Posts tagged with: minimum wage

starbucksWhen most people think of Starbucks they think of overpriced coffee, free wifi, and omnipresence. Starbucks are everywhere. The company was founded in 1971 and since 1987 they’ve opened an average of two new stores every day. In the U.S. alone there are 12,973 locations.

When most people think of “big business”, though, they don’t often think of the Seattle-based coffee company. But they should. Starbucks has 151,000 fulltime employees, $15 billion in annual revenues, and three times as many locations as Walmart. Starbucks is one of the biggest of big businesses. And, not surprisingly, a big proponent of cronyist policies.

Cronyism occurs when an individual or organization colludes with government officials to create legislation or regulations that give them forced benefits they could not have otherwise obtained voluntarily. Those benefits come at the expense of consumers, taxpayers, and everyone working hard to compete in the marketplace. A prime example is minimum wage laws. Almost without fail, big businesses tend to support higher minimum wages.

Since they could just choose to pay higher wages, why would they support federal mandated wage floors? One reason is because it helps to eliminate the competition from small business who don’t have the size and scale to absorb higher-than-market wage increases.

In a recent interview with CNN, Starbucks CEO Howard Schultz said he supports an increase to federal minimum wage even though he admits the $15 wage in Seattle could have “traumatic effects” on small business owners and employees.
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A couple of interviews to bring you up to speed on from that last couple of days:

First of all, here’s Acton Director of Research Samuel Gregg on the GRN Alive morning show on the Guadalupe Radio Network this morning to discuss current efforts to raise the federal minimum wage, giving his analysis on the likely impact of such a move on the economy and the job market.

And from yesterday, here’s Acton co-founder and President Rev. Robert A. Sirico with host Mike Rosen on The Mike Rosen Show on 850 KOA in Denver, Colorado, to discuss Pope Francis’ recent comments to United Nations officials, which included remarks on “legitimate redistribution of economic benefits by the State.” Rosen and Sirico speak extensively about Catholic teaching on economics, and about the misleading nature of the term “trickle-down economics.”

Terminator-2-Judgement-Day-posterI oppose implementing Skynet and increasing minimum wage laws for the same reason: to forestall the robots.

It’s probably inevitable that a T-1000 will return from the future to terminate John Connor. But there is still something we can do to prevent a TIOS from eliminating the cashier at your local McDonalds.

In Europe, McDonalds has ordered 7,000 TIOSs (Touch Interface Ordering Systems) to take food orders and payment. In America, Panera Bread will replace all of their cashiers with wage-free robots in all of their 1,800 nationwide locations by 2016. There is even a burger-making robot that can churn out 360 gourmet hamburgers per hour.

I, for one, welcome our new fast-food robot overlords. I’m just not ready for them yet.
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mcdonalds“Clean up your own mess. Your mother doesn’t work here.”

That was a sign, printed on dot matrix printer paper, which hung in the breakroom of the McDonald’s where I worked. While that was nearly thirty years ago, I suspect that same sign is still there (though probably reprinted on a laser printer). But the idea behind it has changed. Your mother may not work at McDonalds, but the company—and others that hire low-skilled employees—are increasingly taking on the role of in loco parentis.

Lessons in basic life skills that were once taught by parents—such as punctuality, self-direction, basic personal hygiene—are increasingly being provided by the shift manager at the local fast food restaurant. That is why it’s absurd to claim that companies that are willing to hire people who are unqualified for the labor force are somehow getting over on the American taxpayer.

As Reihan Salam,
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Seattle-mystWhen I was growing up I had a buddy—let’s call him “Bob”—who was constantly asking, “What happens if we do . . . ?” Bob’s curiosity, however, only led him to wonder about foolish actions. He never pondered, for example, what would happen if we all volunteered at the senior citizens center. Instead, his thinking ran more along the lines of what would happen if we jumped off the senior citizens center.

The reaction of me and the rest of my friends was always, “Let’s find out!” But we were more prudent than Bob (or maybe just more cowardly) so we’d encourage him to try whatever reckless idea he had in mind so we could learn from his experience. We learned, for instance, that if jump off the 3-story senior citizens center, a stack of cardboard boxes will not be enough to sufficiently break your fall.

Bob’s shenanigans would daily provide for us what social scientists would call a “natural experiment.” A natural experiment is a study of the effect of an independent variable, which has not been planned or manipulated by the researchers, on a dependent variable. (The word ‘natural’ in the term natural experiment therefore refers to an event that is not planned by the researchers.)

The city of Seattle is about to pull a Bob, by foolishly raising the minimum wage to $15 per hour. The effect on the citizens of Seattle will be almost entirely harmful. But it will provide a natural experiment on the effect of raising the minimum wage laws that the rest of American can learn from. Anyone who isn’t already convinced that increasing the minimum wage has a detrimental impact on employment and harm minority workers will, in a few years, have solid proof. We will all be able to look to Seattle to see the difference between good, albeit naive, intentions and sound economic policy.

Here are some of the effects I predict the policy will have in the next three years:
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amnesty_no_compromisePeople face tradeoffs. To get one thing that we like, we usually have to give up another thing that we like. That principle is one of the most basic in economics — and yet the most frequently ignored when it comes to public policy. A prime example is the tradeoff that is required on two frequently debated political issues: immigration reform and minimum wage laws.

Many of the same people who support increasing the minimum wage also support increased immigration and amnesty for illegal immigrants. But increases in minimum wage can have a severely detrimental impact on immigrants.

(For the sake of argument, we’ll set aside the question of whether amnesty is a policy that should be promoted and assume that is a policy we’d consider beneficial, at least for illegal immigrants.)

Imagine that Congress passes two laws that take effect on the same day — January 1, 2016 — one granting amnesty to illegal immigrants and the other raising the federal minimum wage to $10.10 an hour. What would be the result?
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minwage11Acton’s Director of Research, Samuel Gregg, recently  wrote about the effects of raising the minimum wage at the National Review Online. The latest CBO report estimates that increasing the minimum wage to over $10/hour in 2016 will not greatly affect the poorest in society; it is estimated that this increase will only help 2% of those living in poverty. The benefit of the increase will go to people “already comfortably above the poverty line.” Gregg discusses this phenomenon:

Is that just?

Given the minimal (pardon the pun) effects of mandated minimum wages upon poverty, one must ask why some people invest so much intellectual energy and political capital in a policy that tends to benefit, for example, teenagers and young people from comfortable backgrounds who won’t be staying in minimum-wage jobs for very long.

In part it’s the top-down approach at work. Legislating minimum wages gives us the illusion that legislators and governments can flip a switch and make things better. Legislated minimum wages, however, aren’t immune from the workings of supply and demand. (more…)

Blog author: jcarter
Wednesday, February 5, 2014
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Over the past few months I’ve become obsessed with the idea that economic principles and arguments need to be explained more intuitively. I’ve assumed that the best way to approach that task would be to create robust metaphors that can be intuitively grasped. But a short parody video by Julie Borowski on the minimum wage has made me realize that sometimes all we really need is to show the obvious conclusions of policy positions.

Borowski’s presentation is silly, her style slapdash and homemade, and her argument well worn to the point of being trite. But there is something about having the argument presented visually that helps to put a fresh spin on an stale (and obvious) point.

Watch the video below and keep in mind that when she talks about “raising your own minimum wage” that this is exactly what we are asking the government to do on the behalf of low-skilled workers — often with the same results.

(Via: Cafe Hayek)

100930_minimum_wageYesterday I mentioned that translating economic principles into intuitive concepts is one of the most urgent and necessary tasks to prevent such evils as harm to the poor. Today, William Poole provides an excellent example of what is needed with his “common-sense thought experiment” on minimum wage increases:

Suppose Congress were to enact a minimum wage $50 higher than the current one of $7.25 per hour. Would a minimum of $57.25 reduce employment? I know of no economist who would assert a zero effect in this case, and recommend that readers ask their economist friends about this thought experiment. Assume that the estimate is that a minimum of $57.25 would reduce employment by 100,000. The actual number would be far higher but 100,000 will do for this thought experiment. Now, consider several other possible increases of less than $50. The larger of these increases would have substantial effects, the smaller ones smaller effects.

But is there reason to believe that a minimum of $10 would have no effect? I have never seen a convincing argument to justify that belief. If you accept as a fact that a minimum wage of $57.25 would reduce employment, and you accept as a fact that some workers are currently paid $7.25 per hour, then logic compels you to believe that a small increase in the minimum wage above $7.25 will have at least a small negative effect on employment.

The only escape from this logic is to believe that there is a discontinuity in the relationship between the minimum wage and employment. No one has offered evidence that there is a discontinuity at a certain minimum wage such that a minimum above that has an effect and one below does not.

Far too often, advocates of minimum wage increases tend to dismiss such thought experiments before giving them due consideration. I think I know why. I don’t mean to cast aspersions on their motives (it certainly sounds like I’m about to cast aspersions on their motives, doesn’t it?), but I suspect they fear that admitting the undeniable logic of this reasoning will cause them to lose the moral high ground.
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Given the recent and wide-ranging discussion here on the PowerBlog surrounding the the minimum wage (Hunter Baker, Joe Carter, Jordan Ballor, Elise Hilton, yours truly), this short little video offers a nice overview of the seen and unseen effects of such an instrument.

To make its argument, the video assumes the worst about wage-setters, describing Edgar the Employer as Edgar the Exploiter: one who cares only about “making profit” and even dreams about paying his employees less. I have yet to meet such a miser, even in my dark days behind the McDonald’s fry vat, but surely he exists. (more…)