The Entry-Level Job Is Going The Way Of The Starter Home

Investor’s Business Daily posted an article today about the impact of raising the minimum wage. Traditionally the minimum wage job has been a place for those young people who are just entering the workforce to learn the basic principles of holding a job–showing up on time, being there when you are supposed to, treating people with respect, integrity, etc. Most of these concepts should have been covered during the school years, but many of them are not. The entry-level job was the last place a potential employee would be able to learn them. An entry-level job was supposed to encourage the employee to work hard in order to get a better paying job and advance his/her career. Well, I guess that concept has gone out the window.

Investor’s Business Daily reports:

Twenty-one states and Washington, D.C., will raise their minimum wage this year, under the misbegotten notion that it will help the poor, in particular struggling minority youth. It won’t.

As a new study from the American Action Forum shows, not only will most workers not be better off, they will take a huge hit.

Why? Common sense tells you that when you raise the cost of something, anything, less of it will be used or consumed. It’s a fundamental precept of economics. And labor is no different.

Coercive minimum-wage hikes this year, the AAF estimates, will kill 261,000 jobs held mostly by poor, undertrained, undereducated, young suburban millennials and minority teens.

But it’s even worse than that: Once the minimum-wage increases are fully phased in, some 1.7 million jobs will be lost. As the Daily Caller helpfully notes, the U.S. Bureau of Labor Statistics estimated last year that the U.S. economy will add 11.5 million jobs over the next 10 years. So that’s roughly 15% of a decade’s worth of jobs destroyed.

The complaint has been that you can’t support yourself on the current minimum wage. You’re not supposed to—you are supposed to use the opportunity of a minimum-wage job to become a better worker and be promoted or educate yourself and move on to a better job.

The article concludes:

Yes, some people will do better because of the “Fight for $15,” the organizing shibboleth used by activists who want a national minimum wage. But many small businesses struggle to stay open. Labor is their No. 1 cost, taking up more than two-thirds of total costs. If you raise the minimum wage sharply, they have to lay off people or raise prices to stay in business. And some won’t make it.

The job losses are already happening. Just last month, the food chain Red Robin announced it would eliminate busboys at 570 restaurants to “address the labor increases we’ve seen.” For “labor increases,” read “minimum wage hikes.”

Other restaurant chains take a slightly different approach, automating to offset rising labor costs. Neighborhood mainstays Chili’s and Applebee’s,  for instance, are replacing front-end wait staff with computer tablets for placing orders. Since a tablet entails a one-time expense of roughly $200, the investment pays for itself in a little over 13 hours at minimum wage.

It’s sad that just as the tax-cut boom gets going, one big group is going to be cut out of the action entirely. Whenever government sets the price of anything, distortions occur. In this case, the “distortion” is millions of lost jobs. It’s cruel, racist and devastating to lower-income people who depend on entry-level jobs to make ends meet.

The Cost Of Raising The Minimum Wage

On Friday, The Washington Free Beacon posted an article about a new minimum wage law in Washington, D.C.

The article reports:

Washington, D.C. will lose thousands of jobs as the district’s plan to raise the minimum wage to $15 goes into effect, while the higher wages will primarily benefit workers in the surrounding suburbs, according to a new report by the city’s chief financial officer.

D.C. Mayor Muriel Bowser spearheaded the effort for a $15 minimum wage, more than double the federal minimum wage of $7.25 an hour. Analysis by the city’s Office of Revenue Analysis, however, says the plan could cost the district 2,500 jobs by 2026, the Washington Times reports.

The district’s minimum wage is currently $11.50 an hour and each year will grow by 70 cents until it reaches $15 in three years. After 2020, the minimum wage will grow based on inflation.

The article explains that the probable impact of the increase in the minimum wage will be to bring more workers into Washington from the neighboring suburbs. This will increase the competition for jobs within the city and make it more difficult for residents of the city to find jobs.

The article concludes:

D.C. passed a measure to raise the minimum wage to $15 for hourly employees in June. Critics immediately castigated the law at the time.

“Unfortunately, it’s employees and small businesses who will pay the tab,” Michael Saltsman, research director of the free market Employment Policies Institute, told the Washington Free Beacon at the time.

D.C. restaurants lost 1,400 jobs in the first six months of 2016 and experienced their worst hiring period in 15 years. Suburbs in Virginia and Maryland added nearly 3,000 jobs over the same period.

Sometimes Reality Is Just Not Fun

The Service Employees International Union (SEIU) is known for its fight for a $15 minimum wage for fast food workers. The union chooses to ignore the fact that these are entry-level workers learning the basics of holding a job–showing up on time, being conscientious, treating people with respect, etc. Recruiting these people into the SEIU provides a larger base for union dues (and bigger donations to Democratic candidates), but where has the battle gotten the workers?

Ed Rensi posted an article at Forbes on Tuesday talking about the consequences of the push for a $15 minimum wage for fast food workers.

The article points out a few of the unintended consequences:

Let’s start with automation. In 2013, when the Fight for $15 was still in its growth stage, I and others warned that union demands for a much higher minimum wage would force businesses with small profit margins to replace full-service employees with costly investments in self-service alternatives. At the time, labor groups accused business owners of crying wolf. It turns out the wolf was real.

Earlier this month, McDonald’s announced the nationwide roll-out of touchscreen self-service kiosks. In a video the company released to showcase the new customer experience, it’s striking to see employees who once would have managed a cash register now reduced to monitoring a customer’s choices at an iPad-style kiosk.

…Of course, not all businesses have the capital necessary to shift from full-service to self-service. And that brings me to my next correct prediction–that a $15 minimum wage would force many small businesses to lay off staff, seek less-costly locations, or close altogether.

…The out-of-state labor groups who funded these initiatives aren’t shedding tears over the consequences. Like their Soviet-era predecessors who foolishly thought they could centrally manage prices and business operations to fit an idealistic worldview, economic reality keeps ruining the model of all gain and no pain. This brings me to my last correct prediction, which is that the Fight for $15 was always more a creation of the left-wing Service Employees International Union (SEIU) rather than a legitimate grassroots effort. Reuters reported last year that, based on federal filings, the SEIU had spent anywhere from $24 million to $50 million on the its Fight for $15 campaign, and the number has surely increased since then.

This money has bought the union a lot of protesters and media coverage. You can expect more of it on November 29. But the real faces of the Fight for $15 are the young people and small business owners who have had their futures compromised. Those faces are not happy ones.

I suspect that over time many of the businesses involved would have switched to kiosks anyway, but the drive for $15 an hour definitely helped speed up the process. The fact that the SEIU was able to gather (or pay) protestors and that the news covered this story in a positive light is evidence that we are not teaching people basic economics in school. Somehow we have lost sight of the fact that businesses are in business to make a profit. When businesses are no longer profitable, they go out of business. In this case even the businesses that could afford to automate cut back on their workforce because of increasing labor costs. This is another example of shortsightedness on the part of the unions and of the law of unintended consequences.

Why Should We All Have To Play By The Same Rules?

On Friday The Washington Free Beacon posted a story about a group in Colorado that was working toward a $12 an hour minimum wage.

The article reports:

Colorado Families for a Fair Wage, which obtained the signatures needed to place a measure requiring a $12 minimum wage on the November ballot, paid many of its petition handlers less than $12 an hour, according to paperwork filed with the state and obtained by in the Washington Times.

“According to a circulator and wage report filed with the Colorado Secretary of State’s office by proponents of increasing the minimum wage, 24 of the workers collecting signatures to get on the ballot were paid less than $12 an hour,” the Times reported. “The report was obtained Keep Colorado Working, the opposition campaign, in an open records request.”

Colorado Families for a Fair Wage is a coalition of liberal groups, including prominent labor unions, such as the AFL-CIO and American Federation of Teachers. The group denied the allegations that it failed to pay its employees adequate wages following the Washington Times report, blaming “clerical errors” in campaign filings for the gap in pay.

“Every person working on the minimum wage ‘$12 by 2020’ ballot initiative has earned a minimum of $12 an hour and more because it’s crucial that the paychecks of Colorado working families can cover housing, food and other basics, campaign manager Patty Kupfer said in a release. “We included pay policy language in our office policy document to specifically ensure that every worker would earn at least $12 an hour.”

The group said it will file amended paperwork with the secretary of state’s office to reflect that it paid all of its workers at least $12 an hour.

How embarrassing. Either they paid their workers less than the minimum wage they were working toward or the people they paid the proposed minimum wage were not competent enough to do their job right. Either way it’s embarrassing.

There is something being overlooked here, and I don’t know why. The minimum wage was never intended to support a family or an individual living on their own–it was intended to provide a gateway into the workforce to enable people to learn the real basic job skills–showing up on time, respecting authority, being curteous, and other basic fundementals. So what happened? Unions discovered that if the minimum wage increased, the unions could bargain for higher wages for their members. Note that the Colorado Families for a Fair Wage includes prominent labor unions. Because much of the American public does not understand the purpose of the minimum wage, the fact that raising the minimum wage significantly will put small businesses out of business and cause employees to lose hours or jobs is not considered by most people.

There is also the aspect of illegal immigration. As long as America has thousands of illegal immigrants who are willing to work under the table for below minimum wage, raising the minimum wage is going to do more harm than good. One of the problems in the battle to close our borders to illegal immigration is that the U. S. Chamber of Commerce is a major campaign contributor to politicians (particularly Republicans). The Chamber of Commerce is an organization of businessmen. These businessmen like the fact that illegal immigration is a source of cheap labor. As long as the Chamber of Commerce continues to pour money into political campaigns, our illegal immigration problem will continue. That is the way Washington currently works. Until people are elected to office at all levels who are not part of the current system and not interested in becoming part of the current system, illegal immigration will continue and because unions contribute heavily to Democratic campaigns, the minimum wage will probably be raised past the point where it makes economic sense. That is where we are.

The Cost Of Paying A Higher Minimum Wage

Yesterday Twitchy reported that Wendy’s will be introducing self-service kiosks in their 6000 stores nationwide this year.

Investor’s Business Daily reported yesterday:

Wendy’s Penegor said company-operated stores, only about 10% of the total, are seeing wage inflation of 5% to 6%, driven both by the minimum wage and some by the need to offer a competitive wage “to access good labor.”

It’s not surprising that some franchisees might face more of a labor-cost squeeze than company restaurants. All 258 Wendy’s restaurants in California, where the minimum wage rose to $10 an hour this year and will gradually rise to $15, are franchise-operated. Likewise, about 75% of 200-plus restaurants in New York are run by franchisees. New York’s fast-food industry wage rose to $10.50 in New York City and $9.75 in the rest of the state at the start of 2016, also on the way to $15.

Wendy’s plans to cut company-owned stores to just 5% of the total.

There are some things those asking for significant increases to the minimum wage should keep in mind. Very few people are actually attempting to support families on minimum wage jobs–generally those holding those jobs are people attempting to enter the work force for the first time. These jobs allow them to develop basic workplace skills–showing up on time, being polite to customers, and showing up for work every day. Companies are in business to make a profit. If they do not make a profit, there is no reason for them to stay in business. No government has the right to determine what profit is acceptable–left alone, the free market will do that. Part of our current problem is that the government has interfered so much with the free market, that that normal checks and balances within the free market are not working as they should. The solution would be to get the government out of the marketplace–let businesses complete for workers and pay them what is necessary. It is also telling that because economic growth in America is currently slow, workers who would not normally be working in minimum wage jobs are working there.

Be Careful What You Support

Investor’s Business Daily is reporting that a week after California Gov. Jerry Brown signed the state’s $15 minimum wage boost into law, UC Berkeley Chancellor Nicholas Dirks sent a memo to employees announcing that 500 jobs were getting cut.

The article reports:

Those workers might want to have a chat with the folks at UC Berkeley’s Center for Labor Research, who just days before Brown signed the wage-hike bill released a study touting the minimum wage as a boon to low-income household breadwinners.

After that report came out, Ken Jacobs, chairman of the UC Berkeley center, told the Los Angeles Times, “This is a very big deal for low-wage workers in California, for their families and for their children.”

It is a big deal, as well, to those soon to be out of work UC Berkeley workers.

But why is anyone surprised about jobs cuts following a wage hike? It’s one of the most basic laws of economics. Any high school kid taking Econ 101 can explain it:  If you raise the price of something, demand goes down.

Keep in mind, too, that a $15 minimum wage is more than twice the federal minimum wage today. And it would set the wage floor higher than it’s ever been. On an inflation-adjusted basis, the minimum wage peaked in 1968 at just over $10 an hour.

In a strong economy, raising the minimum wage might not be as much of a problem, but in an economy that is not rapidly expanding, companies simply do not have a large enough profit margin to handle the increase in the cost of employees. The demand for an increase in the minimum wage also overlooks the fact that most of the people who hold minimum-wage jobs are people who are just entering the work force. It is in that entry-level job that new employees learn basic skills–such as showing up on time, following directions, being responsible, etc. Those minimum-wage jobs give young people the skills they need to move on to higher-paying jobs. Increasing the minimum wage to the point where there will be less minimum-wage jobs accomplishes nothing positive. Unfortunately, it has become a Democratic policy talking point, and because of that, more young people who support this idea will lose their jobs if they succeed in increasing the minimum wage.

How To Pass A Minimum Wage Hike Without Hiking Minimum Wage

Hot Air posted an article today about the recent fight in California to pass an increase in the minimum wage. Unions and business owners are supporting the increase. Each have their own reasons.

Under the new law, hotels that are unionized don’t have to increase their wages. Hotels that are open shops have to follow the law and increase wages. So a union hotel employee who pays $56.50 every month for membership in the hotel workers union does not get a raise, while his non-union equivalent gets a pay raise.

The article concludes:

The raison d’etre of unions is supposedly to arrange better conditions, compensation and benefits for their members, so why they would agree to that deal doesn’t jump out at you. But the reality is that not all of the hotels are unionized. The ones who run open shops fall under the new arrangement and have to pay their workers significantly higher wages. So how do they get out of this sudden spike in labor costs which could put them at a disadvantage with their competitors? (Cue the Jeopardy music…)

They can just unionize their work force.

It’s really a genius maneuver if you think about it. Getting a raise for some of the workers in the city who already belong to your union doesn’t really translate into that much more money in dues because they only collect a small percentage of the increase. But if you can suddenly enlist the workers at a whole raft of new businesses into your organization you get a piece of all their paychecks. It’s the perfect plan, really.

Of course, the people who get left out in the cold are the actual members of the union, particularly once they find out what’s going on. But that was never the real objective of the union in modern times anyway. What’s critical is enlisting as much of the workforce as possible and keeping the cash flowing in so they can continue to fund the political campaigns of Democrats.

It pays to read laws carefully and look at who is supporting them. In this case, those in the unions who have worked to pass the law assumed that they would gain by its passage. Those in the upper levels of the union had another idea. They supported a law that would cost union shops less while potentially increasing the number of union shops. This is only one example of the damage that the alliance of unions and politicians can do.

The Law Of Unintended Consequences At Work

The video below was posted on YouTube today:

Raising the minimum wage has a negative impact on both small businesses and on those seeking to enter the workforce. This video shows one example of the law of unintended consequences regarding the minimum wage. Minimum wage jobs are for low-skilled employees entering the workforce. Anyone attempting to support themselves by working for minimum wage needs to be encouraged to seek further education or increased job skills.

The Law Of Unintended Consequences At Work

One of the political discussion of late has focused on the minimum wage. What it is, what it should be, and should it be raised. One thing that is often not considered in the debate is who are the people who work at minimum wage jobs.

The Pew Research Center reported in 2014:

Perhaps surprisingly, not very many people earn minimum wage, and they make up a smaller share of the workforce than they used to. According to the Bureau of Labor Statistics, last year 1.532 million hourly workers earned the federal minimum of $7.25 an hour; nearly 1.8 million more earned less than that because they fell under one of several exemptions (tipped employees, full-time students, certain disabled workers and others), for a total of 3.3 million hourly workers at or below the federal minimum.

That group represents 4.3% of the nation’s 75.9 million hourly-paid workers and 2.6% of all wage and salary workers. In 1979, when the BLS began regularly studying minimum-wage workers, they represented 13.4% of hourly workers and 7.9% of all wage and salary workers. (Bear in mind that the 3.3 million figure doesn’t include salaried workers, although BLS says relatively few salaried workers are paid at what would translate into below-minimum hourly rates. Also, 23 states, as well as the District of Columbia, have higher minimum wages than the federal standard; people who earned the state minimum wage in those jurisdictions aren’t included in the 3.3 million total.)

People at or below the federal minimum are:

  • Disproportionately young: 50.4% are ages 16 to 24; 24% are teenagers (ages 16 to 19).
  • Mostly (77%) white; nearly half are white women.
  • Largely part-time workers (64% of the total).

Often minimum-wage jobs represent an opportunity for someone with little experience or job skills to enter the workforce. Minimum wage jobs teach workers to show up on time, be responsible employees, and be reliable employees. These are skills that are valued at all levels of employment.

So what happens when you raise the minimum wage? On Friday, Investor’s Business Daily posted an article on the subject.

The article reports:

 

  • IBD’s Jed Graham surveyed six big U.S. cities that hiked the minimum wage in 2015 and found they took a serious jobs hit. “Wherever cities implemented big minimum-wage hikes to $10 an hour or more last year, the latest data through December show that job creation downshifted to the slowest pace in at least five years,” Graham wrote.
  • During the 1970s, Congress forced Puerto Rico to adopt the U.S. federal minimum wage. The result, according to a 1992 study by economists Alida Castillo-Freeman and Richard Freeman: “Imposing the U.S.-level minimum reduced total island employment by 8%-10%.” So Puerto Rico lost 1 out of every 11 jobs to the minimum wage.
  • A study by the American Enterprise Institute looked at Seattle’s recent minimum wage hike. After it began phasing in a series of hikes in 2014, Seattle lost 10,000 jobs between just September and November, and its unemployment rate jumped a full percentage point. As AEI economist Mark Perry notes, Seattle’s minimum wage hike from $9.32 an hour to $15 an hour amounts to a $11,360 tax on every minimum wage job.
  • A 2014 Congressional Budget Office study estimated that raising the federal minimum wage from $7.25 an hour to just $10.10 an hour would kill half a million jobs. Worst of all, those who suffer most are the young, minorities and those with little education or training.

The article at Investor’s Business Daily focused on Carl’s Jr. and Hardee’s CEO Andy Puzder, who has begun to automate his restaurants. Because the minimum wage has increased, his expenses have gone up, and he has used technology to keep expenses down.

Before anyone gets all up in arms about this, I would like to introduce a little history into the discussion. Back in the days of dinosaurs, I attended school in New York City. My family did not have a lot of money, but I did not have the option of taking lunch to school every day. We were expected to use our one hour lunchtime to find a place to buy and eat lunch near the school [which was located in the Pam Am Building (now the Met Life Building)]. Because my allowance was small, I often ate at the automat. I would put in 35¢ and get a ham and cheese sandwich. I would put in 10¢ and get a carton of milk. If I was feeling rich, I would spend 20¢ or so on a piece of pie or cake. No one was screaming about automation then. The automat eventually disappeared from the scene, but I am not sure why. It was a great place to eat lunch.

At any rate, actions have consequences. When you raise the minimum raise past the skill level of certain jobs, you eliminate people from the work place–generally those with limited skills or limited experience. Those are the people who with a little training and experience could go on to get good jobs that pay more than minimum wage. In trying to help them by raising their wages, you are actually preventing them from getting the foot in the door that they need to become successful.

 

Pay Raises Happen Naturally In A Healthy Economy

In a healthy economy, incomes will rise. If the economy is not growing, artificially forcing companies to raise wages only creates problems. Some recent events at WalMart reinforce this concept.

Investor’s Business Daily posted an article about Walmart’s story today:

The Benton, Arkansas-based mega-retailer has tried hard to be a good corporate citizen but has been met with angry opposition every time it tries to open a store. More recently, it announced raises for 1.2 million employees next month to a $10 per hour minimum, with senior workers getting a hike to $15 an hour, from $13 currently. But these wage hikes were made for the worst possible reason: political pressure.

Not coincidentally, Wal-Mart recently announced it was closing 154 stores. Those are mostly stores that, operating on Wal-Mart’s razor-thin 3% profit margin, can no longer make money at higher wages. That’s precisely why Wal-Mart won’t build the two stores in D.C. it said it would. As a result, local minority youths will lose out on hundreds of decently-paying entry-level jobs.

During a healthy economy (or an economic recovery), family income increases.

This is a picture of what has happened to household income since 1985:

http://www.rightwinggranny.com/wp-content/uploads/2016/01/640px-us_real_household_median_income_thru_2014.png

As you can see, when the economy is healthy household income rises, when the economy falters, incomes fall or remain the same. This is a basic economic concept. When the government interferes in this process, companies lose money and are forced to cut their loses.

The article concludes:

In the five-year period between January 2010 and December 2014, DC restaurants were hiring an average of 187 new food workers every month,” wrote economist Mark J. Perry on his Carpe Diem blog at the American Enterprise Institute. “Last year though, restaurant hiring stalled out, likely due to rising labor costs, and the city’s food jobs fell by an average 21 every month in 2015 (through November).” By the way, job growth for restaurants remains healthy in surrounding areas just outside D.C.

This is what happens when you raise the minimum wage, even with the best of intentions. Perry estimates that just by raising the minimum wage to $10.50 in D.C, with another hike to $11.50 slated for July of this year, some 2,000 jobs already have been lost.

Sorry, but forcing employers of unskilled, largely untrained labor to pay higher prices for their labor is a recipe for automation, layoffs and no job creation. It punishes the poor, unskilled and uneducated most of all. The leftist demagogues who push this nonsense should be ashamed.

Do As I Say–Not As I Do

Yesterday Last Resistance posted an article about a California group that is working to establish a minimum wage of $15 an hour.

The article reports:

An advocacy group out of Modesto, Calif. pushing for a $15 an hour minimum wage posted a job ad Thursday offering to pay $12 an hour. Below what it is demanding others pay their workers.

The Craigslist post was for a job opening at the local Fight for $15 campaign. On the national level, the organization has spearheaded the push to raise the minimum wage to $15 an hour. The post was signed by Steven Applebaum who lists his affiliation with the Modesto Fight for $15 campaign.

“Do you make minimum wage?” the posting asked. “Can you afford your bills and expenses? Do you hope and pray that you won’t ever face a medical or car bill because you don’t have the savings to cover it?”

Evidently this is not an isolated incident. The article further reports:

Fight for $15 is not the first group caught offering less than what it claim people need. Cody McLaughlin replied in June to a job posting on Facebook for Working America. The group is an affiliated with the AFL-CIO. It was hiring field recruiters as part of its campaign to get a $15 minimum wage. When he asked if it paid $15 the group said the group could offer him  $12.25 per hour.

Democratic presidential hopeful and self-described socialist Bernie Sanders has been one of the more vocal lawmakers in support of the living wage. He has even introduced a bill to raise the federal minimum wage to $15 per hour. This despite the fact he only pays his own interns $12 per hour.

How about practicing what you preach?

When Government Gets Involved…

On a recent trip to a local restaurant where you order at the counter, my husband noticed the addition of about five or six order kiosks. They were sort of cute, and looked as if they might be fun to operate. I didn’t really think anything about it under I read an editorial in today’s Wall Street Journal.

The editorial is entitled, “Another Minimum Wage Backfire.” President Obama has supported raising the minimum wage, and a number of states have raised it on their own. Now we are beginning to see the impact of raising the minimum wage.

The editorial reports:

Last week the Wendy’s Company did a public service on its second-quarter earnings call by explaining how mandated wage hikes will lead to fewer jobs for the low-skill workers that progressives claim to be helping.

First, CFO Todd Penegor talked about the pressure to pay higher wages and said that “we continue to look at initiatives and how we work to offset any impacts of future wage inflation through technology initiatives, whether that’s customer self-order kiosks, whether that’s automating more in the back of the house in the restaurant. And you’ll see a lot more coming on that front later this year from us.”

Translated loosely, that says that Wendy’s is a business who does business to make a profit. The company will do whatever it has to do to keep making a profit and keep its stockholders happy. If people lose their jobs because of federal regulations, that is unfortunate, but the blame should be on the federal regulators–not the company.

I would like to note here that the reason the unions like higher wages is that they feel that if the minimum wage is higher, unions can ask for higher wages when they bargain. However, an increased minimum wage will have a strong impact on the food industry because that is the industry where many teenagers get their first jobs as busboys, kitchen workers, etc. More of these jobs will be replaced by machines, and less teenagers will have the experience of having a first job. An increased minimum wage will also cause an increase in prices in many of the restaurants that are still inexpensive enough to bring the whole family.

Raising the minimum wage is another idea that although it it well meaning, does not consider the law of unintended consequences. Very few people are supporting families on minimum wage jobs, generally these jobs are entry level jobs for people just entering the job market. Raising the minimum wage does not accomplish anything–it simply takes away the opportunity for teenagers to begin a working career.

No Good Deed Goes Unpunished

There are parents who support the ‘everybody gets a trophy’ mentality, but what happens when their children enter the business world. What happens when the CEO of a company tries to practice ‘everybody gets a trophy’ in his business. We have a recent example.

Yesterday Business Insider posted a story about Dan Price, founder and CEO of the Seattle-based credit-card-payment processing firm Gravity Payments. Mr. Price decided to raise the minimum salary at his company to $70,000. At first his employees were thrilled, but things do not work out as well as planned.

Employees are leaving. Why? Because some employees feel that some less valuable employees got increases bigger than some more valuable employees. One employee complained that the new policy did not reward work ethic–there was no incentive to do more or work extra hours to complete tasks. People who had done that in the past were treated no differently than the less conscientious employees.

The company is struggling financially because of the decision to pay everyone $70,000 a year. There is also a court case filed by Dan Price’s brother, a minority owner, which was filed soon after the pay raise.

There is something in the American psyche that expects to be paid a fair wage for a hard days work. There is also something in the American psyche that resents it when people who do not do a good job are paid the same as people who do. That is why socialism will fail in America, just as it has failed in all the other places it has been tried.

Hoisted On Their Own Petard?

Yesterday the Los Angeles Times reported that Los Angeles labor leaders, who recently supported a minimum wage increase approved last week by the Los Angeles City Council, are now asking for changes in the law that would exempt companies whose workforces are unionized.

The article reports:

For much of the past eight months, labor activists have argued against special considerations for business owners, such as restaurateurs, who said they would have trouble complying with the mandated pay increase.

But Rusty Hicks, who heads the county Federation of Labor and helps lead the Raise the Wage coalition, said Tuesday night that companies with workers represented by unions should have leeway to negotiate a wage below that mandated by the law.

“With a collective bargaining agreement, a business owner and the employees negotiate an agreement that works for them both. The agreement allows each party to prioritize what is important to them,” Hicks said in a statement. “This provision gives the parties the option, the freedom, to negotiate that agreement. And that is a good thing.”

Laws for thee, but not for me. If a unionized company can be exempt in order to stay in business, why can’t a non-unionized restaurant be exempt?

The Council voted to raise the minimum wage to $15 an hour by 2020. The increase in the minimum wage will be a problem for both restaurants and fast food places. The increase will also pose a problem for other small businesses.

Looking Past The Obvious

On Monday, the New York Post posted an article about the push to move the minimum wage to $15 an hour. Contrary to what is true in most case, it isn’t about the money.

The article reports:

A Times editorial last week cheered Los Angeles’ enactment of a $15-an-hour minimum wage — but noted that restaurants, particularly fast-food joints, don’t like it. Said The Times: “The restaurant industry . . . will not go down without a fight.”

We didn’t think that bringing down an entire industry was what the campaign for a $15 minimum was supposed to be about. Oops.

Back in March, we noted that a similar hike in Seattle’s minimum wage was leading to a spate of local restaurant closings, given that labor costs account for 36 percent of the average restaurant’s earnings.

The left has been on a war against McDonald’s for years. I will admit that I do not routinely eat at McDonald’s (although I love their mango smoothies), but that is my choice–just because I don’t eat there doesn’t mean that I have the right to prevent anyone else from eating there.

The article cites one example of the impact of the minimum wage hike:

Case in point: Z Pizza, which has to shut down — putting all 11 employees out of work — because its owner can’t afford the higher labor costs. Ritu Shah Burnham says she tried layoffs, cutting hours, price hikes and not paying herself — to no avail.

And while small businesses have six years to phase in the wage hikes, she has only two, since she’s a franchise of a large chain.

The Times dismissed such concerns, saying minimum-wage hikes can be offset by higher prices and by “paying executives and shareholders less.”

That didn’t work for Burnham, who has no shareholders and is no executive — just a victimized small-business owner whose workers’ hourly wage is about to be cut to zero, thanks to their “advocates.”

It is time to send all of the big government types home. The only way to turn this around is to elect people at all levels of government who believe in freedom from excessive government regulation. The big government types are killing small business, and thus, killing the economy.

From The Young Conservatives Website

The following cartoon is from the Young Conservatives website:

branco min wage cartoon

The article below the cartoon states:

A survey of American economists found that 90 percent of them regarded minimum wage laws as increasing the rate of unemployment among low-skilled workers. Inexperience is often the problem. Only about two percent of Americans over the age of 24 earned the minimum wage.

Advocates of minimum wage laws usually base their support of such laws on their estimate of how much a worker “needs” in order to have “a living wage” — or on some other criterion that pays little or no attention to the worker’s skill level, experience or general productivity. So it is hardly surprising that minimum wage laws set wages that price many a young worker out of a job.

Support of an increase in the minimum wage is political–it is  not based on economic realities. Unions support it because it allows them to negotiate for higher wages. Eventually this cycle leads to inflation and hurts low-income wage earners the most.

Looking Behind The Economic Numbers

Breitbart.com posted an article today the current state of the American economy. The article points out that the current stated unemployment rate of 6.1 percent does not tell the whole story.

The article reports:

Only about half of the drop in the adult participation rate may be attributed to the Baby Boom generation reaching retirement age. Lacking adequate resources to retire, a larger percentage of adults over 65 are working than before the recession.

Many Americans who would like full time jobs are stuck in part-time positions, because businesses can hire desirable part-time workers to supplement a core of permanent, full-time employees, but at lower wages. And Obamacare’s employer health insurance mandates will not apply to workers on the job less than 30 hours a week.

The article also mentions the fact that many of our young people are being encouraged by colleges to obtain degrees in subjects that are of limited value in the workplace. These students graduate with massive debt and no marketable skills.

The article concludes:

New business regulations, more burdensome than are necessary to accomplish legitimate consumer protection and environmental objectives, exacerbate these problems.

All of this suppresses wages except for the most skilled and talented workers.

No surprise, average family income, adjusted for inflation has fallen from about $55,600 in 2007 to $51,000 even as the gap between families at the bottom and top widens.

It’s time for a new economic policy for America.

The Practical Side Of Economic Policy

I hate to admit this, but I think economics is boring. I understand the basics, but after that I get lost. Yet economics and economic policy have a lot to do with how successful all of us are and how successful the country is. Right now America is not in good economic shape, and economic policies have a lot to do with that fact.

Fox News posted an article on Friday by Peter Morici entitled, “Why I can’t be both an economist and a liberal.” Mr. Morici goes into detail about the effects of some of the economic policies coming out of the Obama Administration.

The article cites an example of the consequences of one Administration policy:

The Congressional Budget Office estimates raising the federal minimum wage to $10.10 an hour, as President Obama proposes, would eliminate 500,000 to 1,000,000 jobs. Businesses will be forced to raise prices, lose customers and lay off employees. Fast food restaurants will begin to use more machines and we’ll see something similar to automated checkout devices at drug stores and supermarkets.

Past increases in the federal minimum wage did not have large impacts on employment, because those were in line with inflation, and businesses adopted strategies expecting such periodic adjustments. The minimum wage was last reset in 2009 and we knew that raising it one dollar to $8.25 to preserve purchasing power would not cost many jobs.

Jumping it up to $10.10 an hour, however, would fundamentally redefine the tradeoffs businesses face regarding unskilled labor and automation. The workers left standing would have more spending power but overall, increasing unemployment by at least 500,000 would take a bite out of GDP and growth from an already anemic economic recovery.

Meanwhile, the Democrats criticize the Republicans for not being willing to raise the minimum raise. Common sense and cause and effect are not mentioned.

The article also mentions the idea that if America would cut its CO2 emissions to curb global warming, China would follow suit.

The article points out:

Liberals argue that by setting a good example the United States can bring China along.

Nonsense! American diplomats have not been able to get Beijing to respond on its undervalued currency or protectionism generally, abandon the use of force to settle territorial disputes in the China seas, or anything else the Chinese Communist Party sees as impairing economic growth or its quest to wrest leadership from the United States on global economic and security issues.

It’s time for those in leadership in America to begin putting the good of the country above the good of their political party or worse, the desire to stay in power. We have created a political class–something never intended by the founders of this country. It is time to limit terms of Senators and Representatives and return to government by the people. A Congressional term should not be a ticket to lifelong wealth.

The Law Of Unintended Consequences Strikes Again

Yesterday Byron York posted an article in the Washington Examiner about the coming increase in the minimum wage for federal contractors. The minimum wage for federal contractors will go from $7.25 and hour to $10.10 an hour. This will include fast food workers, laundry workers, and other low paying jobs on military bases. So what are the consequences?

The article reports:

In late March, the publication Military Times reported that three McDonald’s fast-food restaurants, plus one other lesser-known food outlet, will soon close at Navy bases, while other national-name chains have “asked to be released from their Army and Air Force Exchange Service contracts to operate fast-food restaurants at two other installations.”

…The administration is making it very expensive to do business on military bases, and not just because of the minimum wage. Under federal contracting law, some businesses operating on military installations must also pay their workers something called a health and welfare payment, which last year was $2.56 an hour but which the administration has now raised to $3.81 an hour.

In the past, fast-food employers did not have to pay the health and welfare payment, but last fall the Obama Labor Department ruled that they must. So add $3.81 per hour, per employee to the employers’ cost. And then add Obama’s $2.85 an hour increase in the minimum wage. Together, employers are looking at paying $6.66 more per hour, per employee. That’s a back-breaking burden. (Just for good measure, the administration also demanded such employers provide paid holidays and vacation time.)

These are the actions of an administration that does not understand or value our military and does not understand basic economic principles. The Obama Administration has already begun to make changes in the way the military exchanges are run that will change the savings our military get on food and clothing (see rightwinggranny.com). We need to elect leaders who value our military and take care of them.

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The New Definition Of Senate Oversight

Yesterday the Washington Examiner posted a story about an exchange between HELP Committee Chairman Tom Harkin and ranking Sen. Lamar Alexander at a Senate Hearing.

Senator Alexander asked Labor Secretary Thomas Perez  if he believes that the Congressional Budget Office (CBO) is qualified to judge the impact of raising the minimum wage. The CBO has stated that raising the minimum wage will cost jobs. Perez did not directly answer the question.

The article reports what happened next:

Harkin said that Perez can “answer as he wants to answer, not as you direct him to answer. You can’t force him to say one thing or another. If he wants to answer that question, then he can answer that question.”

Alexander: “So a senator is not entitled to a yes-or-no answer to a specific question?”

Harkin: “The senator is entitled to ask a question, and the secretary can give the answer as he sees fit.”

Alexander: “That’s not much congressional oversight in my book.”

Harkin: “Well, it’s being respectful of people who want to respond in the way that they feel is best suited to answering the question.”

Alexander: “Well then we might as well not ask questions if we can’t get answers.”

This exchange depicts where we are in Washington. Congress has given up so much power that it has lost its oversight of the executive branch of government. It will be interesting to see if the minimum wage gets raised by an executive order. Then we will see if there are enough people in Congress who respect the Constitution to demand that it be followed. America has serious economic issues–this is not the time to play political games with people’s lives.

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Work vs Welfare

Below is the Executive Summary from a white paper released by the CATO Institute on August 19. The white paper was entitled, “The Work versus Welfare Trade-Off: 2013.”

Executive Summary

In 1995, the Cato Institute published a groundbreaking study,The Work vs. WelfareTrade-Off, which estimated the value of the full package of welfare benefits available to a typical recipient in each of the 50 states and the District of Columbia. It found that not only did the value of such benefits greatly exceed the poverty level but, because welfare benefits are tax-free, their dollar value was greater than the amount of take-home income a worker would receive from an entry-level job.

Since then, many welfare programs have undergone significant change, including the 1996 welfare reform legislation that ended the Aid to Families with Dependent Children program and replaced it with the Temporary Assistance to Needy Families program. Accordingly, this paper examines the current welfare system in the same manner as the 1995 paper. Welfare benefits continue to outpace the income that most recipients can expect to earn from an entry-level job, and the balance between welfare and work may actually have grown worse in recent years.

The current welfare system provides such a high level of benefits that it acts as a disincentive for work. Welfare currently pays more than a minimum-wage job in 35 states, even after accounting for the Earned Income Tax Credit, and in 13 states it pays more than $15 per hour. If Congress and state legislatures are serious about reducing welfare dependence and rewarding work, they should consider strengthening welfare work requirements, removing exemptions, and narrowing the definition of work. Moreover, states should consider ways to shrink the gap between the value of welfare and work by reducing current benefit levels and tightening eligibility requirements.

One of the things that has made America great has been the willingness of Americans to work hard, knowing their diligence would be rewarded. When the government creates a situation where staying home doing nothing pays as well as working, it undermines the work ethic in America and weakens our country. It might also be a good idea to examine the role the tax burden plays in this–does the working person earn less because of the tax burden that comes with working? Is the welfare recipient subject to a lesser tax burden?

The bottom line here is simple. People are not stupid. If a person can make as much money not working as he would working, why should he work? I recently posted a story with a striking example of this philosophy at rightwinggranny.com. We need to reinstate the work requirements to receive aid, and we need to be more aware of who is getting aid so that we can limit fraud.

It’s time to make sure that the people who are working hard are rewarded for their hard work.

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