Tag Archives: Minimum wage

Los Angeles Welcomes the Robots

I weep for Los Angeles. The “fight for 15” has made it to the LA City Council and is now poised to pass, setting the stage for a $15 minimum wage by 2020.

Progressives are celebrating of course, but thankfully there are some who understand that this is a bridge too far. Both Jordan Weissman and Danny Vinik of Slate and The New Republic respectively expressed reservations about such an exorbitant hike in the minimum wage, despite their favorable stances on progressive and union economics. Weissman frets that the available economic research “doesn’t really tell us anything about what happens because of an increase along the lines of what Los Angeles is now poised to pass,” while Vinik worries that “this isn’t a small hike and the employment effects could be significant.”

They are right to worry even as they celebrate the effectiveness of the “grass roots” (scare quotes for the fact that this is entirely a Big Labor driven initiative) campaign to agitate for a higher wage. Where they go astray is in their reliance on the “research” of experts and economists because as anyone paying attention knows, an economist or think tank or lobbying interest can produce the research they want to bolster support for a given policy. Data manipulation and rosy projections of a policy’s impact are the rule rather than the exception in Washington. An army of experts is just as fallible as an army of the first four hundred names in the Boston phone book, and in fact most of us would opt for the latter. Instead, progressives are never going to face reality unless they are forced to reckon with their glaring failures.

Fortunately, they seem to think that skepticism of the $15/hr minimum wage is just noise coming from conservative scolds who hate poor people. This kind of dismissive arrogance is going to be their undoing. Whereas Detroit and Baltimore and most major American cities under the thumb of one party Democratic rule took decades to succumb to the market distortions and bad incentives that go hand-in-hand with progressive economics, Seattle, San Francisco and Los Angeles – all who have adopted $15 minimum wages – are going to crater much faster if they adhere to utopian visions of egalitarian societies brought about by coercive meddling in the most basic and essential of all economic tenets: supply and demand.

It still boggles the mind that we have to keep repeating this, but if you arbitrarily hike the cost of labor, an equal and opposite reaction is inevitable. Either the employer will reduce his suddenly higher (doubled!) labor costs by reducing the amount of labor generally (i.e. layoffs) or he is going to raise prices to account for higher costs. That means $7 Big Macs sold through electronic kiosks. In fact it means a whole lot of robots replacing a whole lot of humans as employers find it cost effective to install automation in place of low-skilled workers making $15 an hour. Progressives seem to believe that costs can be magically deferred, or else ignored altogether. This juvenile, childish, ignorant view of the market explains how so many call for companies to pay their employees double what they earn now, because they can “afford” it.

One question: when did we cease treating fast food jobs as the entry level, foot-in-the-door opportunities that they are and instead as vocations in need of proper benefits?

I almost wish the LA measure took effect immediately, as I am eager to get this experiment underway and then over with, as it is going to be anything but pleasant for the residents of my beloved home town. $15/hr is insane. You’re going to see franchises hightailing it to Nevada and Arizona, a massive spike in unemployment, and a huge influx of robots. Remember when George H.W. Bush was raked over the coals for being in awe of an grocery store checkout automation? Prepare yourself for legions of frustrated people whose exasperation at encountering machines and kiosks in every store is compounded by the fact that everything is twice as expensive as before. Progress!

Obviously LA has some time before they implement this folly, so there is hope that someone with sense will get the ear of the city council during the next five years. And as Megan McArdle explains in her warning for Los Angeles, most noticeable impacts from minimum wage distortions tend to take a while:

When the minimum wage goes up, owners do not en masse shut down their restaurants or lay off their staff. What is more likely to happen is that prices will rise, sales will fall off somewhat, and owner profits will be somewhat reduced. People who were looking at opening a fast food or retail or low-wage manufacturing concern will run the numbers and decide that the potential profits can’t justify the risk of some operations. Some folks who have been in the business for a while will conclude that with reduced profits, it’s no longer worth putting their hours into the business, so they’ll close the business and retire or do something else. Businesses that were not very profitable with the earlier minimum wage will slip into the red, and they will miss their franchise payments or loan installments and be forced out of business. Many owners who stay in business will look to invest in labor saving technology that can reduce their headcount, like touch-screen ordering or soda stations that let you fill your own drinks.

This is right, but it is a summary of what typically occurs with small increases in the minimum wage. LA and Seattle and San Francisco are each flirting with stratospheric wage hikes, on the order of 80-100%. Thus, all of the symptoms and reactions by business McArdle outlines will still occur, just much faster. You will see major layoffs, major automation and major corporate flight from Washington and California if these states don’t wise up and walk back these wage increases. I assume this is what will happen, especially once politicians start getting browbeaten by their preferred business interests as well as by their less well off constituents suddenly faced with soaring prices for food and basic essentials. But all this does beg the question: why are they doing it?

Unions. By raising the minimum wage unions enjoy a higher corresponding wage floor from which to bargain in the future. Once a minimum wage is set, it affects contractors across the economy. Bids for public and private sector work must compete with union wage edicts to have any chance at the bid. This serves to crowd at smaller competitors and secure easy access for unions. And it similarly lifts the baselines for pension and benefit negotiations in addition to wages. In short, every single minimum wage initiative in America is about fattening the pockets of unions at the expense of the working poor, who are doubly affected by this union greed in the form of higher prices and fewer available jobs.

But we’re supposed to cheer on the “Fight for 15” and take to the streets to rail against corporate greed. But who is being greedy here? Somehow this mosaic of heroic workers in solidarity loses some romance once you realize they are just props for a larger union agenda, one that doesn’t give an actual damn about poor people or jobs. Unions by and large live by the wisdom of Michael Mulgrew, the former president of the New York United Federation of Teachers, who said

“If someone takes something from me, I’m going to grab it right back out of their cold, twisted, sick hand, and say it is mine. You don’t take what is mine. And I’m going to punch you in the face and push you in the dirt.”

Beautiful. It is also the prevailing wisdom of unions and the Democratic Party. This same sentiment animates progressive objection to reforming the welfare state or anything to do with public pensions. Same with cutting federal spending or eliminating waste. Right now the Ex-Im Bank is close to going the way of the dodo, something all of us on the free market right are cheering with heightened enthusiasm since it will be the first actual elimination of a federal anything in as long as I can remember. This worthless avatar of abject cronyism purports to serve America’s economic interest by providing taxpare loans to companies that deal heavily in exports. In practice the bank is an unfair bonanza for two large companies, Boeing and GM, who enjoy protection from smaller competitors without crony access to the bank’s largess. Conservatives and libertarians in Congress are close to declaring victory by not renewing the bank’s charter. Democrats are threatening to walk from the trade deal if Ex-Im is not renewed. What a farce of a position that is for a party purporting to stand against cronyism and speak for the little guy. Ex-Im is most definitely not about the little guy, rather it is federal bank for handing out favors to connected corporations. Not even Elizabeth Warren will allow it to expire, proving how sincere she is about reducing the incestuous and toxic relationship between big business and big government.

In the end, when it comes time to let a useless federal program sunset, the left rallies in unison to condemn it as heartless and bad for the economy. Because for the left, anything that reduces government at all is bad for the economy. The inverse of never wanting to allow government programs to disappear is always wanting to make more government appear, which is thew motivation behind the “fight for 15.” This is all about expanding union power and reducing private commercial autonomy in the market. The result will be more robots and less humans in the workplace.

While it is possible that Brett and Jermaine might welcome the robot revolution, the rest of us will be screwed. Straighten up, Los Angeles.

 

Minimum Wage Dishonesty

The left’s dishonesty on the minimum wage is reaching criminal proportions. This morning NPR did a report that said essentially: “In response to the CBO report showing that half a million jobs would be lost [jobs for the poor and unskilled], the Obama administration issued a report citing seven Nobel winners and almost six hundred economists saying that minimum wage hikes have almost no effect on employment.”

Well then! I’m sold! Six HUNDRED economists plus a whole SEVEN Nobel laureates?!?!? Egads, how could anyone so much as question the eminent wisdom of such renowned geniuses? Except, the Nobel awarded the Peace Prize to Obama in his first year in office. When it gave Hayek a Nobel in economics in ’74, it awarded one to a socialist economist the same year. I’m sorry, any organization that recognizes a socialist and free market economist in the same year or gives the Peace Prize to a president based on reputation and rhetoric is an organization not to be taken seriously. And what of the six hundred economists? Well, it could be six hundred Paul Krugmans and Jared Bernsteins which, along with 5 bucks can get you a cup of coffee. These are economists of the left, and they have a political agenda to sell, not an economic analysis to be taken with any kind of seriousness.

But this is just what the left does. “97% of scientists…” “600 economists…” Consensus! Um, consensus among a bunch of like-minded hacks with a political agenda, more like it. The simple fact is the minimum wage hurts the poor, which hurts minorities, and the left is terrified of being exposed on this, thus the asinine claims that a whole bunch of really very smart and wise and not in any way prone to politics people say the minimum wage is all good and magically doesn’t involve trade offs or increase the price of labor.

The only thing worse than the purveyors of this transparently self-serving political propaganda masquerading as “science” or “economics” is that so many people buy it. Remember when the CBO reports that Obamacare would lower deficits and costs were treated as gospel truth (and the only reason the CBO issued those reports was through using the inputs and data provided to them in the Democrats’ assumptions and models)? Well now that CBO looks at some hard data and pisses all over a left wing talking point, it must be refuted, and the way the left refutes things that contradict their propaganda is to trot out the Nobel winners and the “six hundred economists” trope.

It is willfully dishonest and malicious. Even more, it exposes the left’s indifference to the actual plight of poor and minorities, the constituencies most affected by the shrinking labor markets that are the result of minimum wage increases. The left’s hypocrisy on race is manifest in many things (resistance to choice in education being the biggest), but on the minimum wage it is so glaringly obvious and yet they are never called on it. Here we have the CBO, typically the sainted institution upon which all controversial policy is to be settled (so long as the data supports leftist propositions), stating unambiguously that jobs for the low skilled and poor are going to be adversely affected in exchange for some extra benefits going to the non-poor, and the left is in full spin mode and doing all they can to call bullshit on the same CBO they normally love. They have to do this in order to avoid looking like a bunch of hypocrites who are indifferent to the plight of the poor. Which is exactly what they are. The history of labor unions is of a movement meant to crowd out poor and minority workers so that middle class blue collar workers could avoid labor competition through the establishment of wage floors. And the left is still doing this with the minimum wage, a policy that negatively affects African-Americans.

And almost no one calls them on it.

The Progressive Agenda: 2014

Not since Toto pulled on the curtain has one been so exposed. If the dramatic reveal of the wizard as a fraud and a liar shocked the audience, President Obama’s unmasking in 2013 only served to confirm its suspicions. For anyone paying attention, Obama has always been a dishonest broker, someone who cynically marginalizes and defames his opposition while countenancing no accountability of his own. But for a majority of Americans Obama was a noble if flawed man whose great ideas were subject to continual and unprecedented “obstruction” from his “enemies.” The rollout of Obamacare shattered the president’s reputation as honest and trustworthy and shredded what credibility Democrats had left. Amid the euphoria of government shutdown fallout redounding negatively for Republicans, progressives believed the “fever” of their opposition would break and the public would be eager to put liberals back in charge of the House of Representatives after seeing such extremism undertaken by conservatives. What actually transpired was the stuff of progressive nightmares rather than the wet dream of unopposed politics they promised themselves. The entire progressive agenda was suddenly in jeopardy, all due to Obamacare’s inconvenient flair for highlighting government incompetence. But where sane and sober-minded people would use this moment of intense adversity as an opportunity to take stock and reevaluate their agenda and look for fixes where their policy went off the rails, progressives are seemingly stuck in a perpetual Gene Wilder-Richard Pryor movie where deafness and blindness are the only possible explanations for their agenda moving forward. If nothing else, the progressive agenda for 2014 amounts to that kind of comedy.

So let’s dive in to the morass and swim in the muck and dredge up some more mixed metaphors to convey how gross and icky the progressive agenda really is.

Before we outline what it actually will consist of, let’s establish what the progressive agenda would look like if Democrats were to control the government as they did in ’09-’10 with no pertinent legislative opposition. Obviously there would be a spate of tax increases on the wealthy as the first order of business, followed immediately by a laundry list of new regulations to be enforced by a phalanx of newly hired bureaucrats. Domestic energy production would finally meet its maker and become the stuff of legend and nostalgia. A stimulus at least double the size of the first would undoubtedly be spent on bullet trains and public union pensions while card check and compulsory union membership gain momentum after a federal law or ruling or edict explained that government’s hostility towards employers was really just about “fairness.” And entrepreneurs should be content to outsource their HR to Washington and better not complain of anything so quaint as a loss of autonomy or agency. The government knows better than the employer how to manage the personnel of the employer’s enterprise, naturally. Universal preschool, blanket amnesty for illegal immigrants, comprehensive student-loan forgiveness, aggressive expansion of transfer payment programs and social obsessions like gay marriage, abortion rights and the comprehensive banning of things people enjoy are items on the progressive wish-list that have no chance of materializing without an iron-clad Democratic grip on the Congress.

Since Democrats are not going to regain the House of Representatives next November, and in fact quite likely are going to lose the Senate, the reality for the progressive agenda in ’14 is not encouraging. Having heretofore shown exactly zero interest in working with or even trying to understand its opposition, progressives are clearly not inclined to begin constructive dialogue with conservatives now. Were they to harbor genuine intellectual curiosity instead of demonizing their opponents, progressives would discover that we don’t in fact wish to wage a war on women or consign the poor to starve in the streets. Compromises that served the national interest rather than the short-term sustenance of our ruling elites could actually emerge. This would only be possible if the political party most enamored with demagoguery and cynicism morphed into one that cherished tolerance; not just of physical attributes in people, but of ideas and ideology as well.

Thus the agenda does not include anything resembling an olive branch to Republicans because how could the progressives champion a policy that has any buy-in from conservatives? The right is the enemy and so the powerful tribal sensation one gets from knowing and identifying the enemy is enough to keep millions of deluded Americans in the progressive herd. Progressivism is essentially a cause; against injustice and unfairness. Every cause needs a villain, and to progressive eyes there just so happens to be a perfect nominee perpetually auditioning for the role.

Sometimes the villain succumbs to the righteous outrage. Here are three agenda items I expect the progressives to agitate and whine about this year, as they hope to shame Republicans into action using cheap appeals to emotionalism.

Immigration

Both sides of the debate largely disgust me on this issue, as the right too often traffics in apparent xenophobia while the left doesn’t even try to conceal that their true intention is to legalize large swaths of future Democratic voters. As a libertarian I subscribe to the freedom of movement concept, in which humans are free to live their lives according to their own dictates, location among them. As a Texan I subscribe to the realist line that the border cannot be fenced or walled, nor should it be, practically or morally. The border from Tijuana to Laredo is nearly two thousand miles of rough desert and river terrain; not exactly talking about Jerusalem or Berlin here where walls have succeeded in partitioning societies and elevating misery and contempt for those on the wrong side as a result. A fence is just not practical, and any conservative who clamors for one is either ignorant to the details or overtly hostile to Latino immigration. This is not to say that “open borders” is the answer either, utopian and perfect as they would be in theory. We should embrace a lenient and welcoming immigration policy that commits itself anew to the rule of law. The driver of conservative immigration anxiety is the current progressive inclination to view the law the way a card shark views a slot machine: as a quaint relic that only rubes concern themselves with. In the wake of Obamacare, the likelihood of another multi-thousand page piece of legislation that no one understands getting through Congress is identical to my chances of marrying Natalie Portman. When a majority of the country believes the president and his party are dishonest actors and are still simmering hot over being lied to about their medical circumstance, there is no way they are going to enlist the same incompetent government to manage a gargantuan immigration overhaul, because they just won’t trust the government to obey whatever the law says.

Minimum Wage

The minimum wage movement is bubbling up once again among progressives who think Elizabeth Warren is awesome and believe Bill DeBlasio is magically going to turn New York into an egalitarian fairy tale. Rags from Slate to The New Republic to Salon have all recently jumped on the bandwagon with pieces claiming that the minimum wage increase is “good economics.” How does one escape this Bizarro World in which people are allowed to state such lies without repercussions? There is simply no good economic reason for the minimum wage to exist, let alone increase. An increase in the cost of labor necessarily means an increase in prices or a decrease in labor, unless the employer is a progressive altruist who abhors profit and enjoys losing money. The cacophony that will ring from coast to coast about the minimum wage in 2014 is probably a precursor to the even more hilarious progressive fantasy desire of a federal living wage for all. You know, the one where the government just gives every American a check? The logical endpoint of every slapdash progressive economic scheme is just more redistribution. Forced egalitarianism, also known as totalitarian socialism. The proggies will get back to their native ideological foundation eventually; just give them time.

Climate Change

If progressives think they have an ace card to play in 2014, it will likely come from their climate change fear-mongering deck on issues like fracking and the Keystone XL pipeline. Following the same playbook used to gin up angst about inequality, progressives will deploy apocalyptic language flanked by a hodgepodge of unintelligible and misleading data in order to confuse and distort the issue to the point that it feels morally bankrupt to stand opposed. Hammering dystopic visions of melted ice caps and smoldering hellscapes into the collective subconscious of the population is bound to raise the urgency of climate change in the mind of the average voter. And to the unwashed ranks who remain stubbornly unconvinced that a massive warming of our planet is even occurring, let alone merits an alarm call for radical global economic makeover, the cult of climate belittles us and points haughtily at their sacred “consensus.” Science is supposed to be about inherent skepticism and prolific experimentation; consensus is what matters to a group of friends debating where to have lunch. That “95% of scientists agree…” on anything as mysterious, unpredictable and unknowable as the Earth’s historic climate patterns is enough to pronounce their consensus wrong. Because there simply cannot be consensus on this issue, at least not without political and monetary motivations. At this point I think it quite uncontroversial to assert that with the fall of the Berlin Wall in 1989 and the crumbling of Communism as a viable governing ideology, it is no coincidence that we see the rise of environmentalism so soon on the heels of the collapse of communism. For all the pomp and celebration by free marketers at the end of the Soviet Union (Francis Fukuyama wrote The End of History in ’89 – a bit prematurely – to aggrandize the triumph of capitalism and liberty the world over) the allure of collectivism did not die. Instead it found a new home in the burgeoning environmental movement. And almost every initiative of the greens and the radical environmentalists consists of moving the planet incrementally toward global governance on emissions, regulations and taxation, a communist aim if ever there was one.

Fortunately, the green movement remains rather impotent. Bill McKibben draws headlines for silly stunts like chaining himself to the White House fence to protest Keystone, green groups are disconcertingly influential within the EU and UN, and Al Gore is still somehow respected. But overall the movement is listless and creatively challenged: if protesting a pipeline and the hydraulic fracturing of natural gas (both of which are cleaner technologies than coal and more efficient than renewables) are the best the environmental movement can come up with, I’m afraid they’re dooming themselves to a constant state of pissing into the wind.

Still, they’ll bring all their righteous anger and sentimental nonsense to the fore in 2014. I don’t think it will matter though, as climate change is the least likely of all progressive projects to move out of Congress this year. Republicans could ostensibly get browbeaten into some kind of motion on immigration and minimum wage, but not on climate. My money is on none of the above seeing any legislative action this year, but you can set your watch to the fact that the progressives will surely try.