Low-Skilled Workers Flee the Minimum Wage


What happens when, in a country where workers are free to move, a region raises its minimum wage? Do those with the fewest skills seek out the regions with the highest wage floors?

New minimum wage research by economist Joan Monras of the Paris Institute of Political Studies (Sciences Po) attempts to answer that question. Monras theoretically shows that there should be a close relationship between the employment effects of raising the minimum wage and the migration of low-skilled workers.

When the demand for local low-skilled labor is relatively unresponsive (or inelastic) to wage changes, raising the minimum wage should lead to an influx of low-skilled workers from other states in search of better-paying jobs. On the other hand, if the demand for low-skilled labor is relatively responsive (or elastic), raising the minimum wage will lead low-skilled workers to flee to states where they will more easily find employment.

To test the model empirically, Monras examined data from all the changes in effective state minimum wages over the period 1985 to 2012. Looking at time frames of three years before and after each minimum wage increase, Monras found that

  1. As depicted in the graph below on the left, those who kept their jobs earned more under the minimum wage. No surprise there.
  2. As depicted in the graph below on the right, workers with the fewest skills were having an easier time finding full-time employment prior to the minimum wage increase. But this trend completely reversed as soon as the minimum wage was increased.
  3. A control group of high-skilled workers didn’t experience either of these effects. Those affected by the changing laws were the least skilled and the most vulnerable.

These results show that the timing of minimum wage increases is not random.

Instead, policy makers tend to raise minimum wages when low-skilled workers’ real wages are declining and employment is rising. Many studies, misled by the assumption that the timing of minimum wage increases is not influenced by local labor demand, have interpreted the lack of falling low-skilled employment following a minimum wage increase as evidence that minimum wage increases have no effect on employment.

When Monras applied this same false assumption to his model, he got the same result. However, to observe the true effect of minimum wage increases on employment, he assumed a counterfactual scenario where, had the minimum wages not been raised, the trend in low-skilled employment growth would have continued as it was.

By making this comparison, Monras was able to estimate that wages increased considerably following a minimum wage hike, but employment also fell considerably. In fact, employment fell more than wages rose. For every 1 percent increase in wages, the share of a state’s population of low-skilled workers in full-time employment fell by 1.2 percent. (The same empirical approach showed that minimum wage increases had no effect on the wages or employment of a control group of high-skilled workers.)

Monras’s model predicts that if labor demand is sensitive to wage changes, low-skilled workers should leave states that increase their minimum wages — and that’s exactly what his empirical evidence shows.

According to Monras,

A 1 percent reduction in the share of employed low-skilled workers [following a minimum wage increase] reduces the share of low-skilled population by between .5 and .8 percent. It is worth emphasizing that this is a surprising and remarkable result: workers for whom the [minimum wage] policy was designed leave the states where the policy is implemented.

These new and important findings reinforce the view that minimum wage increases come at a cost to the employment rates of low-skilled workers.

They also pose a difficult question for minimum wage proponents: If minimum wage increases benefit low-skilled workers, why do these workers leave the states that raise their minimum wage?


Corey Iacono

Corey Iacono is a student at the University of Rhode Island majoring in pharmaceutical science and minoring in economics. He is a FEE 2016 Thorpe Fellow.

This article was originally published on FEE.org. Read the original article.

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Gun Shop Owner Stands to Challenge Obama on Second Amendment


Homeland Insecurity Status AlertsCreating conflict. It’s what politicians do. Pointing the finger at the supposed boogeyman and saying “HERE! THIS IS THE CAUSE OF ALL YOUR WOES!”, and crying out for more power under the rubric of “safety”.

“I just came from a meeting today in the situation room in which I’ve got people who we know have been on ISIL websites living here in the United States…and we’re allowed to put them on the no-fly list when it comes to airlines, but because of the National Rifle Association, I cannot prohibit those people from buying a gun,” Obama said.

Do you see the problems with the above quotation? Let me spell it out for you:

1) They can add you to a no-fly list simply for visiting a website. This means that without being accused and convicted of a crime, you can lose your right to travel unmolested by government. That is exactly the opposite of rights expressly spelled out in the Constitution.

2) The NRA is painted as the bad guy simply for insisting (in a court of law) that the Federal Government be subject to the limitations placed upon it by the Constitution and specifically the 2nd Amendment. Somehow “they” are the evil ones.

Where does it end? Where does it ever end? 100 new laws? 1000? 10,000? When will the slew of laws, regulations, licenses, mandates, executive orders, fines, penalties, restrictions, public humiliations, etc., etc. ad nauseam, bring about the perfect society?

And when will the American People grow tired of electing demagogues who promise everything and deliver nothing of value?

Source: Gun Shop Owner Stands to Challenge Obama on Second Amendment — Listen Closely to the President’s Response | Video | TheBlaze.com

Don’t Be Fooled by the Political Game: The Illusion of Freedom in America


The shaping of the will of Congress and the choosing of the American president has become a privilege reserved to the country’s equestrian classes, a.k.a. the 20% of the population that holds 93% of the wealth, the happy few who run the corporations and the banks, own and operate the news and entertainment media, compose the laws and govern…

Continue Reading:

Source: Don’t Be Fooled by the Political Game: The Illusion of Freedom in America – The Future of Freedom Foundation

Seymour Hersh: Everything Obama said about the Bin Laden Raid is a Lie!


Puppet Masters

When I first heard about the so-called raid, it turned my stomach. When I was excoriated by an enthusiastic public for not supporting the mission, or the methods, I was called “unpatriotic”. Now it turns out I was right. Anything originating with this Whitehouse is Kabuki Theater, designed solely to manipulate you and keep you passive.

Vox Popoli: The banality of US evil


Vox Popoli: The banality of US evil

Eric Garner died in a New York minute because “soft despotism” turned hard enough to kill him in cold blood. There was no anger there, no hate; the police simply failed to grasp the moral disproportion between the “crimes” he wasn’t even committing at the time and their use of force. And an investigating grand jury did no better.

Vox Popoli: The banality of US evil.

For Pot, Inc., the Rush Begins – and so does the Crony Capitalism


Basic economics dictates how the market can be controlled by politicians and big business to benefit the few at the expense of the many, and that’s exactly what’s happening as New York begins the process of legalizing medical marijuana. Who are the few that will reap the biggest rewards?

In order to implement market controls (note: this is NOT free market capitalism), you must restrict access. From the New York Times story (emphasis mine):

The State Health Department, she said (State Senator Diane J. Savino who was a sponsor of the bill passed last summer), had not yet written guidelines for the medical marijuana program, and the licenses available for companies keen to participate would be few and costly.

That way, only the most well-connected and wealthy can participate.

You tax it heavily:

We can probably take in a couple hundred million dollars a year, minimally,” she said, referring to potential tax revenue.

Um… who do you think is paying those taxes? Consumers who have medical needs. How considerate!

You restrict supply to artificially inflate prices:

When Gov. Andrew M. Cuomo signed the Compassionate Care Act in July, it gave the Health Department 18 months to come up with regulations and choose up to five companies to grow and dispense medical marijuana.

Application costs alone could run to several hundred thousand dollars; start-up costs could top $20 million.

Oh, and did I mention price fixing?:

New York’s health commissioner will set the price of the drug, probably based on the street value.

Which of course means that the street value will adjust dynamically to keep as many black-market customers as possible, and the centrally planned and controlled pricing will never catch up due to bureaucratic lag. This means the black-market will continue to thrive whilst the “legal” market will be strangled and uncompetitive. Capitalism is responsive to market drivers, such as demand vs. price. Socialism (central control by so-called authorities) abstracts the supply from the consumption, which means critical market indicators are disconnected.

And the cronies are all lined up:

Now, for the state’s would-be growers, private equity investors, labor unions, lawyers, lobbyists, consultants, branding firms, suits, stoners and hucksters, the rush is on.

This is the moment when old-guard legalizers meet a new breed of capitalist.

Yep! That new breed? Crony-capitalists!

  • Patrick McCarthy, a lobbyist & once an aide to Gov. George E. Pataki and executive director of the New York Republican State Committee
  • Dean Petkanas, was chief financial officer at Stratton Oakmont
  • Derek Peterson, a former senior vice president at Morgan Stanley Smith Barney (who hired Senator Harry Reid’s son Rory as a lobbyist)
  • The Governor of NY

    Richard N. Gottfried, a Democratic state assemblyman cited an unwritten formula of government regulation:

    “When you make a statute very restrictive — and the governor did that in the last hours — you raise the stakes and create a need for more lawyers and consultants

  •  Cannabis industry cash has begun to flow into New York. Ms. Savino said her campaign donations from out-of-state growers were “around $10,000 or $15,000 — not much.” (But it’s the thought that counts, right?)
  • Unions have also claimed a share. In New York, all licensees will be union shops, a result of two years of lobbying by the United Food and Commercial Workers International Union

And one last big crony-capitalist play – use government regulations to control unwanted competition:

…at the Cannabis and Hemp Association meeting, the aspiring moguls had a regulatory request for Ms. Savino. They wanted more regulation, not less (talking about over-the-counter remedies being sold as non-psychoactive hemp oil or CBD oil)  … Such products are largely unregulated and sell for as much as hundreds of dollars for a small amount. Could the state crack down on them?

Most telling quote in the whole article:

Ms. Savino pulled a bottle of something called Green Cures CBD Oil from her purse, eying it skeptically. “People believe what they want to believe,” she said. “It’s hard to protect people from what they think will help.”

And people thinking that this crony-capitalist “legalization” will help anyone in New York will find that in the long-run it helps no one except those who exploit the voters, tax payers, and consumers, such as politicians, lobbyists, bankers, and union bosses.

 

 

Public Pensions $2 Trillion Short of What They Owe Retirees


“A new report by Moody’s Investors Service finds that public pensions are $2 trillion short of the amount they owe current and future retirees.  “Combined with large unfunded liabilities, aging plan demographics effectively transfer costs incurred by a previous generation onto the present one, increasing the burden on current government operations,” the report stated.”

So what does this mean? Higher taxes to fund the liabilities, cutting of public services (aka austerity), and insolvency. Most likely all three. This is what happens when you pair public employee unions and the politicians who feed off of them.

The next time a union endorses a politician, you can be sure they are in league to fleece the tax payers.

http://feedproxy.google.com/~r/BigGovernment/~3/hatnDRG2fmE/story01.htm

Of Course the People Don’t Want War


“Why of course the people don’t want war… That is understood. But, after all, it is the leaders of the country who determine the policy and it is always a simple matter to drag the people along, whether it is a democracy, or a fascist dictatorship, or a parliament, or a communist dictatorship. Voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked, and denounce the peacemakers for lack of patriotism and exposing the country to danger. It works the same in any country.” – Hermann Goering, Nazi officer

Or you can denounce the peacemakers as “isolationists”. That seems to work as well.