Posted tagged ‘minimum wage’

Increasing Poverty and Homelessness: Who Benefits?

27 March 2014

Giving politicians the power to manage the economy causes all kins of problems. For one thing, they act in their own interest – just like anyone else. This shouldn’t be a surprise to anyone, but it seems to be. It’s time to get past the idea that politicians (or bureaucrats) are wise and altruistic overseers of the economy, taking necessary actions to correct imperfections and imbalances caused by, well, regular people.
A good example is the proposed legislation in the Maryland General Assembly to raise the state minimum wage by nearly forty percent. The purpose of this law is to make it illegal for a high-school dropout — let’s call him John — to agree to accept a $10 hourly wage from a shop owner.
The evidence clearly shows the likely result of this action. If the shop owner has a job, she will hire the best-qualified person she can. A person with a good work history, or a high school diploma or GED, will seem like a better bet than John. John, representing the lowest level of skills and education in our society, will be the loser from this legislation. He will become unemployed, and likely remain unemployed for the long term. An increase in the minimum wage almost always increases unemployment for that reason. Specifically, it increases the already abysmal employment prospects for those starting out in the job market (the 17 – 25 cohort), and even more so for the black and Hispanics in that group. An increases in the minimum wage ends up being a knife in the back of the least advantaged, the worst-off among us. When Montgomery County sought to raise the minimum wage, this was the advice they got from expert labor economists at the University of Maryland and Georgetown University. The deleterious effects, the economists testified, are more likely when the increase is large and when the unemployment rate is already high. Economist Stephen Fuller looked at the Maryland bill and concluded it would probably cause a reduced standard of living and higher costs.

But political management of the economy doesn’t pay any attention to those people at the bottom. When the high school grad with the increased wage gets his paycheck, he’ll thank the politicians who caused it. The politicians have no incentive, however, to be concerned about the people at the very bottom of the economy – the ones we should be most concerned about. John’s lost job or lost employment opportunity doesn’t have any political loss for them. They are seeking political support, and they get rewards for increasing the minimum wage — and also for increasing unemployment, poverty, and homelessness.

Jobkiller Regulations Go Into Effect

17 September 2008

As the federal minimum wage increase goes into effect, Big Government dictates who may accept a job offer, and who must not be allowed to accept it.  Job losses are inevitable, according to simple economics: If the employee increases value by $6.60 per hour, she will be hired; if she increases value by $6.50 per hour, she will not be hired.  The upshot is that lower-skilled employees will either lose their jobs, or not be offered jobs.  The job losses are all the more acute right now, given the difficulties of the economy.

Some people see political imagery as more important than the magnitude of job losses.  This federally-mandated increase means that the Maryland minimum wage ($6.15) is overridden, and obsolete.  Sean Dobson of Progressive [sic] Maryland had an interesting take on the situation: ‘‘As of July 24, the federal minimum wage is higher than Maryland’s minimum wage, and that’s simply unacceptable in this bluest of blue states.”   Some state legislators, including Silver Spring’s Tom Hucker,  and the governor think that Maryland should jack up its minimum wage again, just so that it isn’t lower than the federal minimum.  Appearances, it appears, are the most important thing that the state has to keep up.