Tag Archives: Minimum wage

WichitaLiberty.TV: Wichita economic development, Kansas schools and spending, minimum wage

In this episode of WichitaLiberty.TV: Can we reform economic development in Wichita to give us the growth we need? Kansas school test scores, school spending, and how the Wichita district spends your money. Then, who is helped by raising the minimum wage? View below, or click here to view at YouTube. Episode 84, broadcast May 10, 2015.

WichitaLiberty.TV: Wichita Eagle, Kansas Democrats, Kris Kobach on voting, and the minimum wage

In this episode of WichitaLiberty.TV: Wichita Eagle labels hold a clue to the newspaper’s attitude, Kansas Democratic Party income tax reckoning, straight-ticket voting could leave some issues unvoted, and how a minimum wage hike would harm the most vulnerable workers. View below, or click here to view at YouTube. Episode 72, broadcast January 25, 2015.

Kansas minimum wage hike would harm the most vulnerable workers

A bill to raise the minimum wage in Kansas will harm the most vulnerable workers, and make it more difficult for low-skill workers to get started in the labor market.

Legislation introduced by Representative Jim Ward of Wichita would raise the minimum wage in Kansas by one dollar per hour each year until it reaches $10.25 per hour in 2018. The bill is HB 2012, captioned “enacting the Kansas working families pay raise act.”

The caption of the bill, referencing “working families,” hints at the problem, as seen by progressives. The minimum wage does not generate enough income to raise a family. While the bill calls for raising the minimum wage, it makes no reference of whether workers are raising a family, or working part-time for pin money while in high school.

But aside from that, there is the important question to consider: Will raising the minimum wage help or harm low-wage earners? And are the policy goals — taken in their entirety — of the groups pressing for a higher minimum wage in the best interest of workers? The answer to these questions is that higher minimum wages harm low-wage workers and low-skilled people who would like to work.

The great appeal of a higher minimum wage mandated by an act of the legislature is that it seems like a wonderfully magical way to increase the wellbeing of low-wage workers. Those who were earning less than the new lawful wage and who keep their jobs after the increase are happy. They are grateful to the lawmakers, labor leaders, newspaper editorialists, and others who pleaded for the higher minimum wage. News stories will report their good fortune.

That’s the visible effect of raising the minimum wage. But to understand the entire issue, we must look for the unseen effects.

The not-so-visible effect of the higher wage law is that demand for labor will be reduced. Those workers whose productivity, as measured by the give and take of supply and demand, lies below the new lawful wage rate are in danger of losing their jobs. The minimum wage law says if you hire someone you must pay them a certain amount. The law can’t compel you to hire someone, nor can it compel employers to keep workers on the payroll.

The difficulty is that people with lose their jobs in dribs and drabs. A few workers here; a few there. They may not know who is to blame. Newspaper and television reporters will not seek these people, as they are largely invisible, especially so in the case of the people who are not hired because of the higher wage law.

In the real world, business owners have many things they can do when labor becomes more expensive. Some things employers do to compensate for higher labor costs include these:

  • Reduce non-wage benefits such as health insurance.
  • Eliminate overtime hours that many employees rely on.
  • Substitute machines for labor. We might see more self-service checkout lanes at supermarkets, more automated ordering systems at fast food restaurants, and more use of automated telephone response systems, for example.
  • Use illegal labor. Examples include paying employees under the table, or requiring work off-the-clock.
  • Some employers may be more willing to bear the risks of using undocumented workers who can’t complain that they aren’t being paid the minimum wage.
  • Some employers may decide that the risks and hassles of being in business aren’t worth it anymore, and will close shop. Others simply can’t afford the higher wages and close. The Wall Street Journal reported on a nonprofit restaurant that couldn’t survive under Michigan’s higher minimum wage, reporting “These unintended consequences of a minimum wage hike aren’t unique to small towns in south-central Michigan. Tragically, they repeat themselves in locales small and large each time legislators heed the populist call to ‘raise the wage.'”

If we are truly concerned about the plight of low-wage workers we can face some harsh realities and deal with them openly. The simple fact is that some people are not able to produce output that our economy values very much. They are not very productive. Passing a law that requires employers to pay them more doesn’t change the fact that their productivity is low. But there are ways to increase productivity.

One way to increase workers’ productivity is through education. Unfortunately, there is ample evidence that our public education system is failing badly.

Capital — another way to increase wages — may be a dirty word to some. But as the economist Walter E. Williams says, ask yourself this question: who earns the higher wage: a man digging a ditch with a shovel, or a man digging a ditch using a power backhoe? The difference between the two is that the man with the backhoe is more productive. That productivity is provided by capital — the savings that someone accumulated (instead of spending on immediate consumption or taxes) and invested in a piece of equipment that increased the output of workers and our economy.

Education and capital accumulation are the two best ways to increase the productivity and the wages of workers. Ironically, the people who are most vocal about raising wages through legislative fiat are also usually opposed to meaningful education reform and school choice, insisting on more resources being poured into the present system. They also usually support higher taxes on both individuals and business, which makes it harder to accumulate capital. These organizations should examine the effects of the policies they promote, as they are not in alignment with their stated goals.

If it were possible to increase the prosperity of everyone by simply passing a law, we should do it. But that’s not the way the world works regarding minimum wage laws.

Who is harmed?

Walter Williams explains who is most harmed by minimum wage laws, and also the politics:

How about the politics of the minimum wage? In the political arena, one dumps on people who can’t dump back on him. Minimum wages have their greatest unemployment impact on the least skilled worker. After all, who’s going to pay a worker an hourly wage of $10 if that worker is so unfortunate as to have skills that enable him to produce only $5 worth of value per hour? Who are these workers? For the most part, they are low-skilled teens or young adults, most of whom are poorly educated blacks and Latinos. The unemployment statistics in our urban areas confirm this prediction, with teen unemployment rates as high as 50 percent.

The politics of the minimum wage are simple. No congressman or president owes his office to the poorly educated black and Latino youth vote. Moreover, the victims of the minimum wage do not know why they suffer high unemployment, and neither do most of their “benefactors.” Minimum wage beneficiaries are highly organized, and they do have the necessary political clout to get Congress to price their low-skilled competition out of the market so they can demand higher wages. (Politics and Minimum Wage)

The role of labor unions

Labor unions favor higher minimum wages laws. Why? Here’s what one union said in making its argument: “However, not only is $9/hour a step in the right direction, it is also good for union members, who stand to seek even greater wage increases in their contracts, if they make more than the current minimum wage of $7.25.” ( United Food and Commercial Workers International Union (UFCW).)

For more on this, see Why Unions Want a Higher Minimum Wage: Labor contracts are often tied to the law — and it reduces the competition for lower-paying jobs.

Minimum wage as competitive weapon

We also need to examine the motivations of business firms that support a higher minimum wage. Sometimes they see a way gain a competitive advantage.

In 2005 Walmart came out in favor of raising the national minimum wage. Providing an example of how regulation is pitched as needed for the common good, Walmart’s CEO said that he was concerned for the plight of working families, and that he thought the current minimum wage of $5.15 per hour was too low. (“Working families.” That’s in the caption of the proposed Kansas law. It’s no coincidence.) If Walmart — a company progressives love to hate as much as any other — can be in favor of increased regulation of the workplace, can regulation be a good thing? Had Walmart discovered the joys of big government?

The answer is yes. Walmart discovered a way of using government regulation as a competitive weapon. This is often the motivation for business support of regulation. In the case of Walmart, it was already paying its employees well over the current minimum wage. At the time, some sources thought that the minimum wage could be raised as much as 50 percent and not cause Walmart any additional cost — its employees already made that much.

But its competitors didn’t pay wages that high. If the minimum wage rose very much, these competitors to Walmart would be forced to increase their wages. Their costs would rise. Their ability to compete with Walmart would be harmed.

In short, Walmart supported government regulation in the form of a higher minimum wage as a way to impose higher costs on its competitors. It found a way to compete outside the marketplace. And it did it while appearing noble.

Minimum wage laws: Helpful or harmful?

A version of the following appeared in the Wichita Eagle (Wage hike isn’t that simple, September 8, 2007).

minimum-wage-poster

Will raising the minimum wage help or harm low-wage earners? And are the policy goals — taken in their entirety — of the groups pressing for a higher minimum wage in the best interest of workers?

The great appeal of a higher minimum wage mandated by an act of the legislature is that it seems like a wonderfully magical way to increase the wellbeing of low-wage workers. Those who were earning less than the new lawful wage and keep their jobs after the increase are happy. They are grateful to the lawmakers, labor leaders, newspaper editorialists, and others who pleaded for the higher minimum wage. News stories will report their good fortune.

That’s the visible effect of raising the minimum wage. But to understand the entire issue, we must look for the unseen effects.

The not-so-visible effect of the higher wage law is that demand for labor will be reduced. Those workers whose productivity, as measured by the give and take of supply and demand, lies below the new lawful wage rate are in danger of losing their jobs. The minimum wage law says if you hire someone you must pay them a certain amount. The law can’t compel you to hire someone, nor can it compel employers to keep workers on the payroll.

The difficulty is that people with lose their jobs in dribs and drabs. A few workers here; a few there. They may not know who is to blame. Newspaper and television reporters will not seek these people, as they are largely invisible, especially so in the case of the people who are not hired because of the higher wage law.

If we are truly concerned about the plight of low-wage workers we can face some harsh realities and deal with them openly. The simple fact is that some people are not able to produce output that our economy values very much. They are not very productive. Passing a law that requires employers to pay them more doesn’t change the fact that their productivity is low. But there are ways to increase productivity.

One way to increase workers’ productivity is through education. Unfortunately, there is ample evidence that our public education system is failing badly.

Capital — another way to increase wages — may be a dirty word to some. But as the economist Walter E. Williams says, ask yourself this question: who earns the higher wage: a man digging a ditch with a shovel, or a man digging a ditch using a power backhoe? The difference between the two is that the man with the backhoe is more productive. That productivity is provided by capital — the savings that someone accumulated (instead of spending on immediate consumption or taxes) and invested in a piece of equipment that increased the output of workers and our economy.

Education and capital accumulation are the two best ways to increase the productivity and the wages of workers. Ironically, the people who are most vocal about raising wages through legislative fiat are also usually opposed to meaningful education reform and school choice, insisting on more resources being poured into the present system. They also usually support higher taxes on both individuals and business, which makes it harder to accumulate capital. These organizations should examine the effects of the policies they promote, as they are not in alignment with their stated goals.

Economic freedom ads debut in Wichita

This week the Wichita Eagle reports that Charles Koch, chairman of the board and CEO of Wichita-based Koch Industries, is starting a local campaign to educate people on the benefits of economic freedom and the harm of government overreach. (Charles Koch launching Wichita campaign about economic freedom, government overreach, July 9, 2013)

So far one video advertisement is available, shown at the end of this article.

In announcing this effort, a statement at the Charles Koch Foundation reads:

“We believe the best way to promote progress and societal well-being is through free societies,” said CKF founder Charles G. Koch. “The spot was developed as part of our ongoing work to support the kind of scholarship and analysis that examines how to ensure opportunities for earned success while sharing compassion for the vulnerable.”

Koch is not shying away from important issues related to economic freedom such as the minimum wage. The common belief, fiercely held and believed by those who say they want to help the poor, is that a high minimum wage is needed. In a video on another site sponsored by the Charles Koch foundation, it is argued that “And among the least skilled, least educated workers, increases in the minimum wage significantly increase unemployment. The minimum wage may be a well-intentioned policy, but it often hurts the very workers who are in most need of our help.” The video is Does the minimum wage hurt workers? at the site Economic Freedom.

Recently Koch has contributed several articles on the importance of economic freedom and the harm of cronyism, including Charles Koch: The importance of economic freedom, and in the Wall Street Journal, Charles G. Koch: Why Koch Industries is speaking out.

Minimum wage increase not a solution

Those who advocate for a higher minimum wage law appear to have the best interests of workers as their concern. But as is almost always the case when government intervenes into markets, the unintended consequences create more harm than good.

In the case of the federal minimum wage, we need to remember that this law — as well-intentioned as it may be — is not the solution to unemployment or raising the standard of living of workers.

The great appeal of a higher minimum wage mandated by an act of Congress is that it seems like a simple and harmless way to increase the wellbeing of low-wage workers. Those who were earning less than the new lawful wage and keep their jobs after the increase are happy. They are grateful to the lawmakers, labor leaders, newspaper editorialists, and others who pleaded for the higher minimum wage. News stories will report their good fortune.

That’s the visible effect of raising the minimum wage. But to understand the entire issue, we must look for the unseen effects. Milton Friedman explained in Capitalism and Freedom:

Minimum wage laws are about as clear a case as one can find of a measure the effects of which are precisely the opposite of those intended by the men of good will who support it. Many proponents of minimum wage laws quite properly deplore extremely low rates; they regard them as a sign of poverty; and they hope, by outlawing wage rates below some specified level, to reduce poverty. In fact, insofar as minimum wage laws have any effect at all, their effect is clearly to increase poverty. The state can legislate a minimum wage rate. It can hardly require employers to hire at that minimum all who were formerly employed at wages below the minimum. … The effect of the minimum wage is therefore to make unemployment higher than it otherwise would be.

The not-so-visible effect of the higher wage law is that demand for labor will be reduced. Those workers whose productivity — as measured by the give and take of supply and demand — lies below the new lawful wage rate are in danger of losing their jobs. The minimum wage law says if you hire someone you must pay them a certain minimum amount. The law can’t compel you to hire someone, nor can it force employers to keep workers on the payroll.

The people who lose their jobs are dispersed. A few workers here; a few there. They may not know who is to blame for their situation. Newspaper and television reporters will not seek these people, as they are largely invisible, especially so in the case of the people who are not hired because of the higher minimum wage level.

Some things employers do to compensate for higher labor costs include these:

  • Reduce non-wage benefits such as health insurance.
  • Eliminate overtime hours that many employees rely on.
  • Substitute machines for labor. We might see more self-service checkout lanes at supermarkets and more use of automated telephone response systems, for example.
  • Use illegal labor. Examples include paying employees under the table, or requiring work off-the-clock.
  • Some employers may be more willing to bear the risks of using undocumented workers who can’t complain that they aren’t being paid the minimum wage.
  • Some employers may decide that the risks and hassles of being in business aren’t worth it anymore, and will close shop.

Solution to low wages

If we are truly concerned about the plight of low-wage and low-skilled workers we can face some realities and deal with them openly. The primary reality is that some people are not able to produce output that our economy values highly. These workers are not very productive. Passing a law that requires employers to pay them more doesn’t change the fact that their productivity is low. But there are ways to increase productivity.

One way to increase workers’ productivity is through education. Unfortunately, there is ample evidence that our public education system is not producing graduates with the skills needed for well-paying jobs. But this is a problem that can be fixed.

Another way to increase wages is to encourage more capital investment. But capital is a dirty word to liberals, as it conjures up images of rich people earning income from the labors of others. But as the economist Walter E. Williams says, ask yourself this question: who earns the higher wage: a man digging a ditch with a shovel, or a man digging a ditch using a power backhoe? The difference between the two is that the man using the backhoe is more productive, although the worker using the shovel is undoubtedly working harder. But it is productivity, not work effort, that is valued. That productivity is provided by capital — the savings that someone accumulated (instead of spending on immediate consumption or taxes) and invested in a way that increased the output of workers and our economy.

These savers and investors are not necessarily wealthy people. Anyone who defers current consumption in order to save and invest — no matter how small the amount — provides capital to industry.

Education and capital accumulation are the two best ways to increase the productivity and the wages of workers. Ironically, the people who are most vocal about raising wages through legislative fiat are also usually opposed to meaningful education reform and school choice, insisting on more resources being poured into the present system. They also usually support higher taxes on both individuals and business, which makes it harder to accumulate capital. These people and organizations should examine the effects of the policies they promote, as they are not in alignment with their stated goals.

Minimum wage as competitive weapon

We also need to examine the motivations of those calling for a higher minimum wage. Sometimes they see a way gain a competitive advantage.

In 2005 Walmart came out in favor of raising the national minimum wage. Providing an example of how regulation is pitched as needed for the common good, Walmart’s CEO said that he was concerned for the plight of working families, and that he thought the current minimum wage of $5.15 per hour was too low. If Walmart — a company the political left loves to hate as much as any other — can be in favor of increased regulation of the workplace, can regulation be a good thing? Had Walmart discovered the joys of big government?

The answer is yes. Walmart discovered a way of using government regulation as a competitive weapon. This is often the motivation for business support of regulation. In the case of Walmart, it was already paying its employees well over the current minimum wage. At the time, some sources thought that the minimum wage could be raised as much as 50 percent and not cause Walmart any additional cost — its employees already made that much.

But its competitors didn’t pay wages that high. If the minimum wage rose very much, these competitors to Walmart would be forced to increase their wages. Their costs would rise. Their ability to compete with Walmart would be harmed.

In short, Walmart supported government regulation in the form of a higher minimum wage as a way to impose higher costs on its competitors. It found a way to compete outside the marketplace. And it did it while appearing noble.

Regulation for the sake of business

There are many examples of how the conventional wisdom regarding regulation is wrong, That wisdom being Republicans and conservatives are in bed with government, seeking to unshackle business from the burden of government regulation. Democrats and liberals, on the other hand, are busily crafting regulations to protect the middle class from the evils of big business. As it turns out, both Democrats and Republicans love creating regulations, and big business loves these regulations. Business often uses government regulation as way to harm its competitors or gain advantage for itself, which is contrary to the principles of free markets and capitalism.

Holman W. Jenkins., Jr. explains how regulation works in the real world: “When some hear the word “regulation,” they imagine government rushing to the defense of consumers. In the real world, government serves up regulation to those who ask for it, which usually means organized interests seeking to block a competitive threat. This insight, by the way, originated with the left, with historians who went back and reconstructed how railroads in the U.S. concocted federal regulation to protect themselves from price competition. We should also notice that an astonishingly large part of the world has experienced an astonishing degree of stagnation for an astonishingly long time for exactly such reasons.” (Let’s Restart the Green Revolution, Wall Street Journal.)

Another example of a big business using regulation as a competitive weapon comes from 2005 when Walmart came out in favor of raising the national minimum wage. Providing an example of how regulation is pitched as needed for the common good, Walmart’s CEO said that he was concerned for the plight of working families, and that he thought the minimum wage level of $5.15 per hour was too low. If Walmart — a company the political left loves to hate as much as any other — can be in favor of increased regulation of the workplace, can regulation be a good thing? Had Walmart discovered the joys of big government?

The answer is yes. Walmart discovered a way of using government regulation as a competitive weapon. This is often the motivation for business support of regulation. In the case of Walmart, it was already paying its employees well over the current minimum wage. At the time, some sources thought that the minimum wage could be raised as much as 50 percent and not cause Walmart any additional cost — its employees already made that much.

But its competitors didn’t pay wages that high. If the minimum wage rose very much, these competitors to Walmart would be forced to increase their wages. Their costs would rise. Their ability to compete with Walmart would be harmed.

In short, Walmart supported government regulation as a way to impose higher costs on its competitors. It found a way to compete outside the marketplace. It abandoned principles of free markets and capitalism, and provided a lesson as to the difference between capitalism and business. And it did it while appearing noble.

Many, particularly liberals and progresives, make no distinction between business and capitalism. But we need to learn to recognize the difference if we are to have a thriving economy based on free-wheeling, competitive markets that foster innovation, or continue our decline into unproductive crony capitalism.

In the following excerpt from his book The Big Ripoff: How Big Business and Big Government Steal Your Money, author Timothy P. Carney explains that big business is able to use regulation as a blunt and powerful tool against competitors, and also as a way to improve its image, just like Walmart asking for a higher minimum wage.

How does regulation help big business?

Excerpt from The Big Ripoff: How Big Business and Big Government Steal Your Money, by Timothy P. Carney

If regulation is costly, why would big business favor it? Precisely because it is costly.

Regulation adds to the basic cost of doing business, thus heightening barriers to entry and reducing the number of competitors. Thinning out the competition allows surviving firms to charge higher prices to customers and demand lower prices from suppliers. Overall regulation adds to overhead and is a net boon to those who can afford it — big business.

Put another way, regulation can stultify the market. If you’re already at the top, stultification is better than the robust dynamism of the free market. And according to Nobel Laureate economist Milton Friedman:

The great virtue of free enterprise is that it forces existing businesses to meet the test of the market continuously, to produce products that meet consumer demands at lowest cost, or else be driven from the market. It is a profit-and-loss system. Naturally, existing businesses prefer to keep out competitors in other ways. That is why the business community, despite its rhetoric, has so often been a major enemy of truly free enterprise.

There is an additional systemic reason why regulation will help big business. Congress passes the laws that order new regulations, and executive branch agencies actually construct the regulations. The politicians and government lawyers who write these rules rarely do so without input. Often the rule makers ask for advice and information from labor unions, consumer groups, environmental groups, and industry itself. Among industry the stakeholders (beltway parlance to describe affected parties) who have the most input are those who can hire the most effective and most connective lobbyists. You can guess this isn’t Mom and Pop.

As a result, the details of the regulation are often carefully crafted to benefit, or at least not hurt, big business. If something does not hurt you, or hurts you a little while seriously hindering your competition, it is a boon, on balance.

Another reason big business often cries “regulate me!” is the goodwill factor. If a politician or bureaucrat wants to play a role in some industry, and some executive says, “get lost,” he runs the risk of offending this powerful person. That’s bad diplomacy. Bureaucrats, by their nature, do not like to be told to mind their own business. Supporting the idea of regulation but lobbying for particular details is usually better politics.

Raising minimum wage not the solution

As calls mount to raise the federal minimum wage, we need to remember that this law — as well-intentioned as it may be — is not the solution to unemployment or raising the standard of living of workers.

The great appeal of a higher minimum wage mandated by an act of Congress is that it seems like a wonderfully magical way to increase the wellbeing of low-wage workers. Those who were earning less than the new lawful wage and keep their jobs after the increase are happy. They are grateful to the lawmakers, labor leaders, newspaper editorialists, and others who pleaded for the higher minimum wage. News stories will report their good fortune.

That’s the visible effect of raising the minimum wage. But to understand the entire issue, we must look for the unseen effects. Milton Friedman explained in Capitalism and Freedom:

Minimum wage laws are about as clear a case as one can find of a measure the effects of which are precisely the opposite of those intended by the men of good will who support it. Many proponents of minimum wage laws quite properly deplore extremely low rates; they regard them as a sign of poverty; and they hope, by outlawing wage rates below some specified level, to reduce poverty. In fact, insofar as minimum wage laws have any effect at all, their effect is clearly to increase poverty. The state can legislate a minimum wage rate. It can hardly require employers to hire at that minimum all who were formerly employed at wages below the minimum. … The effect of the minimum wage is therefore to make unemployment higher than it otherwise would be.

The not-so-visible effect of the higher wage law is that demand for labor will be reduced. Those workers whose productivity, as measured by the give and take of supply and demand, lies below the new lawful wage rate are in danger of losing their jobs. The minimum wage law says if you hire someone you must pay them a certain minimum amount. The law can’t compel you to hire someone, nor can it force employers to keep workers on the payroll.

The problem is that people lose their jobs in a dispersed manner. A few workers here; a few there. They may not know who is to blame for their situation. Newspaper and television reporters will not seek these people, as they are largely invisible, especially so in the case of the people who are not hired because of the higher minimum wage level.

If we are truly concerned about the plight of low-wage and low-skilled workers we can face some realities and deal with them openly. The primary reality is that some people are not able to produce output that our economy values highly. These workers are not very productive. Passing a law that requires employers to pay them more doesn’t change the fact that their productivity is low. But there are ways to increase productivity.

One way to increase workers’ productivity is through education. Unfortunately, there is ample evidence that our public education system is not producing graduates with the skills needed for well-paying jobs. But this is a problem that can be fixed.

Another way to increase wages is to encourage more capital investment. But capital is a dirty word to liberals, as it conjures up images of rich people. But as the economist Walter E. Williams says, ask yourself this question: who earns the higher wage: a man digging a ditch with a shovel, or a man digging a ditch using a power backhoe? The difference between the two is that the man using the backhoe is more productive, although the worker using the shovel is undoubtedly working harder. But it is productivity that is valued. That productivity is provided by capital — the savings that someone accumulated (instead of spending on immediate consumption or taxes) and invested in a way that increased the output of workers and our economy.

These savers and investors are not necessarily wealthy people. Anyone who defers current consumption in order to save and invest — no matter how small the amount — provides capital to industry.

Education and capital accumulation are the two best ways to increase the productivity and the wages of workers. Ironically, the people who are most vocal about raising wages through legislative fiat are also usually opposed to meaningful education reform and school choice, insisting on more resources being poured into the present system. They also usually support higher taxes on both individuals and business, which makes it harder to accumulate capital. These people and organizations should examine the effects of the policies they promote, as they are not in alignment with their stated goals.

The use of regulation by business, contrary to markets

There are many examples of how the conventional wisdom regarding regulation is wrong: Republicans and conservatives are in bed with government, seeking to unshackle business from the burden of government regulation. Democrats and liberals, on the other hand, are busy crafting regulations to protect the common man from the evils of big business. As it turns out, both Democrats and Republicans love creating regulations, and big business loves these regulations.

For example, in 2005 Walmart came out in favor of raising the national minimum wage. The company’s CEO said that he was concerned for the plight of working families, and that he thought the minimum wage level of $5.15 per hour was too low. If Walmart — a company the political left loves to hate as much as any other — can be in favor of increased regulation of the workplace, can regulation be a good thing? Had Walmart discovered the joys of big government?

The answer is yes. Walmart discovered a way of using government regulation as a competitive weapon. This is often the motivation for business support of regulation. In the case of Walmart, it was already paying its employees well over the current minimum wage. At the time, some sources thought that the minimum wage could be raised as much as 50 percent and not cause Walmart any additional cost — its employees already made that much.

But its competitors didn’t pay wages that high. If the minimum wage rose very much, these competitors to Walmart would be forced to increase their wages. Their costs would rise. Their ability to compete with Walmart would be harmed.

In short, Walmart supported government regulation as a way to impose higher costs on its competitors. It found a way to compete outside the marketplace. It abandoned principles of free markets and capitalism, and provided a lesson as to the difference between capitalism and business. Many, particularly liberals, make no distinction between business and capitalism. But we need to learn to recognize the difference if we are to have a thriving economy based on free-wheeling, competitive markets that foster innovation, or continue our decline into unproductive crony capitalism.

In the following excerpt from his book The Big Ripoff: How Big Business and Big Government Steal Your Money, author Timothy P. Carney explains that big business is able to use regulation as a blunt and powerful tool against competitors, and also as a way to improve its image.

How does regulation help big business?

Excerpt from The Big Ripoff: How Big Business and Big Government Steal Your Money, by Timothy P. Carney

If regulation is costly, why would big business favor it? Precisely because it is costly.

Regulation adds to the basic cost of doing business, thus heightening barriers to entry and reducing the number of competitors. Thinning out the competition allows surviving firms to charge higher prices to customers and demand lower prices from suppliers. Overall regulation adds to overhead and is a net boon to those who can afford it — big business.

Put another way, regulation can stultify the market. If you’re already at the top, stultification is better than the robust dynamism of the free market. And according to Nobel Laureate economist Milton Friedman:

The great virtue of free enterprise is that it forces existing businesses to meet the test of the market continuously, to produce products that meet consumer demands at lowest cost, or else be driven from the market. It is a profit-and-loss system. Naturally, existing businesses prefer to keep out competitors in other ways. That is why the business community, despite its rhetoric, has so often been a major enemy of truly free enterprise.

There is an additional systemic reason why regulation will help big business. Congress passes the laws that order new regulations, and executive branch agencies actually construct the regulations. The politicians and government lawyers who write these rules rarely do so without input. Often the rule makers ask for advice and information from labor unions, consumer groups, environmental groups, and industry itself. Among industry the stakeholders (beltway parlance to describe affected parties) who have the most input are those who can hire the most effective and most connective lobbyists. You can guess this isn’t Mom and Pop.

As a result, the details of the regulation are often carefully crafted to benefit, or at least not hurt, big business. If something does not hurt you, or hurts you a little while seriously hindering your competition, it is a boon, on balance.

Another reason big business often cries “regulate me!” is the goodwill factor. If a politician or bureaucrat wants to play a role in some industry, and some executive says, “get lost,” he runs the risk of offending this powerful person. That’s bad diplomacy. Bureaucrats, by their nature, do not like to be told to mind their own business. Supporting the idea of regulation but lobbying for particular details is usually better politics.

Regulation supports business, not capitalism and free markets

There are many examples of how the conventional wisdom regarding regulation is wrong: Republicans and conservatives are in bed with government, seeking to unshackle business from the burden of government regulation. Democrats and liberals, on the other hand, are busy crafting regulations to protect the common man from the evils of big business. As it turns out, both Democrats and Republicans love creating regulations, and big business loves these regulations.

For example, in 2005 Walmart came out in favor of raising the national minimum wage. The company’s CEO said that he was concerned for the plight of working families, and that he thought the minimum wage level of $5.15 per hour was too low. If Walmart — a company the political left loves to hate as much as any other — can be in favor of increased regulation of the workplace, can regulation be a good thing? Had Walmart discovered the joys of big government?

The answer is yes. Walmart discovered a way of using government regulation as a competitive weapon. This is often the motivation for business support of regulation. In the case of Walmart, it was already paying its employees well over the current minimum wage. At the time, some sources thought that the minimum wage could be raised as much as 50 percent and not cause Walmart any additional cost — its employees already made that much.

But its competitors didn’t pay wages that high. If the minimum wage rose very much, these competitors to Walmart would be forced to increase their wages. Their costs would rise. Their ability to compete with Walmart would be harmed.

In short, Walmart supported government regulation as a way to impose higher costs on its competitors. It found a way to compete outside the marketplace. It abandoned principles of free markets and capitalism, and provided a lesson as to the difference between capitalism and business. Many, particularly liberals, make no distinction between business and capitalism. But we need to learn to recognize the difference if we are to have a thriving economy based on free-wheeling, competitive markets that foster innovation, or continue our decline into unproductive crony capitalism.

In the following excerpt from his book The Big Ripoff: How Big Business and Big Government Steal Your Money, author Timothy P. Carney explains that big business is able to use regulation as a blunt and powerful tool against competitors, and also as a way to improve its image.

How does regulation help big business?

Excerpt from The Big Ripoff: How Big Business and Big Government Steal Your Money, by Timothy P. Carney

If regulation is costly, why would big business favor it? Precisely because it is costly.

Regulation adds to the basic cost of doing business, thus heightening barriers to entry and reducing the number of competitors. Thinning out the competition allows surviving firms to charge higher prices to customers and demand lower prices from suppliers. Overall regulation adds to overhead and is a net boon to those who can afford it — big business.

Put another way, regulation can stultify the market. If you’re already at the top, stultification is better than the robust dynamism of the free market. And according to Nobel Laureate economist Milton Friedman:

The great virtue of free enterprise is that it forces existing businesses to meet the test of the market continuously, to produce products that meet consumer demands at lowest cost, or else be driven from the market. It is a profit-and-loss system. Naturally, existing businesses prefer to keep out competitors in other ways. That is why the business community, despite its rhetoric, has so often been a major enemy of truly free enterprise.

There is an additional systemic reason why regulation will help big business. Congress passes the laws that order new regulations, and executive branch agencies actually construct the regulations. The politicians and government lawyers who write these rules rarely do so without input. Often the rule makers ask for advice and information from labor unions, consumer groups, environmental groups, and industry itself. Among industry the stakeholders (beltway parlance to describe affected parties) who have the most input are those who can hire the most effective and most connective lobbyists. You can guess this isn’t Mom and Pop.

As a result, the details of the regulation are often carefully crafted to benefit, or at least not hurt, big business. If something does not hurt you, or hurts you a little while seriously hindering your competition, it is a boon, on balance.

Another reason big business often cries “regulate me!” is the goodwill factor. If a politician or bureaucrat wants to play a role in some industry, and some executive says, “get lost,” he runs the risk of offending this powerful person. That’s bad diplomacy. Bureaucrats, by their nature, do not like to be told to mind their own business. Supporting the idea of regulation but lobbying for particular details is usually better politics.

Stossel: The state against blacks

John Stossel’s most recent television program was titled The State Against Blacks, and it dealt with the topics of affirmative action, welfare, and the minimum wage.

A featured guest on the show was Dr. Walter E. Williams, an economist at George Mason University. His most recent book is on this topic, and it’s titled Race and Economics: How Much Can Be Blamed on Discrimination? A preview of the book is available at that link.

On welfare, Williams told Stossel: “The welfare state has done to black Americans what slavery could not have done, the harshest Jim Crow laws and racism could not have done — namely, break up the black family. Today, just slightly over 30 percent of black kids live in two-parent families.” He contrasted this with much higher numbers of intact families in the past. A video clip is below.

In another clip from the show, Williams discusses the war on poverty and how the minimum wage is harmful to those it is meant to help.

Summarizing at the end of the show, Stossel told the audience that limited government — not an expansive welfare state — is best for everyone, including the poor, immigrants, and minorities:

There’s no question that in America that blacks, on average, are economically behind whites. Average black household income is about 40 percent less than for whites. Why? Other minorities were once that far behind, but they prospered. In 1910 Chinese immigrants were 10 percent poorer than other Americans. Their grandkids, in 1985, were 35 percent richer than other Americans.

Other minorities rose out of poverty: Italians, Hungarians, the Irish, and so on. So why not most blacks? Because just at the time that blacks like Walter Williams were lifting themselves out of poverty, President Johnson created a government war on poverty. Trillions of your dollars were spent on welfare programs that unintentionally reward dependency.

And then came more regulation like licensing rules and minimum wage rules that stifle entrepreneurship. Politicians like Jessie Jackson say racism is why blacks still struggle today. But Walter Williams taught me that’s just nonsense. There is still racism today. But if that’s such an obstacle, explain the success of black immigrants in America. Their skin is just as dark, but they knew well they’d proposer. Immigrants from Jamaica are poorer than the average American, but a few years later their kids are one percent richer than the average American.

Why? For one reason, it’s harder for immigrants to get government assistance. They don’t grow up in a culture of handouts, so they’re forced to make it on their own. And that makes all the difference. What helps poor people most is limited government, simple rules that everyone understands, that leave newcomers free to braid hair, for example, or drive taxis, or start companies.

If the state keeps the peace but then gets out of our way, people prosper. I didn’t understand that until Walter Williams taught me. And many Americans still don’t get it.

Stossel’s column on this topic is Is Government Aid Helping or Hurting Blacks? Video from Williams’ 1985 PBS documentary “State Against Blacks” is available here. Video from the “Good Intentions” series is here.

Stossel on politicians’ promises

Recently John Stossel produced a television show titled Politicians’ Top 10 Promises Gone Wrong. The show features segments on government programs and why they’ve gone wrong, with a focus on the unintended consequences of the programs. Particularly illuminating are the attempts by programs’ supporters to justify their worth.

Now the program is available to view on the free hulu service by clicking on Politicians’ Top 10 Promises Gone Wrong.

One of the segments on the show explained the harm of Cash for Clunkers, in which serviceable cars were destroyed so that new cars could be sold. The program simply stole sales from the months before and after the program. The mistaken idea that destruction can be a way to create new wealth is held by many who should know better, and Stossel reminds us of the New York Times’ Paul Krugman, who wrote that the terrorist attacks of September 11, 2001 “could even do some economic good” as rebuilding will increase business spending. It’s the seen vs. unseen problem, Stossel and David Boaz of the Cato Institute explain. It’s easy to see people buying new cars. It was reported on television. But it’s more difficult to see all the dispersed economic activity that didn’t take place because of the programs.

“Living wage” laws, in which people would be paid enough to live on — whatever that means — is next. While increasing wages of low-paid workers is a noble goal, increasing the cost of labor results in an entirely predictable result: less labor is demanded. Fewer people will have jobs. The Grand Canyon National Park, for example, switched to automated ticket machines. Christian Dorsey of the Economic Policy Institute, said that elimination of minimum wage laws would leave employers free to drive down wages as low as possible. But Stossel noted businesses hire employees in a competitive market, and it is that market that sets wages. Only about five percent of workers earn the minimum wage. Why do the others earn more than that? Competitive markets force employers to pay more, not laws.

A segment on “fancy stadiums” boosting the economy holds a lesson for Wichita and the Intrust Bank Arena in its downtown. The claimed benefits of these venues rarely appear, and the unseen costs are large — “at the local bar there’s one less bartender, there was one less waitress hired at a restaurant, a movie theater that had one less theaterfull. It’s handing money from your right hand to your left and declaring I’m rich.” While Wichita’s arena seems to be doing well, it’s still well within its honeymoon period. Even then, there was a month where no events took place at the arena.

A segment on the new credit card regulations, intended to protect consumers, shows that the regulations resulted in fewer people being able to get credit cards. Now these people have to go to payday lenders or pawn shops, which are much more expensive than credit cards. Arkansas once capped credit card interest at ten percent. The result was that few people in Arkansas could get a credit card, and the state became known as the pawn shop capital of America.

Ethanol is the topic of a segment. Promised as a way to solve our energy problem, many politicians of both parties support ethanol. But we’ve come to realize the problems with government support of ethanol: rising price of food, excessive use of fertilizer and fuel to produce corn, and an awareness that ethanol is more harmful to the environment than gasoline. “But it makes us feel good,” Stossel says. In Kansas, Governor Sam Brownback is firmly in favor of government support of ethanol, which Boaz called “pound-for-pound, the dumbest program ever.”

On the role of government in causing the housing bubble, Howard Husock said “Government exaggerates, rather than minimizes, the age-old impulse to greed. The government made it harder for bankers who wanted to do the right thing.” Stossel explained that bankers who wanted to stay with safe home loans lost out on profits they could earn selling high risk loans to Fannie Mae and Freddie Mac, the government-sponsored agencies.

At the end, Stossel said: “And that’s the number one promise gone wrong. These guys say they’ll be fiscally responsible. And then we elect them, and they spend more. They’re spending us into bankruptcy. There must be 10,000 harmful programs, and yet they keep creating more. Why can’t we cut them?” Boaz explained: “Every one of those 10,000 programs has a lobbyist in Washington. … They always know when the bill is up before Congress, and they send political contributions, they send people to Washington to lobby. The rest of us don’t do that. … People should be more engaged, people should be better citizens. But the fact is we have lives, and there’s no way that any normal person can know about the 10,000 programs that make up the $3.5 trillion federal budget.”

And so the programs keep growing, Stossel said, and we must pay their costs and unintended consequences forever — “Unless, there’s a new wind blowing in America. A new attitude, a new expectation that maybe Washington should do less. I hear there is. I sure hope so.”

Kansas and Wichita quick takes: Friday October 22, 2010

My best tweet yesterday. I just uninstalled the NPR News app from my iPhone. #NPR #Juan

Many have already voted. Wednesday Sedgwick County Election Commissioner Bill Gale told commissioners that his office had sent 63,000 mail ballots to voters in the county, and 20,000 had been returned. In the 2006 general election, a midterm election comparable to this year, 118,258 ballots were cast in Sedgwick County. Gale’s numbers tell us that around half of voters will use the advance voting system, and perhaps 17 percent have already voted as far as two weeks in advance of election day.

Goyle on defense pork barrel spending. Yesterday Kansas fourth Congressional district candidate Democrat Raj Goyle criticized Republican Mike Pompeo for not supporting a second engine for the F-35 fighter jet program. Goyle says we need to protect 800 jobs in Cowley county by approving this project. The problem is this federal spending program is not needed and wasteful. According to Forbes: “The problem General Electric and teammate Rolls Royce face is that both the Bush and the Obama administrations concluded the single-engine F-35 would do just fine with only one engine supplier. … Defense Secretary Robert Gates has decided to make termination of the second engine a test case of whether Congress is committed to eliminating waste.” Spending money on this jet engine that is not needed is the very definition of government waste. A question: If these jobs were not in the Congressional district Goyle is running in, would he support this project? If the answer is yes, he fails the Defense Secretary’s test for whether Congress is really ready to eliminate waste. If the answer is no, he’s already engaging in the type of pork-grabbing — getting anything and everything for the home district, no matter what the cost — that he purportedly disdains.

They do this too? Here’s another example of left-wing bloggers and writers claiming to have “uncovered” something that sits in plain sight. This time it comes from Think Progress, a project of the hard left — but innocently-named — Center for American Progress Action Fund, which in turn is a project of George Soros. Jonathan Adler explains at National Review Online: “Think Progress has a breathless post up today alleging they have uncovered the Koch brothers sinister plot to coordinate corporate, libertarian, and conservative donors to outside groups and think tanks. What they’ve actually uncovered is (horrors) an invitation-only conference of generally like-minded philanthropic and other organizations that likes to discuss issues and strategies and hear from prominent thinkers and commentators (including, on at least one occasion, NRO’s Ramesh Ponnuru and frequent contributor Veronique de Rugy). Think Progress acts as if this is some sort of revelation, but this sort of thing has been common for some time, particularly on the left. The Environmental Grantmakers Association is one example of an organizational umbrella for like-minded philanthropists that has sponsored closed-door conferences for strategy discussions, but there are others. The Kendall Foundation, Pew Charitable Trusts, and other specific funders have, at times, also taken very aggressive steps to ensure coordination by funders and grant recipients. I wrote about this fifteen years ago in my book on the environmentalist movement. Next thing Think Progress will tell us there’s gambling in Atlantic City.” By the way, the Wichita Eagle will rely on Think Progress as a source.

Does business favor free markets? Many people naively assume that business automatically supports free markets and less regulation. The Washington Examiner’s Timothy P. Carney tells us that this is not so. Writing about his speaking experiences at an event sponsored by Charles Koch, Carney writes: “I’ve often said — and I said it at the dinner — that privately held businesses tend to favor free markets, even when they get big; while publicly held businesses (like those on the Fortune 500), tend to want bigger government as often or more often than they want free markets, depending on the industry and who’s in power.” Carney lists a number of companies — BP, Conoco, Shell, and Wal-Mart that are in favor of more government regulation. Wal-Mart, for example, favored higher minimum wage legislation because it already paid higher wages than its competitors, and the new minimum wage would hurt them, giving Wal-Mart a competitive advantage obtained through regulation. Carney also makes the case that liberals don’t often realize that they’re being played: “This may be the most important point that folks like [left-wing bloggers] Zernike, Yglesias, and Fang miss: many of these businessmen could profit even more under the policies the Left favors than they do under the free market.” As it applies to Koch Industries specifically, Carney notes that strict regulation of refineries makes entry by competitors difficult to impossible, relying on the Los Angeles Times for evidence: “California refiners are simply cashing in on a system that allows a handful of players to keep prices high by carefully controlling supplies. The result is a kind of miracle market in which profits abound, outsiders can’t compete and a dwindling cadre of gas station operators has little choice but go along. Indeed, the recent history of California’s fuel industry is a textbook case of how a once-competitive business can become skewed to the advantage of a few, all with the federal government’s blessing.” I would add that in competitive markets, business firms must seek to please a diverse array of customers, and that’s harder to do than pleasing politicians and regulators.

Kansas politics in New York Times. Particularly the governor’s race. The article contains an accurate assessment on how things really work in Kansas, and should be noted by those who blame all of our state’s problems in Republicans: “But while Republicans dominate the State Legislature and the governor was once chairman of the state party, the reality about those who currently control Kansas is far subtler — the effective majority in the Legislature is a coalition of moderate Republicans and Democrats, while the governor defected to the Democratic Party.” See Kansas Governor’s Race Seen Redefining G.O.P.

Sedgwick County website still dark. Not exactly dark, but the county didn’t renew its domain name registration, and it expired. Usually these things can be cleared up pretty quickly, but for me it’s still out of order after about 24 hours. It works on my iPhone, though, but the county’s website is not friendly to use on mobile devices.

Energy to be topic at Wichita Pachyderm. Today’s meeting of the Wichita Pachyderm club will feature John A. McKinsey speaking on the topic “Cap and Trade: What is the economic and regulatory impact of Congressional legislation?” The public is welcome at Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club.

In Central-Northeast Wichita, government is cause of problem, not solution

From the November 2007 archives. Since then, the Wichita schools have a new superintendent, and Kansas has raised its minimum wage.

An article in The Wichita Eagle “Plan offers hope for city’s troubled heart” (November 14, 2007) reports on the development of a plan named New Communities Initiative, its goal being the revitalizing of a depressed neighborhood in Wichita. The saddest thing in this article is the realization that there is consideration of a plan for large-scale government intervention to solve problems that are, to a large extent, caused by government itself.

The article laments low high school graduation rates and the low proficiency in math and reading. We should make sure we remember that almost all these children have gone to public schools, that is, schools owned and run by government. Plans to improve public schools almost always call for more spending. While education bureaucrats do not like to admit this, spending on government schools in Kansas has been increasing rapidly in recent years. The results of these huge spending increases are just being learned, but it is unlikely that it will produce the dramatic results that are needed.

There is a simple solution to improving schools that won’t cost more than what is already spent, and should cost even less: school choice. In parts of our country where there is school choice through vouchers — or better, through tax credits — it is low-income parents who are most appreciative of the chance for their children to escape the terrible public schools. Further, there is persuasive evidence that when faced with viable competition, the public schools themselves improve.

In Kansas, however, there is little hope that meaningful school choice will be implemented soon. Although Winston Brooks, superintendent of Wichita schools, says he is open to competition and accountability, it is a false bravado. The political climate in Kansas is such that it is nearly impossible to get even a charter school application approved, much less any form of school choice with real teeth. (See What’s the Matter With Kansas, January 3, 2007 Wall Street Journal.) As the government schools consume increasing resources, parents find it even harder to pay taxes and private school tuition. So the government schools, responsible for graduates who can’t read and calculate, extend their monopoly.

A continual problem in depressed areas of cities is low employment. Government again contributes to this problem by creating barriers to employment, most prominently through the minimum wage law. People have jobs because their employers value the work the employees perform more than what they pay them in wages and benefits. When government says you must pay a higher wage than what the potential employees can contribute through their labors, these low-productivity workers won’t be hired. As the minimum wage rises, which it is on the federal level, it becomes even more difficult for the least productive workers to find jobs.

The reason that some young people find it difficult to get jobs is that they don’t have the education, training, or experience to be very productive at a job. While no one likes to work for only, say $3 or $4 per hour, working for that wage is preferable to being unemployed when the minimum wage is $6 per hour. While working for $4 per hour the worker gains experience at a specific job, and experience at holding any job in general. Soon, as workers become more productive, their wages will rise. Sitting on the sidelines not working or wasting time in a government job-training program does the workers no good.

The article mentions the plight of children whose parents are in prison. More generally, this neighborhood is plagued by crime and gangs. While I do not know the proportion of these people that are in prison for crimes related to drugs, it most surely is high. Gangs exist almost solely because of the trade in illegal drugs. The government’s prohibition of drugs, then, plays a huge role in the problem of crime.

The solution is to legalize drugs. Legalize all drugs, without exception. This should not be interpreted as an endorsement of drug use, as drug abuse is a serious health problem for many people. The health problems that drug abuse causes might even increase after legalization. But the crime problem would cease to exist. No longer would people be in prison simply because they are drug addicts. With legalization, the price of drugs would rapidly decline to perhaps the cost of a pack of cigarettes or a few cocktails each day. No longer would drug addicts have to raise several hundred dollars per day through crime. No longer would gangs find selling drugs profitable, and gangs would likely disappear, or at least move on to other endeavors. Do the owners of liquor stores shoot each other over turf wars, and do their customers engage in crime each day to pay for their fix of cheap alcohol?

The alternative to legalization of drugs is more law enforcement aimed at decreasing the supply of illegal drugs. This government action, if successful, has this consequence: by reducing the supply of drugs, it increases their price, thereby making it even more lucrative to deal in illegal drugs.

Then there is the government’s war on poverty. The economist Walter Williams recently wrote this:

Since President Johnson’s War on Poverty, controlling for inflation, the nation has spent $9 trillion on about 80 anti-poverty programs. To put that figure in perspective, last year’s U.S. GDP was $11 trillion; $9 trillion exceeds the GDP of any nation except the U.S. Hurricanes Katrina and Rita uncovered the result of the War on Poverty — dependency and self-destructive behavior.

In the same article:

There’s one segment of the black population that suffers only a 9.9 percent poverty rate, and only 13.7 percent of its under-5-year-olds are poor. There’s another segment that suffers a 39.5 percent poverty rate, and 58.1 percent of its under-5-year-olds are poor. Among whites, one segment suffers a 6 percent poverty rate, and only 9.9 percent of its under-5-year-olds are poor. The other segment suffers a 26.4 percent poverty rate, and 52 percent of its under-5-year-olds are poor. What do you think distinguishes the high and low poverty populations among blacks? … The only distinction between both the black and white populations is marriage — lower poverty in married-couple families.

In 1960, only 28 percent of black females ages 15 to 44 were never married and illegitimacy among blacks was 22 percent. Today, the never-married rate is 56 percent and illegitimacy stands at 70 percent. If today’s black family structure were what it was in 1960, the overall black poverty rate would be in or near single digits. The weakening of the black family structure, and its devastating consequences, have nothing to do with the history of slavery or racial discrimination.

Williams and Thomas Sowell, who have studied the issue extensively, conclude that it is government anti-poverty programs that are the cause of a permanent underclass. These programs should be canceled.

We see that government — through its poor schools, the raising of barriers to employment through minimum wage laws, the prohibition of drugs, and the culture of dependency and family disintegration supported by welfare — has been a contributing factor, probably the most important factor, in the decline of this neighborhood. It is foolhardy to believe that more government programs can reverse the damage already done by past and present government programs. While I’m sure that the intent of the New Communities Initiative and its coordinating members is noble, the reality is that government intervention is dangerous to the future of Wichita and to this neighborhood.

Who will watch for Kansas minimum wage victims?

Oops, there’s a mistake below. I’ve just been told the higher wage doesn’t take effect until January 1, 2010. So if this law is such a good deal for Kansas, I wonder what’s the reason for the delay until it takes effect?

Today, the new Kansas minimum wage law takes effect. It’s likely that as employers are required to pay their workers more, some will lose their job.

So now minimum wage supporters have a duty to perform. They need to watch for people who may lose their job and for companies that may close due to this law’s effect.

It could be the case that everyone in Kansas is already paid more than the new, higher minimum wage. If so, we wouldn’t expect to see any job loss. But if this is the case, why need for the law?

Higher minimum wage advocates need to be on the watch for workers who lose their jobs because of the effects of a law they agitated for. They are responsible for the plight of those who lose their job.

These unfortunate workers, unfortunate first because they don’t have skills that allow them fill jobs that pay good wages; unfortunate again in their role as sacrificial lambs for those who see social injustice through the fog of social liberalism; unfortunate again to lose their jobs during a recession — what are they to do?

Will the newspaper editorialists who supported the minimum wage seek out these people?

Will newspaper and television reporters feature their stories? It’s easy for reporters to find the workers who will be paid more when the new wage takes effect. Finding the newly jobless is more difficult. But their story is more important.

The unions who supported the higher minimum wage: will they help the newly jobless?

Hopefully no one will lose their job and no firms will close because of the Kansas minimum wage law. This is not likely, and finding the victims of the law will not be easy.

More background is at Kansas minimum wage and Kansas minimum wage at issue again. A collection of articles on this topic is at minimum wage.

Kansas minimum wage advocates now have a duty

A higher Kansas minimum wage has passed both houses of the Kansas legislature and is waiting for the governor’s signature. Now minimum wage supporters have a duty to perform. It’s likely that as employers are required to pay their workers more, some will lose their job.

Senator Dick Kelsey, originally opposed to raising the Kansas minimum wage, asked its supporters to introduce him to someone who actually earned that low wage. He never received such an introduction.

It could be the case that everyone is already paid more than the new, higher minimum wage. If so, we wouldn’t expect to see any job loss. But if this is the case, what is the need for the law?

Higher minimum wage advocates need to be on the watch for workers who lose their jobs because of the effects of a law they agitated for. They are responsible for the plight of those who lose their job.

These unfortunate workers, unfortunate first because they don’t have skills that allow them fill jobs that pay good wages; unfortunate again in their role as sacrificial lambs for those who see social injustice through the fog of social liberalism; unfortunate again to lose their jobs during a recession — what are they to do?

Will the newspaper editorialists who supported the minimum wage seek out these people?

Will newspaper and television reporters feature their stories? It’s easy for reporters to find the workers who will be paid more when the new wage takes effect. Finding the newly jobless is more difficult. But their story is more important.

The unions who supported the higher minimum wage: will they help the newly jobless?

More background is at Kansas Minimum Wage and Kansas Minimum Wage At Issue Again.

Kansas minimum wage: wrong questions

A recent letter in the Wichita Eagle asks these questions: “Who would work for $2.65 an hour? State legislators don’t get paid much, that is true. But would they work for $2.65 an hour? Would they send their sons or daughters to a job that paid that little?”

These questions are intended to stir up sympathy for low-wage workers in Kansas. It is, indeed, not a good situation when someone has such low productivity that they can’t command a very high wage.

But passing a law can’t fix that.

A related comment left on this blog asks these questions that help answer those above: “What do business owners do when their costs go up? They pass the increase along to consumers.”

This is not necessarily true, however. If business owners felt they could increase their prices, they would do so now, and earn greater profits. Generally, when prices are increased, sales go down. Demand for labor may decrease, too, and that’s a big problem for workers.

The writer claims that the 20,000 Kansans presently working for the Kansas minimum wage will have their lot improved if Kansas raises its minimum wage. That will be true for those who keep their jobs. Undoubtedly some, perhaps many, will lose their jobs. It would be a miracle if that didn’t happen.

The writer also asks “Why not let the poor have more money?”

This is a wrong question again. I don’t think anyone is against “letting” people have money. But for sustainability, wages have to be earned.

I’m sure this writer is genuine in his concern for law-wage workers in Kansas. Fixing this problem, however, requires steps that are harder to take than simply passing a law.

One way to increase workers’ productivity is through education. Unfortunately, there is ample evidence that our public education system is failing badly. Even President Obama said so last week, although his prescriptions for fixing schools don’t go far enough.

Capital may be a dirty word to some. But as the economist Walter E. Williams asks, what is the answer this question: who earns the higher wage: a man digging a ditch with a shovel, or a man digging a ditch using a power backhoe? The difference is that the man with the backhoe is more productive — and earns more, too. That productivity is provided by capital — the savings that someone accumulated and invested in a piece of equipment. That increases the output of workers and our economy. Workers can be paid more.

Education and capital accumulation are the two best ways to increase the productivity and the wages of workers. Ironically, the people who are most vocal about raising wages through legislative action are also usually opposed to meaningful education reform and school choice. They usually insist that more resources be poured into the present system. They also usually support higher taxes on both individuals and business, which makes it harder to accumulate capital. These organizations should examine the effects of the policies they promote, as they are not in alignment with their stated goals.

Kansas minimum wage

A group in Kansas is pressing for raising the state minimum wage. Will raising it help or harm low-wage earners? And are the policy goals — taken in their entirety — of the groups pressing for a higher minimum wage in the best interest of workers?

The great appeal of a higher minimum wage mandated by an act of the legislature is that it seems like a wonderfully magical way to increase the wellbeing of low-wage workers. Those who were earning less than the new lawful wage and keep their jobs after the increase are happy. They are grateful to the lawmakers, labor leaders, newspaper editorialists, and others who pleaded for the higher minimum wage. News stories will report their good fortune.

That’s the visible effect of raising the minimum wage. But to understand the entire issue, we must look for the unseen effects.

The not-so-visible effect of the higher wage law is that demand for labor will be reduced. Those workers whose productivity, as measured by the give and take of supply and demand, lies below the new lawful wage rate are in danger of losing their jobs. The minimum wage law says if you hire someone you must pay them a certain amount. The law can’t compel you to hire someone, nor can it compel employers to keep workers on the payroll.

The difficulty is that people with lose their jobs in dribs and drabs. A few workers here; a few there. They may not know who is to blame. Newspaper and television reporters will not seek these people, as they are largely invisible, especially so in the case of the people who are not hired because of the higher wage law.

If we are truly concerned about the plight of low-wage workers we can face some harsh realities and deal with them openly. The simple fact is that some people are not able to produce output that our economy values very much. They are not very productive. Passing a law that requires employers to pay them more doesn’t change the fact that their productivity is low. But there are ways to increase productivity.

One way to increase workers’ productivity is through education. Unfortunately, there is ample evidence that our public education system is failing badly.

Capital — another way to increase wages — may be a dirty word to some. But as the economist Walter E. Williams says, ask yourself this question: who earns the higher wage: a man digging a ditch with a shovel, or a man digging a ditch using a power backhoe? The difference between the two is that the man with the backhoe is more productive. That productivity is provided by capital — the savings that someone accumulated (instead of spending on immediate consumption or taxes) and invested in a piece of equipment that increased the output of workers and our economy.

Education and capital accumulation are the two best ways to increase the productivity and the wages of workers. Ironically, the people who are most vocal about raising wages through legislative fiat are also usually opposed to meaningful education reform and school choice, insisting on more resources being poured into the present system. They also usually support higher taxes on both individuals and business, which makes it harder to accumulate capital. These organizations should examine the effects of the policies they promote, as they are not in alignment with their stated goals.

Kansas minimum wage at issue again

In Kansas, some want the state’s minimum wage to rise to match the federal minimum wage. The Lawrence Journal-World reports on this in its story Lawmakers asked to increase state’s minimum wage.

This issue has been covered on the Voice For Liberty in Wichita in several articles:

Unintended But Foreseeable Harms of the Minimum Wage
Minimum Wage: Helpful? Or Not?
Problem of Low Wages Not Easily Solved
The Descent of The Good Column