Credit: aska mathemetician.com
I was mostly spared the agony tonight. I only caught the tail end of the train wreck due to a thick stack of student writing to grade. Illegal aliens invited to the people’s house by the people’s representatives? Aliens who could be, on the spur of the moment, arrested and deported? Yup.
Anyway, from what I could hear, it was the usual lunacy. Spending, spending, spending and more spending. Oh yes, and taxing too, lots of taxing. We’re going to make jobs programs–paid for by the taxpayers of course. That’ll help the economy. And people don’t have jobs, so we’re going to raise the minimum wage to nearly $10 bucks an hour and tie it to inflation so it will continue to rise. Uh, aren’t minimum wage jobs supposed to be entry level, low or no skill jobs, entry to the job market? And we’re supposed to give those jobs middle class level wages? Right. That’ll really cause job growth to explode! Actually!
Can the POTUS really be so stupid as to fail to understand that raising the minimum wage during a time of unemployment at a real rate at about 14% will absolutely kill job creation? Or is that his goal? Which option is worse? Discuss.
He did say: “Deficit reduction is not an economic plan.” Right. And carbon dioxide is not a byproduct of respiration.
And you’ll be glad to hear that we’re going to do everything necessary to prevent Iran from getting nucs, and we’re going to keep the pressure on Syria. Hear that? It’s the mullahs laughing all the way from Tehran. The jihadists in Syria can’t hear us right now–they’re too busy shooting. They’ll laugh later.
Oh yes, and because people supposedly had to wait for several hours to vote, Mr. Obama’s making another commission to improve the voting experience! It’s not that anyone was prevented from voting, oh no, a straw person or persons, perhaps even straw persons of color, were supposedly forced to wait for hours to vote, so we have to fix that. With another commission. Well, in Obama world, that means the whole idea will fall into a black hole, so…
No, I don’t really think that, at least not with this issue, not while there is vote fraud and fixing to be done. My best guess? They’ll want to vote by Internet. That way entire cemeteries can vote–for Democrats, of course. There’s something about death that tilts folks inexorably to the left…
But here’s my favorite, on the very day we learn of a nuclear test in North Korea, and I swear he said this, word for word:
We’ll engage Russia to seek reductions in our nuclear arsenal.
Re-read that one, because if you’re a rational human being, you thought he said:
We’ll engage Russia to seek reductions in their nuclear arsenal.
I mean, any rational person, any sane President of the United States had to have said that, but nooooooo, he actually said:
We’ll engage Russia to seek reductions in our nuclear arsenal.
We have to “engage” the Russians to reduce our own nuclear arsenal? Uh, You don’t suppose they’ll be all for that, do you? As they used to say in the Grey Poupon commercials: “but of course.” Nothing will serve the cause of world peace more than decimating our military and reducing our nuclear deterrent to, well, how low will we have to go to satisfy Barack Obama? How much will it take to fulfill his pledge of “flexibility” to Vladimir Putin?
I may have more to say about this soon. Or maybe not. My stomach is only so strong.
With all due respect, I believe Mr. Obama was referring to the COLLECTIVE arsenal of nuclear weapons possessed by the US and Russia, hence “our” arsenal. But to discuss Russia and not North Korea with regard to that issue – nuclear reduction – is idiotic.
Dear Juggler523:
Thanks for taking the time to comment. Like you, I initially thought that, but I’m afraid I am not disposed to give Mr. Obama the benefit of the doubt on virtually anything, particularly this subject, particularly after he was caught promising more “flexibility” to the Russians after his re-election. He could have said “our respective arsenals,” or “both of our arsenals,” or “bilateral reductions,” or any number of formulations that would have made his intent unmistakably clear, but he did not. I take his comment for a textbook Freudian slip. He has, after all, already expressed his desire for unilateral disarmament of nuclear weapons. I expect Mr. Obama to do all he can to diminish our military capabilities and our standing in the world, and he has consistently lived down to my expectations.
Thanks again!
I was listening to coverage about that cop-killer dying in a burning cabin. When they interrupted for the SOTU, I turned it off. All this is more of the same from a president who really doesn’t like the United States.
Really? Because this is one of the areas where common sense is not a good guide. The following are just some points that contradict some of the prejudices in all that:-
– Minimum wages achieved by means other than mandating them, e.g. through tax breaks or by direct hiring, need not harm job creation at all. They may or may not be harmful in other respects, e.g. lowering G.D.P., but they could well be beneficial over all (at certain levels the tax break approach helps both job creation and G.D.P., according to some modelling I’ve seen).
– Even mandated minimum wages can’t hurt anything if they are in “pushing string” ranges, i.e. if they are anyway less than people wanting to live off them have to hold out for. They are just economically pointless, but politically useful.
– Even mandated minimum wages at higher levels than “pushing string” ranges can help both wages received and employment levels, at certain levels and under certain rather unusual circumstances. Lippsey’s Positive Economics explains this quite well, using graphs – and also points out that minimum wages are usually set higher still, so that they get counterproductive after all. Still, the fact that this can happen shows that the accusation is, hmm, prejudiced. Of course, it is probably still accurate, given that politicians usually don’t know what they are doing either, but that is only being accurate on the stopped clock principle.
Anyhow, minimum wages are not intrinsically daft, but are only wrong-headed under the wrong circumstances, set at wrong levels, and/or implemented the wrong way.
Dear P.M.Lawrence:
Thanks for your comment, as always. In this case, common sense need not be our guide at all, or our sole guide in any case. The history of such political hikes makes quite clear that they reduce, not increase jobs. And the larger issue is whether the federal government should be involved in this at all.
Minimum wage jobs are essentially for teenagers, unskilled and inexperienced children, entering the workplace for the first time. Mandate more pay than their labor is worth and there will be fewer jobs for them, denying them the opportunity to learn the attitudes, habits and skills necessary to be employable in more lucrative jobs. This too, is the lesson of history.
Even at the current minimum wage, a young married couple just starting in life, each working at minimum wage jobs, can earn in the neighborhood of $30,000 per year, which is much of the nation isn’t a bad living. Unless, that is, you believe it is the business of government to mandate how much that couple must be making and so engage in whatever redistribution of wealth is necessary to obtain it. That’s worked so well in housing, for example.
But as you noted, I suspect we essentially agree that now is not an appropriate time to raise the minimum wage. There is, to me, no appropriate time. It’s not the government’s business.
Thanks again!
Actually, the history is mixed, with any general pattern lost in the noise. Current best research suggests – no more than that, in my view – that a mandated minimum wage can be moderately helpful as part of a larger strategy that also includes other measures. Brad Delong recently went into it here, introducing it with “I would point out that the EITC and the minimum wage have different weak points–too high [emphasis added] a minimum wage will have a substantial disemployment effect [emphasis added], and too high an EITC does create incentives to pad your hours. A mixed strategy helps attenuate both these flaws.” (My own view is that the best thing, if we start from here, is the tax break approach I discuss here, covered in more detail in the work of mine and of Professors Phelps and Swales that it links to.)
No, not essentially but accidentally (in the U.S.A.). That is, it is an accident of recent U.S. circumstances. Things are different elsewhere, and more relevantly to your concerns, they are becoming different in the U.S.A., and indeed have already done so to a considerable extent.
We don’t agree, because my position is subtler:-
– It would probably help a little to raise the minimum wage a little, now, because of the mechanism I will outline below.
– The actual proposals are probably for too great an increase to be constructive, because that’s what politicians usually go for.
Sort of. That is, the government should never have been in that game in the first place, and people’s personal resource bases should never have been destroyed over the generations. That ideal world would have been rather Distributist (google it), with people working for themselves or for others for low, free market top up wages and getting the rest of what they needed from their own private resources (if they were working for themselves, their drawings would fold both of those in together).
But it’s not like that. In the old phrase, they break your legs and give you a crutch. That creates dependency in a poison pill way: simply stopping government support just like that would leave people helpless, with just the metaphorical broken legs. So, on the principle of you break it, you bought it, it is the government’s business to provide support – only, not in the present, continuing way that perpetuates the cycle of dependency the government itself created but as part of a transition that gets us out of here (the tax break system I linked to would work as the first step of such a transition). Naturally, the government would never do that if it could help it, but it still owes it, morally speaking.
Now, as promised, for how mandated minimum wages really work out. Murray Rothbard’s view is typical of the faulty common sense understanding. It’s basically all bullshit because he doesn’t know what he is talking about, apart from his description of the unions’ interests in all this. It only works out like that when the mandated minimum wage is too high relative to the effect of ordinary hiring on the employers’ cost patterns. But when – as often happens – the employer is a significant one in a local area, or operates nationwide but is a big presence everywhere, and the mandated minimum wage is comparatively low, other things happen that change the outcomes. I already mentioned that Lipsey’s Positive Economics explains this quite well using graphs, but as I can’t do that here I will bring it out with a pair of tables using example numbers (I hope the tables are formatted OK! please reformat them if necessary):-
With this pattern of utility that each additional employee gives to the employer, a mandated minimum wage means that the employer is best off with either 6 or 7 employees (it comes out the same).
With this pattern of utility that each additional employee gives to the employer, a floating wage means that the employer is best off with just 5 employees. That’s fewer than with a mandated minimum wage!
What’s going on? Well, when each additional employee is hired, the employer has to increase what he gives to all the employees he already has as well, or they would just quit and re-apply and he would have to take them (or he would have to hire yet others who knew that they could hold out for that much). So the additional cost of each additional employee is not that employee’s wages but that employee’s wages plus the extra that has to be paid to all the others together. That’s not much more each, but it’s quite a bit for all of them together, and that decreases the optimum staffing level – so, with these numbers, a mandated minimum wage gives both more employment and higher wages!
Now, this doesn’t just happen because I found numbers in some sweet spot (in fact, these are the first numbers I tried). What the graphs and equations would tell you, if you could find them, is that under quite ordinary conditions there’s always a sweet spot of some size just above the “free” market wage – because those quite ordinary conditions aren’t actually a free market but a market with employers dominant enough that their own hiring affects conditions more broadly.
Generally speaking, the amount of wages available to pay entry-level workers is fixed, so a higher minimum wage is going to result in fewer workers. That is especially true for moribund economies.
Unions like raises in the minimum wage because their contracts often tie to a multiplier of the mininmum wage. At least they did a long time ago when I lived in the Midwest.
The only thnig that works in favor of te minimum wage at this point is that there are a lot of wages coming available as employers cut people back to 30 or fewer hours per week to avoid insurance penalties. Those cut hours allow the other 30 hours to be paid at a higher wage. That’s damning with faint praise.
No, the amount of wages available to pay employees is typically not fixed in any physical constraint sense, as they are typically paid in arrears and have already generated the cash flow needed for that by the time they are paid (that wouldn’t be the case for a small firm with a larger customer, as large customers typically pay even more in arrears). Of course, firms may have bureaucratic approaches that stop them hiring outside a fixed budget that was already set up in advance.
For more on this “fund” theory of how wages are resourced, see the early nineteenth century work of people like David Ricardo and Nassau Senior.