programs. Depending on where one is on the EITC schedule, that policy can increase work incentives. And there is a lot of empirical evidence showing EITC encourages labor force participation. An unintended consequence of that labor supply response, however, is that employers capture some of the tax subsidies. This can happen in a simple supply and demand framework, where an increased labor supply to the market drive wages down. This can also happen in a bargaining context where the size of the bilateral surplus expands from lower taxes, and employers capture some of this increased surplus. Work by UC Berkeley’s Jesse Rothstein suggests that for every $1 of transfer to workers using the EITC, post-tax income rises only by $0.73 because of employer capture.

But what about other programs like food stamps or housing assistance? These means tested public assistance programs are not tied to work, and we should not expect them to lower wages. Let’s take food stamps, which are available to eligible families whether or not a family member works or not. Indeed, when people are not working, they are more likely to be eligible for food stamps since their family incomes will be lower. Therefore, SNAP [Supplemental Nutrition Assistance Program] is likely to raise, and not lower a worker’s reservation wages — the fallback position if she loses her job. This will tend to contract labor supply (or improve a worker’s bargaining position), putting an upward pressure on the wage. Whether or not wages are increased is an empirical matter: there is evidence that the initial roll-out of the food stamps program across counties in the 1970s lowered work hours, consistent with an increase in the reservation wage. The key point is that it is difficult to imagine how food stamps would lower wages. And if they don’t lower wages, they can’t be thought of as subsidies to low wage employers. The same logic applies to other means tested programs like energy or housing assistance. Moreover, these conclusions hold in a wide array of models of the labor market, including ones that emphasize bargaining or efficiency wage concerns.

Arindrajit Dube, “Public Assistance, Private Subsidies and Low Wage Jobs”, Arindrajit Dube, 2015-04-19.

September 23, 2019

The “Global Climate Strike”

Filed under: Cancon, Environment, Media, Politics — Tags: , , , , , , , — Nicholas @ 03:00

The big “let’s all play hooky from school” event’s Toronto organizers have been getting positive coverage from some of the local media, because of course they have. Here’s Tanya Mok for BlogTO, listing the totally reasonable and not in any way unrealistic “demands” of the movement:

FridaysForFuture Demonstration, 25 January 2018 in Berlin.
Photo by C. Suthorn via Wikimedia Commons.

The coalition has made a list of seven demands, which “reflect the rallying cries of the intersectional movements” they belong to. Some of those demands include:

  • Indigenous rights and sovereignty.
  • The protection of forests, land, and water sources.
  • A shift to publicly-owned renewable energy, and reducing national carbon emission by 65% by 203, reaching zero emissions by 2040.
  • A $15 minimum wage for all, and higher taxation on the rich.
  • Universal public services like health care and dental care, free university and college, housing as a human right, and free public transit.
  • Justice for migrants and refugees, allowing status for all. That includes putting an end to deportations and allowing for the full access to public services.

There will be a concert at Queen’s Park after the rally, as well as a follow-up benefit concert at the Tranzac Club in the evening. A giant street mural project run by Greenpeace will also be taking place prior to the rally, around 10 a.m., at the southern point of Queen’s Park.

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