Coyote Blog

When a country

• Increases the minimum wage, and therefore the minimum skill / productivity needed for a job
• Adds substantially to the costs of labor through required taxes, insurance premiums, pensions, etc
• Makes employees virtually un-fireable, thus forcing companies to think twice about hiring young, unproven employees they may be saddled with, good or bad, for decades
• Puts labor policy in the hands of people who already have jobs (ie unions)
• Shift wealth via social security and medical programs from the young to the old

It gets this

The bitterly ironic part is that when these folks hit the streets in mass protests, it will likely be for more of the same that put them there in the first place.

 
Want to argue that such policies are hurting workers rather than helping?  Good luck, at least in Italy

Pietro Ichino, a professor of labor law at the University of Milan and a senator in the Italian legislature, is known as the author of several “neoliberal” books and studies recommending that the Italian government relax its extraordinarily stringent regulation of employers’ hiring and firing decisions. As Bloomberg Business Week reports, that means that Prof. Ichino must fear for his life: “For the past 10 years, the academic and parliamentarian has lived under armed escort, traveling exclusively by armored car, and almost never without the company of two plainclothes policemen. The protection is provided by the Italian government, which has reason to believe that people want to murder Ichino for his views.”

Memo to US:  Don’t get cocky, you are going down the same path

 Update:  Interesting and sort of related from Megan McArdle

An apparent paradox that frequently puzzles journalists is that Europeans work fewer hours than workers in the United States, while in some countries, hourly productivity appears to be the same, or even higher, than that of American workers.
This is not actually a paradox at all.  Much of the decline in European hours worked per-capita came in the form of unemployment.  Rigid labor laws which make it hard to fire (and thus, risky to hire) shut less productive workers out of the market, particularly the young, and those who had been displaced due to disruptive industry change.  So does anything that raises the cost of labor, like, er, loads of mandatory vacation and leave.  When you exclude your least productive workers from the labor force, your measured hourly productivity will be higher, particularly if you use metrics like GDP per hours worked.

Looks like I will be on Fox & Friends at 8:15 EST tomorrow (Wed) to discuss the State of the Union, and specifically the Obama administration and public vs. private investment.  That will make four national TV appearances and 4 entirely different topics (parks, minimum wage, electric car efficiency, and infrastructure investments).  I’m really honing a razor-sharp personal brand.

I will be on the Fox and Friends morning show tomorrow morning at about 8:50ET  (though of course these things are always subject to change right up to the last minute).  I will be talking Fisker Karma.

This will make the third time I have been on national TV — one talking about park management, one talking about the minimum wage and this one talking about MPG calculations for electric cars.  At least I am not in a rut, though I think my pundit brand identification is probably confusing.

Via Carpe Diem and a whole string of other sites:

“How will California parents react when they find out they will be expected to provide workers’ compensation benefits, rest and meal breaks, and paid vacation time for…babysitters? Dinner and a movie night may soon become much more complicated.

California Assembly Bill 889 will require these protections for all “domestic employees,” including nannies, housekeepers and caregivers. The bill has already passed the Assembly and is quickly moving through the Senate with blanket support from the Democrat members that control both houses of the Legislature – and without the support of a single Republican member. Assuming the bill will easily clear its last couple of legislative hurdles, AB 889 will soon be on its way to the Governor’s desk.

Under AB 889, household “employers” (aka “parents”) who hire a babysitter on a Friday night will be legally obligated to pay at least minimum wage to any sitter over the age of 18 (unless it is a family member), provide a substitute caregiver every two hours to cover rest and meal breaks, in addition to workers’ compensation coverage, overtime pay, and a meticulously calculated timecard/paycheck.

Failure to abide by any of these provisions may result in a legal cause of action against the employer (“parents”) including cumulative penalties, attorneys’ fees, legal costs and expenses associated with hiring expert witnesses, an unprecedented measure of legal recourse provided no other class of workers – from agricultural laborers to garment manufacturers.”

I know this is exactly the kind of thing you would expect me to oppose, but I have decided this is exactly the kind of thing California needs.  I am tired of average citizens passing crazy requirements on business without any concept of the costs and injustices they are proposing, and then scratch their head later wonder why job creation is stagnant.
I want to propose that California do MORE in this same vein.  Here are some suggestions:

• Every household will have to register for a license to conduct any type of commerce, a license to occupy their house, and a license to hire any employees.  Homeowner will as a minimum have to register to withhold income taxes, pay social security taxes, pay unemployment insurance, pay disability insurance, and pay workers comp insurance.
• Households should have to file a 1099 for every payment they make to contractors
• All requirements of Obamacare must be followed for any household labor, including payment of penalties for even part-time labor for which the homeowner does not provide medical insurance
• No alcohol may be purchased by any individual without first applying for and receiving a state liquor license
• No cigarettes may be purchased by any individual without first applying for and receiving a state cigarette license
• No over the counter drugs may be purchased by any individual without first applying for and receiving a state over the counter drug license
• No eggs may be purchased by any individual without first applying for and receiving a state egg license
• Any injuries of any type in the household must be reported to OSHA
• Form EEO-1 must be filed once a year to catalog the race and gender of anyone who did any work in the home
• Any time one has a dispute in court with another citizen or an employee, they will now be treated the same as businesses in California, which means that the presumption, irregardless of facts, will be strongly in favor of any employee and against the homeowner, and in favor of any other party in any dispute whose net worth is perceived by the jury as less than the homeowner’s.
• At least once a year the home’s kitchen must be inspected and certified by both the fire marshal and the health department.  Any deficiencies must be immediately repaired before the kitchen can be used.  All code requirements for commercial kitchens will apply to household kitchens, including requirements for a three-basin washup sink, separate mop sink, and fire extinguishers
• All homes will be inspected once per year for ADA compliance.  All parts of the home must be wheelchair accessible, even if there are currently no handicapped residents in residence.  Homes more than one-story tall will require an elevator.  All counters must be of the proper height, and all bathrooms must have ADA fixtures.
• Each home will be required to prominently display all its required licenses as well as state and federal information posters for workers.
• All homes will be audited at least once every three years to ensure that use taxes have been filed and paid on all out of state Internet purchases
• Material Safety Data Sheets must be on file for all household cleaning products and other chemicals and available for inspection by the fire marshal
• All gas tanks (car, lawnmower, portable 5-gallon) will be treated just like commercial gasoline storage tanks, and require monthly leak / loss reporting.  Annually, a complete spill prevention plan must be filed with the state.
• A stormwater discharge plan must be filed annually with the state
• Any dropped thermometer or CFL bulb will require homeholder to call out (and pay disposal costs) of a state hazmat team
• Lifeguards are required at all home pools during daylight hours
• Households should file property tax returns in the same way that businesses must, listing individually every single piece of personal property they own, from their car to their lawnmower to the pink flamingo in the front yard.
• Homeowner must track the number of days any guests stay in their house so they can file and pay lodging taxes on a monthly basis
• Any homeowner who hauls a boat or trailer on US highways must register with the Department of Transportation and receive a DOT number.  They must keep full driver logs and maintenance records available for DOT audit and inspection, and every driver must be drug-tested at least once per year.
• All food on pantry shelves must meet all state labeling laws
• At each entrance to the house, a sign warming those entering must be posted warning that certain cancer causing chemicals may be present

Finally, after spending the entire day complying with these rules, the homeowner must read at least 3 posts each day from progressive blogs explaining why anyone who complains about such rules as unreasonable is just a reactionary who doesn’t really know how to run his business very well, and they could certainly do better.

Postscript:  Every single item on this list is something my company has been required to do.  I am sure I left a bunch out.

Yet more crap to keep up with as an employer

Today the NLRB released its final rule mandating all private sector employers subject to the National Labor Relations Act to post notices informing employees of their rights under the Act. The final rule is scheduled to be published in the Federal Register on August 30, 2011. Posting of the Employee Rights Notice becomes effective November 14, 2011. Failure to post will be an unfair labor practice….

Failure to post the Notice will constitute an unfair labor practice which may be filed with the NLRB by any person. Further, the failure to post the Notice will be deemed evidence of anti-union animus or motivation where employers are alleged to have interfered, restrained, or coerced or otherwise discriminated against employees to encourage or discourage union membership or activity.

We already spend a thousand bucks a year or so with printing companies that keep us supplied with updated signs for all of our locations.  At some point we are going to have to buy billboards to fit all the stuff we are required to post — minimum wage notices, NLRB notices, civil rights policies, occupancy permits, sales tax licenses, liquor licenses, egg licenses, cigarette licences, fire inspections, health inspections. Soon I am sure we will have a couple of square feet of Obamacare notices.

Via Carpe Diem, from William Even and David Macpherson:

“Each 10% increase in the minimum wage [since 2007] was accompanied by a decrease in employment of 1.2% for Hispanic males, 2.5% for white males and 6.5% for black males. When looking at hours worked, we saw a similar effect: Each 10% increase in the minimum wage reduced hours worked by 1.7% for Hispanic males, 3% for white males and 6.6% for black males.

The data clearly show a disproportionate loss of hours and employment for black young adults. Let’s put these lost opportunities into context. Between 2007 and 2010, employment for 16- to 24-year-old black males fell by approximately 34,300 as a result of the recession; over the same time period, approximately 26,400 lost their jobs as a result of increases in the minimum wage across the 50 states and at the federal level.

Here is a portion of Kevin Drum’s argument against lowering the minimum wage to stimulate employment

Is this really what we’ve come to? That we should provide a (probably very small) boost to the job market by allowing businesses to hire people for $9,500 per year instead of $14,500? Seriously? I mean, this is the ultimate safety net program, aimed squarely at working people at the very bottom of the income ladder. If we’re willing to throw them under the bus, who aren’t we willing to throw under the bus?

Part of the problem is that Drum is absolutely convinced that our intuition (and, oh, 200 years of experience) that demand curves slope downward is flawed in the case of low-skill labor.  He has read the two studies out of a zillion that, contrary to all the others, suggests that minimum wage increases may not affect employment and has convinced himself that these are the last word in the science.    As an employer who has laid people off and made larger and larger investments in automation with each successive minimum wage increase, I will continue to trust my intuition that higher minimum wages makes hiring less desirable.

I will say, though, that there are a number of reasons why a change in the minimum wage may have a smaller overall effect nowadays than one might expect.  That is because the minimum wage vastly understates the cost of taking on an unskilled worker.  Even with a lower minimum wage, these government costs will remain:

• Soon, the employer will have to pay for the employees health care, a very expensive proposition
• Workers comp and other labor taxes add as much as 20% to the cost of labor
• In states like California, bad employees have an increasing number of avenues to prevent employers from firing them, from appeal to an ADA law stretched out of recognition to any number of other legal presumptions that employers have to just live with hiring mistakes

Hiring employees used to be a joyous occasion.  Now I cringe and wonder what kind of liabilities I am taking on.

But back to Drum’s statement, how sick is it that allowing people off the dole to actually get a job is called “throwing them under the bus?” Drum, for someone so fired up to make decisions based on academic work, sure is willing to put on blinders to all the academic work that actually characterizes who works for minimum wage and how long they stay on it.  He who argues against making policy based on flawed intuition is operating here entirely from a flawed perception of who minimum wage workers are.  He seems to want to picture families of eight supported for decades by someone trapped in the same minimum wage job, for whom a raise only comes when Congress grants it, but that is simply not the reality.

Just as one metric, for example, the percentage of all wage and salaried workers making minimum wage or less fell from 8.8% in 1980 to 1.7% in 2008.  In fact, the actual absolute number of people making the minimum wage fell by over 2/3 during these years.    I would argue that this number is probably too low.  A dynamic labor market needs to bring people in at the bottom, and raising the minimum wage makes this harder, and so traps people into unemployment.  In fact, the number of unemployed in this country is at least 6 times larger than the number of minimum wage workers.

If we dropped the minimum wage, only a fraction of the 2 million or so who make the minimum wage would see their wages go down, but lets assume a quarter of them would.  We are therefore trying to prop up wages for 500,000 but at the same time creating barriers for 13.9 million people who are unemployed and are looking for work.  And it is low-skilled workers who we are most particularly throwing under the bus by keeping minimum wages high.

Other than the demand among the status-conscious for Chanel handbags, the demand for a product or service generally decreases as its price decreases.  This is an observation so trivial it is almost stupid to write down. But I guess the point is still not understood in Washington.

“The Center for American Progress, often called the think tank for the Obama White House, recentlyrecommended another increase in the minimum wage to $8.25 an hour. Though the U.S. unemployment rate is 9.1%, the thinkers assert that a rising wage would “stimulate economic growth to the tune of 50,000 new jobs.” So if the government orders employers to pay more to hire workers when they’re already not hiring, they’ll somehow hire more workers. By this logic, if we raised the minimum wage to $25 an hour we’d have full employment.”

Coyote, Jan 2011

For many, low wage jobs are the first rung on the ladder to success and prosperity.  Raising the minimum wage is putting the first rung of the ladder out of reach of many low-skilled Americans.

My classmate Henry Payne, saying it better in pictures (via Carpe Diem)

From the folks who exempt themselves from minimum wage, OSHA, and much of environmental law, comes the news that while shutting down online poker for most Americans, the District of Columbia is starting up its own online poker site for federal officials and other DC residents.

So a bunch of bloggers agree to write for the HuffPo, a profit-seeking venture, for free.  The HuffPo gets bought by another profit-seeking company, though this one is less successful in shrouding its financial goals in a cloud of feel-good progressivism.  So the bloggers get mad.  But instead of just quitting, they are actually suing the HuffPo for back wages under the Fair Labor Standards Act.

A few observations:

• I blog for free at Forbes.  It’s not like the arrangement was hard to figure out.  They get some free content, I get some exposure and a bit of cache from being associated with Forbes.   Seemed like a good deal to me.  When it ceases to be so, I will quit.
• The fact that everyone agreed to the deal in advance and it was completed by both parties to their mutual self-interest is NOT a defense under the Fair Labor Standards Act (FLSA).  I have employees who beg to work for free all the time (e.g. they have a disability arrangement that allows no outside income).  I have to tell them no.  Any defense from the HuffPo will come through convincing a court that the writers were somehow exempt or not actually employees.
• This same problem arises with internships as well as in my work.  In short, people sometimes value non-monetary aspects of jobs that are not given any credit in the FLSA.  My son would love to have a good summer job and for the right one would work under minimum wage for the experience.   Even the experience of showing up on time, functioning in an organization, working in a hierarchy, etc.  are important skills those outside of the work force gain from obtaining.  (In an interesting parallel to this, probably the most important skill I am gaining at Forbes is simply writing to a regular weekly deadline.  It’s harder than it seems from the outside).

In short, I would say that these folks are utterly without personal honor for filing the suit, but in the current state of labor law they potentially have a case.  How sad that would be.  And what would be next?  A class action suit by product reviewers at Amazon for back wages?

My Forbes column is up on the minimum wage.  It covers some of the ground I could not get to on TV the other night.

For many, low wage jobs are the first rung on the ladder to success and prosperity.  Raising the minimum wage is putting the first rung of the ladder out of reach of many low-skilled Americans.

File this under “why I blog rather than do a lot of talking head cable shows.”

I flew to New York to go in studio on the Stossel show today.  I did a brief bit on the minimum wage, a reprise from my earlier cameo on Stossel special.  It will be on tomorrow, Thursday at 9PM Eastern on Fox Business  (not Fox News, Fox Business).

The whole experience was new to me, which made me virtually unique as I was surrounded by policy wonks who do this kind of talking head thing all the time.   By the way, there was no sharing of questions or his plan in advance — I think they want you cold.  So answers are all in real time.

Please, please, please do not write me or post comments such as “you should have said ____.”  It will just depress me.  Believe me, 5 minutes after walking out I thought of 9 things I should have said.  Which is in fact why I blog rather than engage much any more in real time argument.

Anyway, I think his show will be pretty good — he has Michael Cannon on health care and segments after mine on cash for clunkers and alpaca subsidies.  I shared the green room with an alpaca, which will probably just go to prove the old saying about always getting upstaged by kids and animals.

By the way, I think Stossel must set a different tone for his staff than is normal on TV.  I was talking to one of his producers, a guy that had come with Stossel from ABC, and I asked him if he had studied something relevant to this job in college.  I expected him to say “yes, theater” or “yes, television production.”  But he said “yes, economics at George Mason.”  I loved that answer.

I hear rumor that a few snippets from a series of interviews I did on the minimum wage with John Stossel’s crew may have appeared on his “Politicians’ Top 10 Promises Gone Wrong” show tonight.  I have it TIVO’d but have not been able to watch it yet.  It is being replayed (in Hannity’s usual time slot) at 9pm and Midnight on Sunday (EST).  Even if I am not in it, it still looks like a great show and I can’t imagine that readers of this blog would not enjoy it.   More here.

As Obama pushes the US into a corporate state model like those in Europe, here is one cost we will face: increases in long-term unemployment.  Already we see higher structural barriers being created to employment (preference for preferred unions, higher minimum wage, reduced internships) combined with increasing incentives to remain unemployed (extension of unemployment benefits, subsidized medical services).

Most countries who move to this model experience very high long-term structural unemployment.   The costs to add an employee in Europe are really, really high, meaning that it is only done reluctantly and the preference is for highly skilled workers  (who is going to give a job for life to an untested, unskilled young worker?)  Further, these states are run by a troika of large corporations, unions, and government insiders who protect each other from competition.  Young unskilled workers are a competitive threat to established unions.  Since these unions workers get above-market wages, they are protected from younger workers who are willing to offer their admittedly less skilled labor much cheaper.

I was playing around with data released from the World Bank, and compared the US to a number of other industrialized countries on this metric.  Even in past recessions, long-term unemployment has remained low in the US (click to enlarge).  The metric is percent of total unemployed that are unemployed for longer than 1 year.

I get tired of the perception that labor law is universally beneficial to people selling their labor, and that these laws are solely intended to reduce the ability of rapacious employers to exploit powerless workers.  It confuses people to no end when I say that minimum wage laws prevent workers from selling their labor for less than the minimum wage, and is therefore a restriction on every worker’s freedom.  Supporters of the law say, that’s can’t be right, it simply must be helping all workers.

But I think anyone who has gone through the experience lately of trying to help their teen get a summer job knows this is not the case.  My son would gladly work for free or below minimum wage at any number of jobs to get experience.  Unfortunately, he must be paid the same minimum wage as someone with years of experience, and many large corporate chains have simply banned hiring of kids under 18 to avoid liability and labor law hassles associated with hiring teens.  The result is an astronomical unemployment rate for teens.

So here is another example, with the Feds cracking down on unpaid internships.  This is simply crazy.  The government has got to realize that there are useful and valuable things one can trade his labor for (e.g. experience, training) that can’t be measured in money.

Of course, you know who is the greatest violator of these internship rules?  The organization that requires the longest hours for the least pay (well under minimum wage) for a huge portion of its staff?  Why, its the US Congress, but of course they exempt themselves from these laws.

Update:  From a commenter on Stossel’s blog:

Maggie Hanson:

I have an unemployed friend trying to land work in a new field where she has no experience. She’s up against experienced applicants. I suggested she offer her services for free as an intern for 3 months in exchange for learning on the job and a letter of recommendation. She told me she didn’t think that was legal. I’m appalled to learn she is right! Yet how else is she going to get experience? She can’t afford school. Internships are a free education.

Michigan has  a huge problem with jobs and capital leaving the state for more favorable climates.  Which makes it incredible that the ruling Democrats in the state have this plan to improve things:

• Hiking the minimum wage to $10 an hour for all workers.
• Imposing a blanket moratorium on home foreclosures for 12 months.
• Cutting utility rates 20% across the board.
• Requiring all employers to provide health care to their employees.
• Hiking, by $100 a week, and extending, for six months, unemployment benefits.

Wow, that should really bring companies running to the state to invest their capital.  This is always a powerfully attractive package:

• Raise the price of unskilled labor and entry-level employees
• Reduce protections for lenders investing capital in the state
• Set the state up for power shortages
• Increase the price of labor by $12,000 or more per year
• Increase employment-related taxes  ( a sure outcome of raising unemplyment benefits)

If you want to really confuse someone, restate the minimum wage laws this way:

It is generally illegal in the US to accept a job for less than $7.25 an hour.  The minimum wage laws are therefore a substantial constraint on individual liberties

When I say this to most folks, they get confused because laws like minimum wages are usually stated in terms of empowerment of the common man.  The theory is that individuals don’t have enough bargaining power to really get what the true clearing price should be for their labor, so the government steps in to prevent evil corporations (ie “the man”) from exploiting this power imbalance and paying wages that are too low.

Tell that to my 15-year-old son who is looking for a job.  Sure, he would like to earn some good cash, but the wage scale of a job is way down the list of priorities.  What he really needs is a chance to build basic work skills and knowledge of how organizations function that you and I take for granted.  Further, he would like to get some direct experience with customer contact.  And finally, he wants to demonstrate to future college choices that he can function successfully in a work environment, and that he is motivated enough to keep and hold a job.

As a result, my son would likely gladly take the right job for, say, $3 an hour.  And an employer might jump at this deal, understanding the lower wage helps compensate for the costs of dealing with an inexperienced new employee and the risk of hiring a teenaged boy with distracting amounts of hormones running through his system.  This would be a perfectly rational, consensual, everybody-wins arrangement that is absolutely illegal.  So don’t tell me or my family that minimum wage laws are empowering.

The health care analog

Many very similar liberty-reducing regulations exist in the health care world, and more appear to be on the way.  One great example that is entirely similar to the minimum wage issue is minimum coverage rules.  Many states have lengthy lists of conditions that must be covered in any health insurance plan sold in that state.  From acupuncture to mental health to massages to homeopathic treatments, you can find just about every care specialty with a lobbying organization getting its services embodied in state laws as minimum requirements.

Again, supporters of such laws argue that this is empowering for consumers.  Every health care plan you can buy will have a wide array of covered services.  But, they will also all be expensive.  What if I don’t want mental health coverage or acupuncture?  Why do I have to pay extra for this stuff to be covered by my policy?  I go to the doctor very, very infrequently – basically only if the condition is critical – so why is it illegal to purchase a health insurance plan that matches my health care use preferences?

Currently I pay for my own health care plan and have insurance that I consider true insurance.  It has a high deductible, and does not cover a bunch of non-critical stuff.  I have no dental coverage, and pay dental all out of pocket, as I do most routine medical expenses   I have medical insurance solely to cover catastrophic medical events that would likely be financially disastrous for me  (I do the same thing with my house and car, paying for routine maintenance with insurance reserved for catastrophes).   Fortunately, Arizona allows me to buy such a policy, though it does have minimum coverage rules that make the policy more expensive than it might be.  In other states, like Massachusetts, my health plan with a high deductible is illegal.  It would also be illegal under the current House and Senate versions of Obamacare.

Medical Insurance and Windshields

I do a lot of back road and highway driving, so windshield repair and replacement are things I deal with fairly frequently.  I’ve generally always just paid for these repairs out of pocket.   It is a field where if one shops around, there are a lot of good deals.  However, for a while I lived in a state that had a law that said all auto insurance must have windshield replacement coverage.

The effect on my behavior was dramatic.  When living there, I didn’t even think about shopping around for a windshield repair.  I just had the dealer do it (surely the high cost supplier) when I had the car in for regular service.  I didn’t care what the cost was, it was covered in my policy.  (Ironically, it turns out in retrospect that I should have shopped around — because no one else in the sate cared about cost, all the windshield suppliers jacked up their prices and then competed by offering kickbacks in various forms to consumers, basically competing on how much of the insurance money they would share with the car owner.  Truly dysfunctional).

I have seen the exact same change in my behavior, but in reverse, in switching to a high deductible medical policy.  Until about 3 years ago, like most Americans, we never even thought about the cost of our medical care.  We weren’t paying for it.  But now, as I pay most of our routine expenses, I am amazed at the difference.  When my son needed a CT scan, three phone calls gave us a huge variation in quoted prices.  It turns out, shopping works, even in medical care.

Postscript: I have always wondered why insurance companies didn’t create some incentive for shopping.  If I were running such a company, I would be tempted to tell customers – “our reimbursement rate for CT scans in your area is X.  If you get it done for less than X, we will split the savings with you 50/50.”  Though I suppose the danger is tht this could morph into a variation of the windshield kickback system.

…that this sort of article is absolutely inevitable only AFTER bad legislation is passed.

A federal minimum wage increase that takes effect Friday could prolong the recession, some economists say, by forcing small businesses to lay off the same workers that the pay hike passed in better times was meant to help.

The increase to $7.25 means 70 cents more an hour for the lowest-paid workers in the 30 states that don’t have a higher minimum. It also means higher costs for employers who feel they’ve already trimmed all their operating fat.

“How will they absorb the increase?” said Rajeev Dhawan, director of Georgia State University’s Economic Forecasting Center. “They will either hire less people or they will do less business.”

More than in any period before, businesses are likely to lay off employees and reduce hours, further fueling the economic slump in states seeing double-digit unemployment rates, fiscal conservatives and some economists say.

In the run up to actually passing this legislation, the Arizona Republic did nothing but cheer-lead the effort, and would never have published such a story, or would have mentioned it only in graph 36 with some perfunctory balance-quote from the dreaded “industry representative.”

We saw this exact same thing occur with ethanol legislation.

My son is at the age in high school that he needs to find a job, either during the summer or after school or both.  But this is not an easy chore.  The economy certainly has a lot to do with this, but Congress has been doing its share to keep teenagers unemployed as well:

Thanks to an ill-advised law enacted with bipartisan support in 2007, the cost of providing an entry-level job to individuals with few skills or minimal experience will be going up by more than 10 percent. Those who cannot find a job paying at least $7.25 an hour will not be permitted to work. Welcome to the latest chapter of America’s minimum-wage folly.

Those who press for a higher minimum wage often claim that making entry-level jobs more expensive won’t reduce the number of entry-level jobs. Were the government to compel a 41 percent increase (see graph above showing the 41% increase in the minimum wage from $5.15 in 2006 to $7.25 this year) in the price of gasoline or movie tickets or steel, every rational observer would expect a drop in the demand for gasoline, movie tickets, or steel. Yet when it comes to the minimum wage, politicians and journalists somehow persuade themselves that making workers more expensive won’t reduce the demand for workers.

But that’s exactly what it does. Artificial price floors – mandatory minimum prices set higher than what the market will bear – generate surpluses. Minimum-wage laws are no exception. The price floor imposed by the government on the supply of low-skilled labor results in a labor surplus, which is just another way of saying higher unemployment.

The laws of supply and demand are not optional. They weren’t enacted by Congress and Congress can’t override them. Minimum-wage laws don’t make low- and unskilled Americans more productive, more experienced, or more desirable. They merely make them more expensive – and more likely, therefore, to be unemployed.

People often think of the minimum wage as a restriction on employers — that they cannot pay less than a certain number for a job.  But it is also equally a restriction on job seekers — my son cannot legally offer to take a job for less than $7.25, even though he would probably gladly do so.  For teenagers, just gaining the experience of working and building basic skills (like showing up on time, following procedures, interacting with customers and fellow employees) has enormous value, such that even a nominal payment of a few dollars an hour would more than compensate him for his labor.

But I think there is another factor that increasingly limits teenage jobs that is not often discussed – liability.  I never really thought about this until I was running a business and found that my company and I may be personally liable for bone-headed decisions made by far off employees I have never met.  In our super-ligious society, does a company really want 15-year-old boys interacting with the public, no matter how much or little they are paid, when even one teenage-boy-style flip comment or sexual joke might result in a lawsuit?

Previously, I have written a number of articles on the minimum wage focused on the other end of the age scale.  My company hires folks in the seventies and eighties, a practice that is increasingly difficult to maintain with the minimum wage increasing.

The entire Pacific coast is vying to become the next rust belt.  Only the nice climate and beautiful scenery will keep anyone there.

The Labor Department reported yesterday that Oregon’s unemployment rate soared to 12.4% in May, the nation’s second highest after Michigan’s 14.1%. What to do? If you’re the geniuses in the state legislature in Salem, you naturally raise taxes.

Last week the legislature approved a $2 billion tax hike on personal income and small businesses that haven’t already left the state. The highest tax rate on income above $500,000 would climb to 11% — up from an already high 9%. Oregon will soon boast the second highest income tax rate in the nation, moving ahead of California (10.55%), and only slightly behind New York City (12.6%). Corporations will pay a 7.9% tax on gross receipts, up from 6.6%.

To be fair, Oregon does not really have a sales tax, so it is hard to compare apples and oranges on taxes.  But missing from the article is another factor in their unemployment, and the reason our company ultimately had to leave the state:  Oregon has the second highest minimum wage in the country (just behind Washington State and just ahead of California), and it is getting higher every year as it is automatically indexed to something or other that seems to be rising faster than inflation.

The Arizona minimum wage is going up again:

The annual increase is the third since voters approved the minimum-wage initiative by a 2-1 ratio in 2006. This year’s increase is 5 percent. At $7.25 an hour, the wage is up nearly 41 percent from December 2006 but still only about half of the state’s median wage of $14.25, according to the Arizona Department of Commerce.

Oh my God!  You mean the minimum is still below the median?  (Sorry, that is a bit off-topic, but I just can never resist making fun of journalist’s understanding of math and statistics).

In just over two years, the minimum wage is up over 41%.  As a company that employs a lot of minimum wage workers in Arizona, I thought I would report on the impact to date.  As a quick background, my company runs campgrounds (and other recreation facilities) all across the country.  We typically employ retired couples who live in their RV onsite and work both for the free camp site as well as a wage, usually minimum wage.  In a good year, our business makes between 6-8% pre-tax profit on sales, which I can tell you is a thin, thin cushion given all of my life’s savings are locked up in this one investment.

I don’t know where minimum wage supporters think the extra money comes from to pay higher wages.  If they think at all, I suppose they would say that the government is in effect collective bargaining for these workers and getting businesses to cough up some of their immense profits to pay a bit better wage.

Well, our labor costs are about 50% of revenues  (we are a service business).  This 50% is not just wages, but other costs calculated as a percent of wages, such as FICA, medicare, and unemployment taxes and workers comp premiums.  So, if I still want to earn a living for myself, and the state says half my costs must go up by 41%, then it means that prices are going up 20+%.  And that is what has happened.   Remember, at the same time, fuel prices, electricity prices, insurance prices, and everything else has gone up, so that camping prices have risen by 20% or more.  But there is a limit to how far we can push prices, particularly since our typical customer tends to be relatively low-income.  So we are pursuing two other longer term responses:

• We are increasingly turning to automation solutions, like automatic pay systems and gates, to replace people.  While we like to have someone actually there to answer questions and to help visitors, fee collection machines work 24 hours, are not subject to overtime rules, they never get hurt, they never sue us, and the government never passes laws to increase their price.
• We are changing our operating strategy from hiring retired couples who live on-site to hiring younger workers.  This is a change I really hate.  The business model of hiring retired folks who live on-site at a campground is an old and successful one.  Folks in their seventies (and I even have workers in their eighties and nineties) don’t work very fast, and they have more workers comp claims, but they had the ability to live on-site and life experience that helped them with customer service.  But trade-offs that worked at $5.15 an hour don’t work as well at $7.25 and higher.  So far only selectively, but we are hiring younger folks from the local community to come in and do some of the janitorial and maintenance work.  Even if I pay them $8 or $10 an hour, they make sense if they can be twice as productive.

US unemployment in August "jumped unexpectedly" to 6.1%, by the oddest of coincidences in the first full month just after new, 12% higher US minimum wages took effect. 

The unemployment rate is higher than it has been in the United States in the last 5 years, but substantially lower than the rate most Western European countries like France and Germany experience even during peak economic times. 

In response, the Obama campaign is urging further increases to the minimum wage and emulation of labor policy and legislation in France and Germany.

I always find it fascinating to observe how the same folks who criticize the US for not taking drastic action based on the "settled science" of global warming are often the first to ignore hundreds of years of study in the science of economics.  While the full breadth of economics is far from settled science, one thing that is far better understood than the effect of CO2 on global temperatures is the effect of higher prices on demand:  (via Market Power)

This chart confirms that for teenagers, those between the ages of 16
and 19 years old, all of the jobs that disappeared in 2007 were minimum
wage jobs. In essence, a total of 94,000 hourly jobs disappeared for
this age group overall. This figure is the net change of this age group
losing some 118,000 minimum wage earning jobs and gaining some 24,000
jobs paying above this level.

This represents what we believe to be the effect of the higher
minimum wage level increasing the barriers to entry for young people
into the U.S. workforce. Since the minimum wage jobs that once were
held by individuals in each age group have disappeared, total
employment levels have declined as those who held them have been forced
to pursue other activities.

Now consider this: The minimum wage was just reset on 24 July 2008
to $6.55 per hour, a 27.2% increase from where it was in early July
2007. Our best guess is that a lot of additional teenagers will be pursuing those other activities. 

Meanwhile, the lack of employment opportunities for the least
educated, least skilled and least experienced segment of the U.S.
workforce will likely have costs far beyond the benefits gained by
those who earn the higher minimum wage. The government might be able to
make the minimum wage earning teenage worker disappear, but they didn’t
do anything to make the teenagers themselves disappear.

The increase in minimum wage earners in some of the middle brackets is likely due to a sweeping effect — if the minimum wage is increase from $6 to $7, people making $6.50 before are swept into the "minimum wage" characterization.