Posts tagged with: Macroeconomics

no-signWhat just happened?

On May 18, the Obama administration announced the publication of a new Department of Labor rule updating and expanding overtime regulations.

Why did the overtime rule change?

Since the 1930s some white collar jobs (i.e., those performed in an administrative setting) have been exempt from the overtime requirement. The white collar exemption salary level was adjusted in 2004 to $455 per week or $23,660 a year. The new rule will entitle most salaried white collar workers earning less than $913 a week ($47,476 a year) to overtime pay.

The rule also updates the total annual compensation level above which most white collar workers will be ineligible for overtime. The final rule raises this level to the 90th percentile of full-time salaried workers nationally, or from the current $100,000 to $134,004 a year

The salary threshold will also automatically be updated every three years, beginning January 1, 2020. Each update will raise the standard threshold to the 40th percentile of full-time salaried workers in the lowest-wage Census region, estimated to be $51,168 in 2020.

How is overtime pay determined?

Recently we considered a simple tool and metric for measuring economic well-being: real GDP per capita.

Yet such metrics feel can seem materialistic. What about the things that money can’t buy, we wonder, like health and happiness?

As economist Alex Tabarrok explains, while real GDP is an imperfect measure, it tends to be correlated with many of the non-monetary improvements that contribute to human flourishing.

minimum-wage-15Since 1938, when President Franklin Delano Roosevelt introduced the first federal minimum wage in the U.S., a debate has raged about whether wage floors help or hurt workers. But thanks to a radical economic experiment in California, we may be only a few years away from having a definitive answer.

California Gov. Jerry Brown and state legislators have reached an agreement to raise California’s minimum wage to $15 an hour by 2022. Under California’s plan, its minimum wage — already one of the highest in the nation at $10 an hour — would rise to $10.50 in 2017, $11 in 2018 and a dollar each year through 2022.

By 2022 we should know for sure how the change will affect California. In the meantime, here are ten things you should know about the ongoing minimum wage debate:


10200456-largeIf you ask most people why they support raising the minimum wage they’ll says it’s because it helps the poor. But as David Neumark, a scholar at the Federal Reserve Bank of San Francisco notes, numerous studies have shown that there is no statistically significant relationship between raising the minimum wage and reducing poverty.

That finding may appear to be counterintuitive. After all, if poor people have low wages then increasing their wages should help reduce their poverty. To some extent, this is true. However, what is overlooked is that minimum wages target individual workers with low wages, rather than families with low incomes. The reason that distinction is important is because most workers who earn the minimum wage are in higher-income families.

That becomes more obvious when you think about the composition of the American workforce. If you are from a middle-class family, your first job is likely to have paid minimum wage. The same goes for all your friends who are from families higher on the economic ladder. And it’s the same for young workers today. Go down to the mall and you’ll find that the young men and women working in Forever 21 and Abercrombie & Fitch are not from families that are in poverty. Increasing the minimum wage merely ensures that these young people who are (mostly) from wealthier families get a pay raise.

The relationship between being a low-wage worker and being in a low-income family is fairly weak, as Neumark explains, for three reasons:

300px-GeocentrismGeocentrism was the belief that the sun, the planets, and all the stars revolve around the Earth. The alternative view—heliocentricism—had been around since the 3 BC but was not taken seriously until the 16th century AD. What seems obvious to us now was a matter of heated debated for almost two thousand years.

Economist Don Boudreaux says the minimum-wage debate in economics is rather like the reverse of this debate that took place centuries ago among astronomers.


Blog author: jcarter
Wednesday, December 31, 2014

In an interview on Christian distance education, Dylan Pahman, the assistant editor for Acton’s Journal of Markets & Morality, talks about the education bubble, rising costs of higher education, and whether Christian worldview integration in a distance education program is worth a premium:

Luke Morgan: As a blogger for the Acton Institute, you have written about the education bubble, the textbook bubble, and other items regarding what education costs, and how those things should work in a free market. Could you describe to me what you mean when you say: “the education bubble?”

Dylan Pahman: The idea of a bubble came up in relation to the housing bubble which took place in 2007 in the recent recession. Part [of what] happened is, the government started subsidizing home loans, because they decided “everybody aught to be able to own a home.” So there were good intentions, but what they were doing, was cutting away the calculation of risk… The bank is no longer turning people away, that they normally would have… you have easy access flooded into this market for something people really desire… a nice place to live. In doing so, [the market] ended up ballooning. Demand keeps going up, and as demand goes up the price goes up. So people are getting into more and more debt, for the same exact product until it gets to a certain point where it’s too much, too many people couldn’t handle it, and so a lot of people ended up foreclosing on their homes… it was pretty severe, and it went past the housing market, it effected our whole economy, it effected worldwide economies.

Read more . . .

Blog author: jcarter
Thursday, December 11, 2014

Summer-JobsGiving disadvantaged youth a summer job reduces violent crime, according to a new study published to the journal Science.

In a randomized controlled trial among 1,634 high school youth in Chicago, assignment to a summer jobs program decreases violence by 43 percent over 16 months (3.95 fewer violent-crime arrests per 100 youth). The decline occurs largely after the 8-week intervention ends.