Tuesday, February 18, 2014

Arrogantly Clueless...

So I'm all set to pick apart EJ Dionne's Op-Ed titled Raising the minimum wage is the right idea for the right (not that raising the minimum wage is bad politics [it indeed might work for Republicans], it's just bad economics---particularly for those who work/compete for the minimum wage) when I click on his link to an ABC News interview with "conservative" Silicon Valley millionaire/failed Republican candidate for California governor Ron Unz.

While Dionne's obliviousness (and political bias) with regard to basic economics, given his post at the Washington Post, is almost (but not quite) excusable (or, let's say, understandable), Unz, given his profile, is more than deserving of the following.

I'll begin with the tidbits in Dionne's essay that I couldn't resist, then I'll finish up with the Unz interview.

All Dionne essentially does is cite the "findings" of a few sources that support the notion that, by some magic, raising the cost of labor will defy the basic laws of economics and somehow improve conditions for labor. Sources such as (I'm shocked) Jason Furman and Betsey Stevenson of the White House Council of Economic Advisers, who have figured out just how many millions of folks would receive a raise---and that it would have "little or no impact on employment". No kidding! Mr. Furman and Ms. Stevenson have found decided that employers can literally be forced to pay people more than their productivity warrants and will do little or nothing to compensate for the hit. Okay, they don't presume that we're quite that naive: They conclude decide that
a substantial portion of the cost to employers of minimum wage increases is offset by savings from reduced employee turnover and higher worker productivity.

Nah, they're still insulting our intelligence. Of course we know that if it paid employers---who have firsthand knowledge of worker productivity and the cost of turnover---to pay higher wages, higher wages they would pay. Force employers to pay higher than productivity warrants and, among other measures, they'll pay fewer people going forward. We're talking the most rudimentary economics here.

Here's one more from Dione's article:
In an important article in the economic journal Challenge, “A Conservative Case for the Minimum Wage,” Oren Levin-Waldman, professor of public policy at Metropolitan College of New York, offered a similar view and made compelling moral points. Higher pay “increases the autonomy of low-wage workers,” he said, thus advancing “personal freedom” and “a core concept in conservative thought, which is personal responsibility.” This, in turn, means less dependence “on the largesse of others.”

Well, I don't suspect that Mr. Levin-Waldman pays anyone a salary, for if he did he'd know that forcing employers to pay folks wages above what their productivity supports is the definition of folks depending on the largesse, forced largesse, of others. Of course forced largesse isn't largess at all---it's extraction, if not extortion.

Not that employers aren't inherently charitable people, it's just that they, like everyone else, like to personally direct their personal donations. And I can't imagine that they'll offset the higher cost of labor by reducing support to their near and dear causes. They'll compensate in the business for the higher cost of doing business, in as many ways as you might imagine: Like eliminating employee perks/benefits, and/or employees themselves, like squeezing as much as they possibly can out of every man hour, like employing employee-replacing technology (you've seen those self-checkout lanes), like raising the price of their goods and/or services, etc. And of course the guy/gal looking to get his/her entry-level foot in the door is yet another casualty of one of the most ill-conceived and discriminatory (toward un/low-skilled folks) laws on the books.

Now for the Unz interview:

For starters, I knew something was amiss when ABC News asked Unz whom he voted for in the last election. He said:
To be honest, I didn't like either candidate, Obama or Romney. I think I may have written in Ron Paul's name.

Now that election was in November 2012, right? I suppose I could stop there and just dismiss the bloke altogether. I mean who doesn't remember whom they voted for in a Presidential election held 15 months ago? Or ever for that matter?
ABC: What's behind your advocacy on the minimum wage?

Unz: One aspect of the minimum wage rise, which I think is underappreciated, is [that] it would function as a massive stimulus package, a government stimulus package. If the minimum wage nationwide were raised to $12 an hour, probably between $150 billion and $175 billion a year would go into the pockets of the lower-wage families that spend every dollar they earn. It would cause a tremendous boost in economic demand.

Another important factor: One of the strange things in our society right now is that we have all these low-wage workers who are getting $7.50, $8 or $9 an hour, and because they earn such small wages, the government subsidizes them with billions or tens of billions of dollars of social welfare spending that comes from the taxpayer.

It's a classic example of businesses' privatizing the benefits of their workers while socializing the costs. Forcing the taxpayers to supplement the salary of their own employees.

So Unz would have us believe that the extracting of $175 billion from producers---the folks who provide job opportunities for lower-wage families---and having every dime of it consumed would somehow be good for the economy and, ultimately, for lower-wage families? That the $175 billion in welfare coming out of the pockets of producers wouldn't get passed on to the taxpayer? Really?
ABC: Is there a political reason why Republicans should raise the minimum wage?

Unz: Absolutely. There's been a massive influx of impoverished immigrant workers, which depresses the wages of American workers. The best way of preventing that is a much higher minimum wage.

The reason that businesses hire them is that they're willing to work at such a cheap rate. They're willing to undercut American wages. If the minimum wage were much higher -- say, $12 an hour -- a lot of businesses would hire Americans.

While the influx-of-immigrant-worker argument may seem like basic economics---increasing the supply of labor reduces its cost---further inspection suggests otherwise. Here's Philippe Legrain in his enlightening book Immigrants: Your Country Needs Them explaining why my raisin farmer client has had such difficulty finding workers to pick the crop: 

"the typical migrant from rural Mexico has six years of education and does not speak English, is it really plausible that they are competing for the same jobs at any level? More likely, immigrants take jobs that local workers shun, such as street cleaning and pizza delivery, and thus do not compete with natives at all. So it is not surprising that studies fail to find any evidence to confirm that prejudiced view that immigrants harm the job prospects of local workers."

ABC: But wouldn't companies still hire illegal immigrants and pay them under the table in order to pay them the lower wages they're willing to work for?

Unz: Obviously, some of that would happen. The vast majority of illegal immigrants right now earn above the minimum wage.

Wait a minute! Didn't he earlier say that foreign immigrants are willing to "work at such a cheap rate"? That they're "undercutting American wages"? He then turns right around and suggests that the "vast majority" of them (uneducated and lacking in communication skills as they are) earn above the minimum wage. I suspect he's distinguishing between legal and illegal immigrants, then asserting that the illegals---desperate as they are---earn more than do legals. Oh, that's right, he's not sure whom he voted for in the 2012 election.

Am I being too hard on Mr. Unz? Is my picking on his short-term memory loss (and his ignorance of the facts [and basic economics]) just plain cruel? Okay, I'll stop here. But I have to tell you, it is extremely difficult to be charitable to the likes of Mr. Unz when he is so utterly, and arrogantly, clueless (or doesn't give a rip) as to the cruel effects proposals such as his would have on unsuspecting low-skilled individuals. 

News Flash: the CBO reported today its findings that raising the national minimum wage to $10.10 could cost 500,000 jobs as employers switch to technology "and the like", per the reporter in this CNBC video (I haven't read the report). I happened to catch CNBC's live coverage and, sadly, they didn't include the followup in their video. Their economics reporter, the friendly-to-Washington Steve Leisman, voiced a bit of frustration with the CBO's leaning to one side of the issue. He was disappointed that it didn't acknowledge other economists' findings suggesting that such legislation would have minimal effect on labor. However, he remains unperturbed by the White House's constant clinging to those other economists assertions without acknowledging the plethora of empirical studies---not to mention the commonsense---that supports the CBO's findings. Hmm...

1 comment:

  1. As Spanish novelist, philosopher and poet George Santayana said, "Those who cannot remember [or as I prefer to say 'ignore'] the past, are condemned to repeat it."

    Does anyone know of an earlier minimum wage increase anywhere (state of Federal) that had the predicted outcomes that these White House and other idiots who think they know something about economics are making? None that I'm aware of! The WSJ yesterday ran a great OpEd piece dissecting the economics, and predicting that the CBO's estimated 1/2 million lost jobs at the lowest levels of the "food chain" will have exactly the opposite result of that predicted, greatly expanding the difference in economic wealth between the 'haves' and 'have nots.'