Minimum Wage

The minimum wage debate has emerged. It appears that every few years there is an outpouring of support to increase the federal set minimum wage. When President Obama announced they he was going to increase the federal minimum wage for government contractors, he set the stage for increasing the minimum wage for everyone. Through executive action, President Obama increase the wage for contractors to $10.10/ hour. When that number is extrapolated out, the least amount of money someone could make for working full-time (40hr work week) is just over $21,000 a year[1]. This isn't to bad for those who are most likely at the beginning of their working career or do not possess the skills to demand higher wages.

The framing of the debate is largely a myth. When you hear about people earning minimum wage by politicians, they typically throw out an example of a single parent trying to raise a family on minimum wage. What typically isn't revealed is that is almost never the case. According to a paper written by Mark Wilson, a former deputy assistant secretary of the US Department of Labor, the percent that fits the description of over 25, making minimum wage, and trying to raise a family is 4.7%[2]. That is not what is largely talked about on campaign trails. When listening to politicians campaigning they typically throw out some excellent one liners about how they will improve quality of life, or income equality. However, this ignores much of the debate and is used to get support from the voting public.

When you look at the entirety of the labor force, the total percentage of people making these low wages is less than 3 percent[3]. According to a report conducted by the Mercatus Institute, the largest group making minimum wage are those working in the food industry. Tracking their income becomes difficult because there is an incentive for not reporting cash tips. If an employee doesn't report their cash tips, the company must pay them at least minimum wage, but they will have earned more due to the unreported income. If the majority of those who work in food industries do not report all tips and make more than minimum wage, the percentage of the population making those wages decreases to 1.6 percent[4].

Many people seem to make it sound like if there wasn't a minimum wage, then people would be making next to nothing. But this ignores the fact that competition between companies drives wages, not the federal government. If it was the law that drove wages, you would expect that a large portion of the working population would make minimum wage. However, when you see that the high estimate of the minimum wage earners is 3%, that means that 97% of workers are earning more than the mandated minimum. Evidently it isn't the law that sets the wages, but competition between employers to hire those with the best skills.

In the Mercatus study, reference is made to one of the most famous empirical studies on the effects of a minimum wage increase. Card and Krueger's study on the effect of restaurant workers who had their wages increased in the state of NJ and PA showed no negative effects on unemployment. Surprisingly, according to their findings, employment figures actually increased after the minimum wage was increased. This sounds too good to be true, and in fact, it is. The methodology used in their study was flawed. Instead of using payroll information to measure the amount of minimum wage employees, they conducted surveys of management. They asked about employees, and their hiring decisions before and after the wage increase. So, they never actually measured real employment numbers, just intentions.

While trying to recreate this student, economists Neumark and Wascher targeted the same area as the Card/ Krueger study. Instead of using survey's though, they used the payroll data and found a large difference between their study and Card/Krueger. In the Neumark/Wascher study, they found what many classical economists expected, after the minimum wage increase, employment decreased[5].

The Mercatus study looking at all these different studies ran their own analysis of the unemployment figures in the state of New Jersey. NJ was planning at that time to increase its minimum wage by $1 per hour. According to the conclusions of the study, for those who do not have a high school education, unemployment is expected to increase by approximately 2 percent, those without a diploma, 1 percent. Those who have college degrees there will be no effect. This fits with the conventional wisdom that raising the minimum wage results in penalizing low skilled workers.

With the current state of the economy as a whole and the level of unemployment we are currently experiencing, an increase of the federal minimum wage is exactly something we don't need right now. Given that there is a correlation between increased minimum wage and a decrease in low skilled employment, increasing wages will only hurt low skilled workers. Also, with the youth unemployment figures already high, it will only make things worse.

In the words of Milton Freidman, when government institutes a minimum wage "employers must discriminate against people who have low skills." This is clearly demonstrated with empirical analysis.

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[1] $10.10 x 40 x 52 = 21,008

[2] http://www.downsizinggovernment.org/sites/downsizinggovernment.org/files/pdf/negative-effects-minimum-wage-laws.pdf

[3] http://mercatus.org/sites/default/files/unintended-consequences-raising-minimum-wage.pdf

[4] Ibid

[5] Ibid p.15

The Daily News Byte

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Washington Examiner: Obama to Talk About Climate Change

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Cato: 9th Circuit Recognizes Right to Bear Arms

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Thomas Sowell: Random Thoughts

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FoxNews: California Wants Warning Labels on Sugar Drinks

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The Hill: Dems Look to Force Republicans on Minimum Wage

                As I've been saying from the beginning of this debacle, it wasn't going to be long until pressure was applied to Congress to make increase the minimum wage. The President played a great political move because now the democrats are shown as helping the 'little guy' by increasing wages for some, and they have thrown the ball into the republicans court to do the same. The democrats are already putting their strategy together for how they are going to get a wage increase through the House. The idea of raising the minimum wage is already popular with much of the country and the republicans will be painted as unsympathetic if they don't increase the wage. Also, the accusations will be made that federal contractors make more money, don't you think the average American should make the same?

The Daily News Byte

Politico: Debt Ceiling Vote

                The Senate took up the debt ceiling vote and passed the increase. When the measure came to the Senate, Sen. Ted Cruz opposed the matter and required a 60 vote threshold for the bill to pass. With that, Senate Minority Leader Mitch McConnell pressured numerous republican Senators to break the filibuster Cruz was using. The vote was 67-31 to allow the measure to advance. The Senate then passed the bill 55-43, along party lines.

Politico: Obama raises minimum wage for federal contractors

                During the Presidents SOTU speech he talked about increasing minimum wage for federal contractors.  He has now officially signed that order. The President has already started putting the pressure on congress to match his rate increase for all Americans. The President urged Americans to call their representatives and urge them to vote to increase the minimum wage. Along with his encouragement for congress to act, he is claiming that by increasing wages for contractors he is forcing them to become more efficient and claims the government will not increase contractors' funds to absorb the higher wages. So not only is the president telling those contractors what to pay their employees, but is also telling the company that they have to pay more to their employees but won't receive additional funds. This formula seems like it will mostly backfire causing people to lose their jobs due to increased cost but no additional revenue.

The Hill: Dems seek help from IRS

                With the expectation of a difficult election this year, vulnerable Democrats are looking to the IRS for help. They are directly asking the IRS to investigate groups like Americans for Prosperity, and other private spending groups, to ensure they are not violating any tax laws. Essentially, they are going to use the threat from the IRS to drain resources and find any sort of tax violation. Also, the Treasury department is looking to adjust what is considered political activity, such as voter registration or mentioning a candidate's name in an ad. Amazingly, this is all being done in the open even after the scandal that the Tea Party has been the object of IRS attacks. Democrats are now doubling down on these efforts.

Cato: Obamacare Delay

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Zero Hedge: Savings confiscation

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Washington Post: Obamacare enrollment hits target

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The Daily News Byte

Politico: House passes Debt Limit extension

                Today the House of Representatives passed a 'clean' debt ceiling extension.  With most of the Republican party voting 'no' on the extension, Boehner was able to muster up enough votes from the leadership of the party to get the bill passed. With each passing day it's evident that the Republican party leadership are just Democrat light.

Zero Hedge: Debt limit Vote

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NYTimes: Yellen promises more of the same

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Zero Hedge: Economic Fallacy

                If you're interested in a bit of a rant, this is your article. A guest post on ZeroHedge dealing with the state of economic fallacies we encounter daily. There is a good bit of quoted economists, such as Henry Hazlett. Enjoy.

Washington Post: Syria

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Zero Hedge: American Imperialism and how to dismantle it

                A guest post by Laurence Vance, from the Mises Institute, about the current state of American foreign policy. Since the Snowden leaks, more and more information has come to the surface in regards to NSA spying of foreign nations. Vance decides we need to go back and take a Jeffersonian approach to our foreign policy.

Politico: Rand Paul sues Obama, NSA

                Rand Paul, the leading non-interventionist in the House, is suing the President as well as the NSA for violating the 4th amendment. Paul cites that the 4th Amendment protects the American people from general warrantless searches.

The Daily News Byte

Republicans feel that they can regain the Senate

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ZeroHedge: WaPo praises job freedom and unemployment

With the recent news the Obamacare will cost labor productivity but will give workers freedom from their employer based insurance, the Washington Post is seeing this as a good sign. It appears we have reached a state of utopia when someone can work less hours but get better benefits! Oh wait, that's more like socialism and those benefits will be worse. Also, check out the graph and see how insane the welfare state has become in PA.

The Hillary Papers

Recently, David Petraeus  was credited with saying that Hillary would make an excellent president. Now, reports are coming from private correspondence that show Hillary to be ruthless. Here are included specific instances of Hillary's lack of compassion.

NYTimes: The Case for Higher Minimum Wage

This is an op-ed piece explaining that increasing the minimum wage is good for the economy. According to the article, one of the main purposes of minimum wage is to help the low wage workers gain bargaining power. This seems a little backwards because the ones who hold the power are the employers since they can simply not hire someone or hire less people due to the requirement for increased wages. The Times cites a Berkley study on the effects on minimum wage on Restaurant workers that found no decrease in employment from upping the wages, but " In other words, these estimates suggest that the policy is not useful for raising the earnings of low-wage workers, as the disemployment effect annuls the wage effect for those who are still working."

Hoover Institution: Right Minimum Wage? Zero

Cato: The Negative Effects of Minimum Wage Laws

The Daily News Byte

Republicans and Democrats fight about Obamacare

                Ever since the release of the CBO's budget outlook, Republicans and Democrats have been cherry picking whatever they can spin to make themselves look good. Republicans are picking up on the reduction in labor force participation while Democrats are focusing on people's freedom from employer based health insurance.

CBO Jobs Report

                This is the actual CBO budget outlook report. Since both parties are trying to spin it in their own favor, the best thing to do is actually read the report.

Boehner hit from the right on Immigration

                Immigration reform is coming up against constant opposition. In Speaker Boehner's most recent bid, The Heritage Foundation and Heritage Action were deeply involved in stopping any sort of reform. Conservative groups do not believe anything can be accomplished at this point in time because there is little trust in the President.

Heritage advises putting immigration reform on hold

                With President Obama not enforcing the current immigration laws, the Heritage Foundation is asking why the people should trust him to make real reforms. It's pointless for the House to come together and try to make changes when the Executive won't enforce the existing laws.

NSA reducing amount of monitored calls

                According to numerous reports, the NSA is only able to track around  one third of all US calls. This number is drastically reduced due in large part to the shift from landline phones to cell phones. The President has tasked the NSA to make some adjustments to their data gathering program to help protect civil liberties by not allowing the NSA to store records. The ACLU, however, isn't reassured by these measures.  And in all honesty, can we really trust these people? You know, the ones who lied to congress.

Next logical step for CVS: Ban Soda

                CVS recently announced that it will no longer sell tobacco products.  Because CVS sees itself more as a pharmacy and are more concerned with health, they see it contradictory to provide  medicine and tobacco. Now, according to an opinion piece in the Boston Globe, the next logical step is to attack sugar. This means banning soda, candy, energy drinks and more. I'm sure local businesses are loving this decision.

President Obama doubles down on Executive authority

                President Obama made the claim again that whenever he can use his executive authority on economic issues, he will. According to the President, stagnant wages for the middle class and increasing profits for the rich are not acceptable in the American economy. He promises to do everything within his power to build an economy that is fair and provides more opportunity.  I guess for Obama his title isn't just Commander in Chief, it's also Economic Advisor in Chief.

The only question that matters

Last night the President made his State of the Union address to Congress and the nation. Many have been focusing on either what the President said or didn't say in regards to policy prescriptions. Democrats are unhappy in part with the President because they believe his goals were not ambitious enough. Republicans are upset with the President because they saw his address as an unprecedented expansion of Executive authority.

The President essentially told the American people that the only election that matters is the one for the presidency. With statements made by Obama about going around Congress he has essentially nullified the voice of the American people. Congress is that voice. It allows the minority a seat at the federal government table. Obama has essentially decided those people no longer matter because he has granted himself the authority to go around Congress with executive orders. It started with the minimum wage hike for federal contractors and exploded from there in his SOTU speech.

At this point there is only one question that really needs to be answered, where is the limit of executive authority? The President's commitment to a "year of action" sounds good to those who agree with his policies, but to those apposed it sounds like he is shutting down the honest debate this country needs. With this new found attitude, where will he decide to draw the line and say that Congressional approval is necessary? To me it sounds like, if the President deems it necessary for the benefit of the economy he can just sign an executive order.

When the President decides to go around Congress for the sake of helping the people, he is actually doing exactly the opposite because the people elected the Congress! He is enacting his own policies based off his political ideology and desire for power, not based on what the people at large want. This is why Congress is given the authority to craft legislation, they are a more accurate representation of the nation. When one man decides to circumvent that group he becomes a dictator.