Growth demands a temporary surrender of security.
Gail Sheehy
Crackpot Quote of the Day
As the saying goes, a new-born puppy knows no fear of a tiger. South Korea's erratic behavior would only herald its final destruction. - North Korean diplomat Jon Yong Ryong
As if the Chinese high maintenance problem child repressive Communist monarchy has any standing to call any other country "erratic"! I wish the Chinese would offer the North Koran leadership asylum and allow for the peaceful reunification of Korea. What's it afraid of --commerce breaking out across the border?
What Is Wrong With Some People?
From the NY Daily News:
Isaiah Aguilar, 2, was playing with his sister outside his home in Sabinal, Texas, shortly before the attack. The girl blew up a balloon for her younger brother, but it blew into their neighbor's backyard. Little Isaiah chased after it toward a tied-up female pit bull. He was mauled to death as the canine's owner watched the bloodshed from his doorway and did nothing to stop it, according to the child's parents.The boy's father himself almost came under attack trying to retrieve his dying son.
Some Notable Quotes on the Minimum Wage Kerfuffle
The "grumpy economist" has written one of my favorite posts on the topic. (Great essay. Very readable and highly recommended.) A few excerpts [Cochran is referencing White House spin in advocating raising the minimum wage]:
And even then, the modern Scrooge ("are there no workhouses?") might ask, "Is there no earned-income tax credit? Is there no home heating subsidy? Are there no food stamps? Is there no schip or medicaid? Have they not applied for social security disability? Are there no section 8 housing vouchers?"
The point is not to be heartless -- government programs or not, life on the lower end of America's economic and social spectrum is pretty awful. For example in zip code 60619, just south of the University [of Chicago], there are "4,967 married couples with children, and 12,745 single-parent households (2,655 men, 10,090 women)." The point is, if we seriously want to address the problems of the "working poor," if we want policies that actually work rather than spew a lot of TV time and make us feel good, let us paint a vaguely realistic picture of what their life is like. Absolutely nobody (except perhaps illegal aliens) is trying to support a family on $14,500 from a full time minimum wage job, period. The actual economic life of the "working poor" is a welter of government programs, transitory employment, and a lot of illegal activity
Yes indeed, let us help families to "finally get ahead!" Let us talk about lousy schools, incentive-destroying social programs, horrendous violence, life-destroying incarceration, and the war on drugs run amok. The minimum wage may slightly help the few who can get such jobs, and put such entry-level jobs slightly more out of reach for many others. But it's just irrelevant to the real, first-order problems such families face.
Even if the Administration's theory works, it is exactly the same as a tax on sales of local businesses (i.e. cost passed on as higher prices) to subsidize employment. Back to Greg Mankiw's question about how much the wage should be: on this theory there is no limit! Now we really have crossed the line, from serious economics, to fiddling while Rome burns, to believing in magic.
From Greg Mankiw's textbook on economics (my edits):
The minimum wage has its greatest impact on the market for teenage labor. The equilibrium wages of teenagers are low because teenagers are among the least skilled and least experienced members of the labor force. In addition, teenagers are often willing to accept a lower wage in exchange for on‑the‑job training. Many economists have studied how minimum-wage laws affect the teenage labor market. The typical study finds that a 10 percent increase in the minimum wage depresses teenage employment between 1 and 3 percent. Because the minimum wage raises the wage that teenagers can earn, it increases the number of teenagers who choose to look for jobs. Studies have found that a higher minimum wage influences which teenagers are employed. When the minimum wage rises, some teenagers who are still attending school choose to drop out and take jobs.
Advocates of the minimum wage view the policy as one way to raise the income of the working poor. They correctly point out that workers who earn the minimum wage can afford only a meager standard of living. Opponents of the minimum wage contend that it is not the best way to combat poverty. They note that a high minimum wage causes unemployment, encourages teenagers to drop out of school, and prevents some unskilled workers from getting the on-the-job training they need. Moreover, opponents of the minimum wage point out that the minimum wage is a poorly targeted policy. Not all minimum-wage workers are heads of households trying to help their families escape poverty. In fact, fewer than a third of minimum-wage earners are in families with incomes below the poverty line. Many are teenagers from middle‑class homes working at part-time jobs for extra spending money.From a 2001 Mankiw column on the so-called living wage:
Like most other prices, wages are set by the market forces of supply and demand. The major difference between high-wage workers and low-wage workers is not that the former are better organized or better liked by their employers -- it's that their higher productivity enhances the demand for their services. The living wage campaign wants to repeal the law of supply and demand and raise wages by fiat. The goal is to help low-wage workers. Unfortunately, it wouldn't work out that way. One effect of a higher wage is a reduction in the amount of labor that employers demand.
Living wage advocates often point to a study by economists David Card and Alan Krueger, which claims that raising the minimum wage does not reduce employment. [FYI: Krueger served under Clinton.] Emphasizing the Card-Krueger evidence is like a doctor prescribing a drug relying on a single controversial study that finds no adverse side effects, while ignoring the many reports of debilitating results. In addition to reducing the amount of labor demanded, a high minimum wage compounds the problem by increasing the amount of labor supplied. In other words, not only are there fewer jobs available for unskilled workers, but more people apply for those jobs. A better weapon to fight poverty is the Earned Income Tax Credit, a provision of the income tax system that supplements the income of low-wage workers. Like any spending program, this policy has the cost of higher taxes on everyone else.Let me expand on the Card-Krueger topic: I have discussed some of the limitations in past posts--for example, the reliance on fast food restaurant samples from a small number of states, the reliability and validity of the minimum wage questionnaire used, etc. But from a theoretical perspective there should be a compelling theoretical explanation why minimum wage floors are a specialized exception from general supply/demand considerations. It is an implicit government tax that only effects employers that utilize low skill/experience labor.
Here's another Mankiw nugget:
An ec 10 student recently asked me why some economists, including some prominent ones, favor an increase in the minimum wage, in light of the standard economic analysis of price floors. (Mankiw asked one of 600 economists signing a petition in support.) He would prefer increased cash payments to the poor, such as a much-expanded earned income tax credit (EITC) or a more general negative income tax. But if his first-best policy was politically impossible, a minimum-wage increase was, in his view, an improvement over the status quo. He admitted that the minimum wage had adverse effects on employment, but he judged those to be modest in size.
The minimum wage is not well targeted to poor families. Many minimum-wage earners are like I was in the summer of 1976: teenagers from middle-class homes with minimal skill and experience, getting their first taste of working. [According to Richard Burkhauser (Cornell University) and Joseph Sabia (University of Georgia)]:
Political Cartoon
- Only 12.7 percent of the benefits from a federal minimum wage increase ...would go to poor families. In contrast, 63 percent of benefits would go to families earning more than twice the poverty line and 42 percent would go to families earning more than three times the poverty line.
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| Courtesy of Eric Allie and Townhall.com |
Political Humor
[After Tiger Woods/Obama golf joke] Actually, you know what the president's handicap is? He doesn't understand economics. - Jay Leno
[We can also add Joe Biden, Harry Reid and Nancy Pelosi.]
You knew this was going to happen. Dozens and dozens of lawsuits have already been filed against Carnival Cruise Lines. Well, if you thought the ship was filthy, slimy, and disgusting, wait until these lawyers get involved. - Jay Leno
[Or the Congress holds hearings, and committee members go on fact-finding missions...Did the lawyers get to the clause in the passenger contract that "stuff happens"?]
Lawmakers in Montana are considering a bill that would make it legal for people to take road kill home and use it as food. When Montana residents heard that, they were like, “Wait, that was illegal?” - Jimmy Fallon
[Montana is trying to save highway maintenance money in disposing of dead animals. More seriously, libertarians aren't amused by the need to legalize something that should already be legal; recall the argument against the Bill of Rights was that the enumeration is unnecessary, that an enumeration would eventually be viewed by courts as exceptions FOR liberty against the otherwise prevailing presumption of government discretion (which I believe most libertarians would agree the status quo has become). But remember the story in Kentucky over a Chinese restaurant temporarily shut down down after customers reported to be a (road kill) white-tailed deer wheeled into the back of the restaurant. (The owner said the deer was being stored temporarily at the restaurant, not to be used for restaurant dishes.) The restaurant was cited over health reasons and for possession of an untagged deer. I never hunted as a boy so I wasn't familiar with tagging laws (e.g., here) and/or their relevance to roadkill deer. I think the charge related to deer tagging is questionable unless there was evidence the deer had been shot. I would say that I wouldn't expect a restaurant to be also operating an on-site butchery or meat processing service with its own relevant licensing.]
Musical Interlude: My Favorite Groups
The Supremes, "Someday We'll Be Together". The final #1 hit, as lead singer Diana Ross would leave the group to launch a successful solo singing career. (I still think Diana Ross should have won the Oscar for 'Theme from Mahogany'. I remember I bought a Diana Ross hits compilation, and Mom approved, saying she is a good singer. I was very impressed Mom knew who she was.) It was a sad period of time for pop music fans--Diana Ross leaving, the Beatles disbanding, Simon and Garfunkel splitting up. This is the end of my Supremes' retrospective. Next up: Aerosmith.
