Minimum Wage Foolishness

Once again local liberal op-ed writers are pushing for increases in government mandated wages. According to the latest misguided screed, workers cannot live on fast food minimum wages, fast food chains make buckets of money, the workers are poorly treated and there is a lot of turnover. Solution; the government should force restaurants to pay more. After all 100 economists have signed a letter saying that $10.50 an hour would raise prices of a burger by only a nickel. But it is almost a certainty that none of those economists have worked in or managed a fast food restaurant.

There is so much wrong with the argument for minimum wages, especially a Federal minimum wage, that it is almost a waste of time to rehearse them here because the advocates will never be convinced and those who understand economics and free markets have no need to be reminded.

However, this latest offering contains a remarkable admission for a paper that has strongly supported the President’s policies. It says "The reality is that the economy has contracted so dramatically in recent years that downsized workers who would never have considered a job in fast food are now working there, many to raise families." And why has the economy been so stagnant even though the Federal Reserve has been running the most expansive monetary policy in history for over three years and the Federal government has run massive deficits to stimulate the economy?

In a nutshell, the answer is the administration’s onslaught of stifling regulations from the EPA, the NLRB, the limitations on drilling on Federal lands, and the granddaddy of job killers-Obamacare.

How interesting. Their solution to the damage done by intrusive and excessive government regulations that destroy job growth is more government intrusion and regulation. And when that kills even more jobs, the answer will be more stimulus, more regulation and more income redistribution. This is a movie we have seen too many times already but as long as the American people are easily led by government promises that their lives can be made better by adding more to the deficit, easy money and more constraints on the marketplace, the movie will keep playing.

What’s worse, the liberal media refuse to see the connection between the influx of low skill, illegal immigrants who depress market wages in low skill occupations. And they advocate a path to citizenship for those already here, guaranteeing more will come. So, to keep wages from falling, it will be necessary for the government to raise the minimum wage thereby destroying more jobs. A futile and counterproductive strategy if ever there was one.

Here’s an idea. How about an economy that promotes solid economic growth? That will require an end to crony capitalism, lowering taxes, sensible and reduced levels of regulations, pulling the plug on Obamacare and getting Federal spending under control. But none of this will happen as long the current state of politics prevails in the country.

A Glimpse into Pennsylvania’s Economic Thinking

The debate over privatization of Pennsylvania’s liquor stores has uncovered a very sad and costly lack of understanding of economics and a very strong attachment to union doctrine.

No statement has been more revealing than the comment by a Turtle Creek resident who said she was opposed to privatization because it would eliminate jobs. First of all, private liquor stores will need employees. How will shelves get stocked or sales rung up or bookkeeping and accounting done without employees? Thus, the resident’s comments show either a complete lack of understanding of how business works or belief that if a job is not held by a union employee it does not count. Either way, the opinion of this person reflects the thinking of a large portion of Pennsylvanians. And that thinking remains one of the biggest obstacles to strong job growth in the Commonwealth.

Ironically, the comment came in a report on polling results that found Pennsylvanians view the economy and jobs as very important while the privatization of liquor stores by comparison was only moderately important. Ironic because of the difficulty in creating a pro-growth environment in a state where a huge fraction of voters are still in thrall to the idea that unions create good jobs and where the government has been a hand maiden to union entrenchment in the economy and delivery of public services.

Sometimes a short response to a reporter’s question encapsulates a boat load of information about an issue. The Turtle Creek commenter has done just that.

New PSEA Head Certified to Teach Economics—But What Kind?

The morning news brought the startling revelation that the newly elected head of Pennsylvania’s largest teacher union (PSEA) has a certification to teach economics. Two questions come to mind immediately: what kind of economics is he certified to teach and does it bear any resemblance to real economics?

Bear in mind that the first principle of economics is the law of scarcity. The first principle of unions is to ignore the law of scarcity. Any student with a knowledge of Economics 101 sufficient to get a B grade in the course can tell you that wage rates are a price and that competitive markets for labor are the efficient and best way to allocate labor and determine wages. He would also know that wage rates in different occupations and industries must reflect worker productivity and the price of the product being and sold.

The objective of unions is to do away with market forces and ignore the role of supply and demand. The results, as we have seen, have been catastrophic for U.S. industries such as steel and autos. Now with the Obama administration becoming the heavy-handed advocate in chief for unions, their ability to wreak havoc on the economy is being renewed and the impact on our ability to grow curtailed. When the head of the AFL-CIO is the President’s leading economic advisor, the nation is in serious trouble.

Moreover, and to our great misfortune, in the public sector, where the new PSEA head operates, the forces of international competition can play no countervailing role in suppressing the destructive force of rapacious unionism. Many government services are monopolies that cannot be outsourced. So when unions enter the picture with incessant demands for compensation, favorable work rules and endless grievance procedures, government services become more expensive and are of lower quality than they would otherwise be.

In light of union antagonism to the laws of economics, one must wonder; just what was the nature of the economics covered by the PSEA head’s economic certification?