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As oil and gas prices tumble, it’s a good time to reflect on the marvels of the market and Julian Simon
View related content: Carpe Diem
At today’s price of $2.09 per gallon, gasoline prices in the US are the lowest in history, adjusting for increased fuel economy and higher wages as the chart above illustrates. At today’s average fuel economy of 25.1 miles per gallon, a typical car would require just under four gallons of gas, which would cost $8.32 at today’s price of $2.09. At the estimated average hourly wage today of $20.82, a typical worker would have to work for 24 minutes to earn enough pre-tax income to purchase the gas required to drive 100 miles, and that brings the “time cost of gas” priced in minutes of work to the lowest level in US history.
It’s therefore a great time for us to acknowledge and celebrate the importance of falling gas and oil prices, as Jeffrey Tucker suggests in his excellent and timely article “All Hail the Tumbling Price of Gas: The people against the powerful at the pump.” As Jeff points out, consumers should be especially happy about today’s low gas prices because there are many very powerful special interest groups who are very unhappy that gas prices are approaching $2.09 per gallon (and 43.5% below the $3.70 price in April) and that oil prices are below $50 per barrel.
As Jeff describes it, today’s low gas prices are an impressive tribute to the “marvels of the market” and he points out that there are at least eight very powerful special interest groups who benefit from high prices for gas and oil, and they hate today’s low prices. But even the combined power of those eight powerful groups hasn’t been able to counteract the powerful market forces that have brought gas prices down so quickly and dramatically:
Despite it all — and despite every effort by the world’s most powerful people — all the pressure is downward. It’s a shock, to be sure, but a glorious one. The low price comes about despite a vast and unrelenting barrage of policies and attempts to raise it. Think for a moment of all the powerful interests in the world that have pushed for higher gas prices only to see their ambitions frustrated by a reality they despise.
1. The environmentalists are desperate for higher prices because they are against driving and internal combustion generally, which they believe spoil the planet. They want us pedaling around on bicycles as in Mao’s China or enduring mass transit, or slogging from place to place on foot. They’ve been hectoring us about this for decades. A high price for gas is the best way to bring about their dream to discourage consumption. They cringe with every penny drop. “Fracking” is their F-bomb.
2. And don’t forget about the gloom-and-doom industry. It was only some 10 years ago that “peak oil” theorists were explaining to us how oil was running out and prices were going to soar. We’d better start hoarding, they said, because soon the pumps will be dry. How wrong they were. The new gloomers are all about the supposedly terrible glut of oil.
3. The oil industry itself is similarly unhappy with lower prices because they devastate profits and make it impossible to fund more drilling, production, and exploration. When the oil industry was closest to the presidency, under the Bush years — both father’s and son’s presidencies — it worked to keep prices and production high. Even war for oil became part of this strategy. The industry’s benchmark price is $100 per barrel of crude. But it has no power to make that happen. That’s because the oil industry doesn’t finally control the price of its product.
4. Some of the world’s richest and most powerful states, from Saudi Arabia to Russia to Iran to the United Arab Emirates, consider high oil prices to be their lifeblood. A US gas price that is double or triple the current one could mint a slew of new billionaires. As it is, the rich and mighty just sit watching the price and weep with their heads in their hands. How pathetic was the statement by King Abdullah of Saudi Arabia who said in a speech that he would deal with a lower price “with a firm will”? Will as much as you want, Your Highness, but it is not going to matter. Your will is not decisive. No one’s is.
5. In the United States, both states and localities depend on oil for their entire revenue stream. Politicians in places like Alaska, Texas, and Louisiana are actually in emotional meltdown about this price trend. If they could fix it, they would.
6. Then there are the urban planners — not to speak of legions of intellectuals — who loathe lower prices. They want prices to soar to punish all us drivers and get us to use their subways, buses, and taxi monopolies instead. That we keep insisting on sitting in our comfy bucket seats and driving these machines around makes them crazy. Low gas prices only encourage us to do more of what we love — and what they hate.
7. It’s been a huge priority for government generally to subsidize alternative energies, ones that don’t depend on fossil fuels. So long as gas remains affordable, alternative fuels will not get the boost that regulators want them to.
8. Then there are the central banks run by people who are convinced that falling gas prices are a bad omen of generalized deflationary trends. For five years, they’ve fought relentlessly against deflation, but there is a crucial thing they can’t control: the rate at which people themselves spend and borrow. There’s the rub. It’s because consumers haven’t cooperated that the Fed has not achieved its aims.
Jeff finishes his article with this excellent summary of “power of the market” and the “power of market prices”:
If the market price were a person, he or she would be the wisest, most clever, most powerful person on the planet, causing the multitudes, even the ruling class with enough weaponry to destroy the planet, to submit and bow down in awe. The simple and unassuming price — so humble and yet so decisive for human decision making — is this concise point of data, a mere number, that actually causes nations to rise and fall, topples the mighty, and humbles the arrogant with its truth-telling, rational, and yet unpredictable movements.
Those who want to rule the world fear the market price for this reason, but peaceful people experience it as a gentle force that grounds our daily lives in reality in the midst of artificiality, pomp, and phoniness. The powerful can shake their fists at it, the intellectual class may curse it, and the moralists can denounce it, but no one can make it obey the dictates of those who purport to stand above it, much less make it go away.
The market price is our salvation from the despotism of those who would rule us. The price of gas is a lovely example. And who benefits in the end? You and I. All the activities of the market are ultimately directed toward pleasing the consumers, the 99 percent who are the real rulers of the world. The 1 percent have no power in the face of global forces of competition, supply, and demand.
Take comfort from the gasoline price. It indicates that the powerful aren’t really what they believe they are. In the long run, decentralized markets always outpace and outwit the ability of elites to dictate and manipulate them. Every penny by which the price drops signals to the world: freedom can prevail even in a world in which the powerful are conspiring to destroy it.
Bottom Line: With the price of gasoline at its lowest level ever when adjusted for fuel economy and measured in “time cost,” it’s a great time to celebrate the “marvel and power of the market and market prices” and Jeff Tucker does that exceptionally well in his article. Resource economist Julian Simon must be smiling right now because he predicted throughout his noteworthy career that the prices of commodities and resources would generally trend downward in the long run due to market forces, innovation, and technology. Today’s low gas and oil prices are an appropriate tribute to Julian Simon, and a compelling confirmation of his many decades of work and writing on resource economics.
No polling organization would ever be taken seriously if its sample size was 73, and neither should this ‘study’ on college rape
View related content: Carpe Diem
Trigger Warning: If you get upset when confronted by facts and accurate statistics about campus sexual assault, please stop reading now!
A “study” conducted by “researchers” at the University of North Dakota and North Dakota State University (“Denying Rape but Endorsing Forceful Intercourse: Exploring Differences Among Responders“) and published in the journal Violence and Gender claims to find that almost one in 3 college men would commit rape “if nobody would ever know and there wouldn’t be any consequences.” Oy vey, where to begin on this one?
1. Sensational Headlines. Let’s start with a quick review of the headlines of media reports on the “study” (via Katherine Timf at NRO): a) “Study: 1 in 3 Men Would Rape if They Wouldn’t Get Caught or Face Consequences” (Cosmopolitan), b) “Study Finds That a Third of College Men Would Rape if They Could Get Away With It (Feministing), c) “1 in 3 Male University Students Would Sexually Assault a Woman “If They Could Get Away With It” (Crave Online), and d) “1 in 3 College Men Admit They Would Rape If We Don’t Call it ‘Rape’” (Jezebel). As Tom Blumer reported, the “feminist-leftist fever swamp is apparently thrilled” about this “study,” since it obviously fits the narrative of a campus rape epidemic, even though the facts on campus sexual assault fail to support that narrative.
2. The “Study” Starts with a Discredited Claim About Campus Sexual Assault. Here’s the opening sentence of the paper’s introduction: “The Federal data estimate that about one in five women becomes the victim of sexual assault while in college…..” Federal data, frequently cited by the White House and media, also estimate that “on average only 12% of student victims report the assault to law enforcement.” As I’ve pointed out many times here, those two “federal data” are mathematically contradictory and can’t possibly both be true when actual college crime data on sexual assaults are analyzed.
For example, analyses of the reported campus crime data at the two campuses of the “researchers” reveal the following:
a. At North Dakota State University (NDSU) there were 13 campus reports of sex offenses in the four years between 2010 and 2013 both on campus and off-campus. If only 12% of campus sex offenses were reported, there would have been 95 cases that went unreported, for a total of 108 sexual assaults from 2010-2013 (see top chart above). Based on the 6,355 female students at NDSU, the estimated 108 cases of sexual assault (13 reported and 95 unreported) over the last four years means that about 1.7% of NDSU female students, or 1 in 59, were victims of sexual assault. A similar analysis for the University of North Dakota (UND) reveals that over the last four years there were 34 reported sexual offenses, an estimated 249 unreported cases (based on a 12% reporting rate), for a estimated total of 283 cases of sexual assault (see bottom chart above). Based on female enrollment at UND of 6,572, that would mean that 4.3% of UND female students, or 1 in 23, were victims of sexual assault between 2010 and 2013.
The most federal data from the Department of Justice on campus sexual assault was released in a December report titled “Rape and Sexual Assault Victimization Among College-Age Females, 1995–2013.” Data provided in that report suggest that about 1 in 53 college women are victims of sexual assault while in college.
So the “study” in question by the researchers in North Dakota starts with a completely false and discredited claim about campus sexual assault (as campus crime data from their own campuses verifies), and goes downhill from there.
3. Unbelievably Small Sample Size. The biggest reason that this “study” should be completely ignored and receive no media attention is that its results and conclusions are based on a sample size of only 73 male students at one of the North Dakota universities (it’s not clear from the “study”). Those 73 male students were compensated with “extra credit for their participation,” so were presumably all taking the same college class and were therefore not randomly selected from the male student population. More troubling is the fact that the “margin of sampling error” for a tiny sample size of 73 is about +11.5%, which is such a huge margin of error that the results of this “study” can’t be taken seriously. Interestingly, the “researchers” never mention the standard statistical terms for survey-based results like “margin of sampling error” and “confidence level,” etc.
Statistically, the results of this “study” based on 73 responses are meaningless and certainly cannot be extrapolated to the entire 9 million male college student population of the US as the sensational headlines like “Study Finds That a Third of College Men Would Rape if They Could Get Away With It” suggest.
4. Violence and Gender. Finally, let’s take a look at the journal Violence and Gender that published this “study” and publicized it in a press release provocatively titled “What Motivates Males Who Commit Sexual Assault on Campus?” – see excerpt below:
“These authors describe the numbers as staggering, and we know it is one of the most concerning crimes in the country today,” says Violence and Gender Editor-in-Chief Mary Ellen O’Toole, PhD, Forensic Behavioral Consultant and Senior FBI Profiler/Criminal Investigative Analyst (ret.). “Sexual assault on college campuses is the pink elephant in the room. It is a crime that is underreported and misunderstood. In this article, researchers look at how callous sexual attitudes of some males who do not have feelings of hostility toward women can still engage in forced intercourse with a victim, and consider their behavior as an achievement rather than rape. The implications for these findings are extremely significant for education programs about sexual aggression and rape prevention and the development of a more accurate identification of subtypes of offenders based on their motivation, cognition, and personality traits.”
Note: These findings are not “staggering” and there are no “implications” for these “findings” based on a non-random sample size of 73 at one university.
Further, the stated mission of the Violence and Gender journal is to explore “the difficult issues that are vital to threat assessment and prevention of the epidemic of violence.” Has the journal bothered to check the data on violent crime in America lately? Because if they did, they would find that there is no “epidemic of violence” and in fact it’s exactly the opposite: violent crime in the US has fallen by 52% from the peak in 1991 was lower in 2013 than in any year since 1970, more than 40 years ago (see chart below). See also the Washington Post Wonkblog post today “No one can figure out why crime is so low.”
Bottom Line: To fully comprehend just how bogus this “study” is, imagine the public and media reaction if a polling organization like Gallup, Rasmussen Reports or Pew Research ever tried to release survey results on presidential or Congressional approval or any other topic with a sample size of 73 and a sampling margin of error of +11.5% (instead of the typical random sample of around 1,000 that is necessary to achieve the standard +3% margin of error at the 95% confidence level)! Those polling organizations would immediately lose credibility and would never be taken seriously again by the public and media – and that should be the same reaction to this “study,” these “researchers” and this “journal.”
As Glenn Reynolds commented on Instapundit, “If the lead researcher, Sarah Edwards, had done similarly shoddy and result-oriented scholarship about race she’d be drummed out of the academy. But shoddy research that makes men look like rapists is stylish now.”
For further reading on this “study” see:
3. ‘1 in 3 College Men Would Rape a Woman’ Stat is Based On a Survey of 73 Dudes by Katherine Timpf.
Using White House claim of a 12% reporting rate, only 1 in 37 women at Michigan State are sexually assaulted, not 1 in 5
View related content: Carpe Diem
Last June, George Will wrote an op-ed (“Colleges Become the Victims of Progressivism“) about the “supposed campus epidemic of rape” that stirred up a national controversy and elicited a crititcal response from four Democratic senators (see his response here) and resulted in Will’s syndicated column being dropped by the St. Louis Post-Dispatch. In that controversial op-ed, Will wrote the following:
The [Obama] administration’s crucial and contradictory statistics are validated the usual way, by official repetition; Joe Biden has been heard from. The statistics are: One in five women is sexually assaulted while in college, and only 12 percent of assaults are reported. Simple arithmetic demonstrates that if the 12 percent reporting rate is correct, the 20 percent assault rate is preposterous. Mark Perry of the American Enterprise Institute notes, for example, that in the four years 2009 to 2012 there were 98 reported sexual assaults at Ohio State [updated here on CD for years 2010 to 2013]. That would be 12 percent of 817 total out of a female student population of approximately 28,000, for a sexual assault rate of approximately 2.9 percent — too high but nowhere near 20 percent.
In December, George Will was invited to speak at Michigan State University’s commencement ceremony, and that appearance provoked protests both at the graduation event (some students and guests turned their back on Will during his 15-minute talk) and outside MSU’s Breslin Center (about 250 protesters displayed signs protesting Will’s address). Previous attempts to get Will’s graduation appearance canceled, including a petition signed by 70,000 people and a 30-student sit in at MSU President Lou Ann Simon’s office, were unsuccessful.
In the wake of the controversy about inviting George Will to campus, President Simon defended the university’s decision in this letter but agreed to convene a town hall meeting as early as possible this semester, in recognition that George Will’s campus visit was “painful for many” (obviously the MSU students hadn’t been given a proper “trigger warning” about Will’s visit?). The purpose of the town hall meeting?
To allow members of the MSU campus community to share thoughts following the fall commencement, as well as to offer perspectives and approaches for addressing sexual assault and its impact on our community.
Perhaps a statistical analysis, similar to the one for Ohio State that George Will summarized in his column, using actual MSU campus crime data for sexual assault would be helpful for President Simon’s upcoming town hall meeting. I’m happy to provide that analysis below.
Background: In a January 2014 report titled “Rape and Sexual Assault: A Renewed Call to Action” (which led to the creation of the “Task Force to Protect Students From Sexual Assault” headed by Biden), the White House made the following two statements:
White House Statement 1. Sexual assault is a particular problem on college campuses: 1 in 5 women has been sexually assaulted while in college.
White House Statement 2. Reporting rates for campus sexual assault are also very low: on average only 12% of student victims report the assault to law enforcement.
There’s a huge, irreconcilable statistical problem here. Using actual reported crime statistics on sexual offenses at almost any US college like MSU and applying the White House claim that only 12% of campus sexual assaults actually get reported, we have to conclude that nowhere near 1 in 5 women are sexually assaulted while in college. Alternatively, if the “1 in 5 women” claim is true, the percentage of sexual assaults that get reported to the campus police would have to be much, much lower than 12%. In other words, the two claims made by the White House are mathematically contradictory and they therefore both can’t be simultaneously true when actual college crime data on sexual assaults are analyzed.
Here’s an analysis of sexual assaults at Michigan State University, summarized in the table above.
Trigger Warning: If you are upset by the accurate reporting of facts, statistics and data about campus sexual assault please stop reading now.
Over the most recent four-year period from 2010 to 2013, there were 82 reports of “forcible sexual offenses” to MSU’s Department of Public Safety (see campus crime reports here and here), which included incidents that allegedly took place on campus, in university residence halls, on non-campus properties including fraternity and sorority houses, and on public property adjacent to or accessible from the campus. Using the White House claim that only 12% of campus sexual assaults get reported, there would have been 601 unreported forcible sexual offenses at MSU during that period, bringing the total number of sexual assaults (reported + unreported) to 683 (see table above).
The MSU campus in East Lansing has a total student population of about 50,000 and roughly half of the students are female. Dividing the 683 estimated sexual assaults over a four-year period (82 reported and 601 unreported) into the 25,000 MSU female students would mean that only 2.73% of MSU women, or about 1 in 37, would be sexually assaulted while in college over four years. Certainly that’s still too high, but not even close to the White House claim that one in five (and 20% of) female students are sexually assaulted while in college.
Further, these calculations make the assumptions that: a) 100% of the 82 forcible sexual offenses at MSU from 2010-2013 were male on female incidents (and none were female on male, male on male, or female on female), b) none of the 82 reported offenses were filed falsely or later retracted (see recent example here of a campus sexual assault that was falsely reported and later retracted), c) all of the 82 reported cases involved MSU students and none were reported by MSU faculty and staff, by students from other universities or by non-students. If any of those three assumptions don’t hold perfectly, the 2.73% figure above would be even lower, and the 1-in-37 ratio would be under-stated.
Another reality check: For the “1 in 5 women” claim to be true at MSU, that would mean that approximately 1,250 campus sexual assaults on female students take place every single year (20% of 25,000 over four years, divided by 4), which would mean that there would have to be more than three cases of campus sexual assault every single day of the year, or about one every seven hours! If MSU really was such a crime-infested campus with sexual assaults taking place every seven hours, and with a violent crime rate worse than the most crime-ridden neighborhoods of cities like Detroit, why would any sane parent even consider sending their daughter to MSU?
President Simon: Just some food for thought for your upcoming town hall event. A good starting point for “addressing sexual assault and its impact on our community” might be to start with accurate and truthful statistics on campus sexual assault, and not false, exaggerated and discredited statistics like the “1 in 5 women” claim. After all, victims of sexual assault and violence are best served by the truth, not by wildly exaggerated, unsubstantiated, agenda-driven half-truths.
The Fed’s $3.5T QE purchases have generated almost half a trillion dollars for the US Treasury since 2009
View related content: Carpe Diem
The Federal Reserve just released its annual income statement for 2014, including details on its annual distribution of “residual earnings” to the US Treasury. Last year the Fed earned net income of $101.5 billion, primarily from “$115.9 billion in interest income on securities acquired through open market operations (U.S. Treasury securities, federal agency and government-sponsored enterprise (GSE) mortgage-backed securities (MBS), and GSE debt securities). Note that “acquired” means that the Fed was able to purchase about $474 billion in securities last year in its “open market operations” without any real assets, deposits or money, bringing its total portfolio of securities “acquired” to $4.236 trillion at year end 2014, see red line in chart above. The “acquisition” of $4.236 trillion in marketable securities was mostly the result of the Fed’s monetary expansion known as QE1, QE2 and QE3 that started in 2008 in response to the Great Recession. At the end of 2007, the Fed held “only” about $750 billion in Treasury securities, which then grew to a portfolio of almost $4.25 trillion by December 2014 after the Fed “acquired” almost $3.5 trillion in Treasury securities ($1.7 trillion in purchases from 2008 to 2009) and mortgage-back securities ($1.75 trillion from 2009 to 2014).
That’s how expansionary monetary policy (including QE) works – the Fed uses what I call its “magic check book” to purchase securities in the open fixed-income market by writing checks to individuals, organizations and/or financial institutions on an account that has no funds. If a private party tries to acquire assets that way, it’s called check forgery, writing a bad check, or bank fraud; when the Fed does it, it’s called “monetary policy” or “open market operations” or “acquiring securities” or “QE.”
On its $4+ trillion portfolio of fixed-income securities, the Fed earned an average interest rate of about 3%, which generated the $116 billion of interest income last year for the Fed. To provide context for that amount of interest income, consider that all nearly 7,000 FDIC-insured US banks together earned only $116 billion in net income during the first three quarters of 2014, and will probably end up with about $155 billion in net income for the whole year.
After accounting for operating expenses and other costs (currency issue, interest expenses, dividends, etc.), the Fed paid “residual earnings” to the US Treasury last year of $98.7 billion, see blue bars in chart above. That annual Fed distribution to the Treasury was the largest ever, and brings the total amount distributed since QE started in 2008 to almost half a trillion dollars — $469 billion in the six years from 2009 to 2014.
That was a point made today by the WSJ in its staff editorial “The Fed Cash Machine,” which pointed out that QE has made the Fed’s annual distribution of “residual earnings” a significant revenue source for the US Treasury:
For perspective, the entire federal budget deficit for fiscal 2014, which ended in September, was $483 billion. Without the Fed’s windfall, it would have been nearly $100 billion more. Corporate income tax revenue in 2014 was $321 billion, so the Fed turned over nearly 30% of the amount provided by every American corporation.
Treasury is spending the Fed’s windfall, naturally, which means that when the QE boom ends the country will have to spend that much less or find the revenue somewhere else. The danger is that politicians are getting used to the money, which is one more reason for the Fed to begin winding down its balance sheet sooner rather than later.
Bottom Line: While the record transfer of almost $100 billion from the Fed to Treasury last year has gotten some media attention, what hasn’t been reported, except by the WSJ today is this: The monetary expansions known as QE1, QE2, and QE3 ended up being a gigantic transfer of wealth from the private sector to the public sector. By “acquiring” almost $3.5 trillion in assets with a “magic checkbook” that were previously held largely by private investors and the private sector, those trillions of dollars in Treasury and MBS securities, along with the billions of dollars in interest income those securities generate, got transferred to the Fed, which has then transferred almost half a trillion dollars in residual interest earnings to the US Treasury in the last six years.
Q: Is that fair/accurate to describe QE1, QE2 and QE3 — as monetary policies that ultimately transferred billions of dollars in private wealth to the US Treasury via the Fed? Or is it more accurate to describe it as printing money to finance the government’s budget deficit disguised to look like monetary policy, since the bond holders got paid for their securities? (Thanks to Jeff Dorfman for help with that second description.)
Update 1: Or here’s how Jon Murphy describes it in an email: “The Fed is just printing money and giving it to the Treasury but ‘laundering’ it through bonds.”
Update 2: Another way to think of the Fed’s $3.5 trillion acquisition of assets through QE1, QE2 and QE3 is to view the Fed as the “world’s largest hedge fund” — see posts by Scott Grannis here and here for details.
View related content: Carpe Diem
…. is from the editorial pages of today’s Wall Street Journal (“The ObamaCollege Plan”):
The new entitlement [“free” community college] is best understood as an extension of the Administration’s ideological project to add higher education to the list of entitlements that keep the federal government in charge of American life from cradle to grave…… The ObamaCollege plan is everything we’ve come to expect from this White House.
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No one has more steadfastly, consistently and vigorously brought economy sanity, logic and reason to the issue of the minimum wage law government-mandated wage floor that guarantees reduced employment opportunities for America’s teenagers and low-skilled workers (especially minorities) than George Mason University economics professor Don Boudreaux. On his Café Hayek blog, Don has for many years regularly covered the minimum wage issue with his wisdom, wit, and keen economic thinking, and I applaud his ongoing efforts to educate his readers, students and (hopefully, some day maybe) policymakers about an important economic issue.
In several recent posts, Don has emphasized a very important, but usually overlooked or neglected reason that some empirical studies fail to find negative employment effects following increases in the minimum wage government-mandated wage floor that guarantees reduced employment opportunities for America’s teenagers and low-skilled workers (especially minorities). That reason has to do with the fact that the minimum wage has been in effect for almost 80 years since the Fair Unfair to Unskilled Labor Standards Act was passed in 1938, and it’s been increased 27 times since then. Therefore, the government’s mandated market-suppressing, artificial wage for low- and un-skilled workers has been around for such a long time, and it’s been raised so many times, that the distortionary effects of the minimum wage have long ago been “internalized” by employers who hire unskilled workers. Don explains that phenomenon in a recent blog post where he schools Washington Post columnist Steven Pearlstein about his “simply poor economic journalism,” and provides this additional commentary:
Empirical studies today of the effects of changes today in the minimum wage are biased against finding negative employment results because many of the negative results of minimum-wage legislation have long ago been ‘internalized’ into the economy due to the fact that the minimum wage has been in existence in the U.S. for almost 80 years.
It would be like empirically studying today the effects of a recent rise in the minimum-allowed price of strawberries if strawberries had long ago been made unnecessarily pricey by minimum-strawberry-price legislation. Consumers would long ago have switched their diets away from strawberries; chefs would long ago have begun concocting fewer desserts and recipes with strawberries and more with other fruits and berries. Other ingredients would have become staple substitutes for strawberries in consumers’ diets and in chefs’ dishes and recipes. Farmers, in turn, would have – despite the formal, legislated higher list price for strawberries – either totally abandoned or significantly abandoned strawberry production. Many producers who would otherwise, in the absence of the minimum-strawberry-price legislation, grown and sold strawberries, wind up more and more as the years pass producing other berries that are not burdened with price controls. So when an empirical study is done of the effect on strawberry sales of, say, a 10 percent or even of a 100 percent hike today in the minimum price of strawberries, the detected empirical effects will underrepresent the full depressing impact that a legislated minimum price of strawberries has on the market for strawberries.
In other words, we would expect a huge difference in the possible, detectable negative employment effects between: a) the highly likely, inevitable 28th increase in the federal minimum wage from $7.25 to $10.10 per hour (or something close to that) in the next few years, the effects of which have already been internalized and incorporated into business and staffing decisions over the last 80 years, and b) the imposition for the first time of a government-mandated minimum wage of $10.10 per hour, which didn’t follow 27 previous increases over almost 80 years.
It’s also important to note that increases in the federal minimum wage follow years of highly publicized debate and are therefore fully anticipated by employers well in advance of the actual implementation of a minimum wage hike. For example, the current proposal to raise the minimum wage to $10.10 per hour came from President Obama in his January 2014 State of the Union address. Assuming that a $10.10 per hour minimum wage will likely eventually become a reality, it might be another year or more before it will take effect, giving employers several years of advance notice that a higher minimum wage is inevitable, and giving them incentives to prepare today for the inevitable 39% increase in their labor costs for unskilled workers. Those preparations might include investing today in labor-saving technologies like robots and self-ordering kiosks that McDonald’s and other restaurants are introducing to replace cashiers and servers.
Therefore, Don highlights an important point that the distortionary effects of government-mandated price controls on unskilled labor markets have been internalized by employers for so long, along with the fact that future labor market distortions are so widely anticipated well in advance, that empirical studies will be generally biased against finding negative employment effects of new minimum wage increases.
Don made his case that employers have had almost 80 years to adjust to the distortionary effects of government price controls on unskilled labor in a letter to the Washington Examiner on December 9, 2014:
Jason Russell nicely summarizes the much-discussed new study that finds that raising the minimum wage destroys jobs for many low-skilled workers (“New evidence that the minimum wage kills jobs,” Dec. 9). Yet even this careful study underestimates the damage that minimum-wage legislation inflicts on the job prospects of the unskilled.
Employers in the U.S. have now had 76 years to adjust to the existence of this regulation that makes unprofitable the hiring of the lowest-skilled workers. One result is that business and labor practices that would have employed legions of low-skilled workers in the absence of a minimum wage were either long ago snuffed out or never created. Empirical studies today, therefore, can at best detect only changes in employment at existing firms that use existing business practices – firms and practices that, having evolved in an economic environment with a minimum wage, were never suited to employ as many low-skilled workers as would be employed by businesses that evolved in an environment without a minimum wage.
Raising the existing minimum wage does indeed destroy some jobs. But even the most accurate measurements of today’s job destruction offer no clue to the full magnitude of the vast amount of economic opportunities that the minimum wage denies to the poor and unskilled.
Another important point: Why do some retailers actually support raising the minimum wage? Is it out of compassion and concern for unskilled and low-skilled workers? Or could it be in their self-interest to raise labor costs disproportionately on some of their competitors because those apparently “compassionate” retailers are already paying their workers wages that are above the federal minimum?
In a letter to the WSJ on January 7, 2015 (“Suspect Retail Motive On Minimum Wage”) Don explains why “there’s something suspicious about some retailers pleading with government to force all employers to raise wages”:
Labor Department official David Weil justifies his support for raising the minimum wage in part by recounting that the majority of retailers he met at a National Retail Federation conference pleaded with him to raise the minimum wage (“Wage-Law Enforcer Favors Proactive Approach,” Dec. 31).
Such pleading by some retailers for a higher minimum wage is not as clear a sign as Mr. Weil would have us believe of the wisdom of raising that wage. For starters, every retailer is free to raise its wages on its own. And because raising its wages when other employers don’t allows the wage-raising firm to attract a larger and better pool of employees than it attracts when all firms raise wages, there’s something suspicious about some retailers pleading with government to force all employers to raise wages.
I have a good idea what that something is. The retailers who begged Mr. Weil for a higher minimum wage likely have wage scales well above the industry norm; they rely less intensely than do their competitors on minimum-wage workers. Raising the minimum wage, therefore, would impose heavier burdens on their competitors than on themselves. Mr. Weil’s retailer friends thus see a hike in the minimum wage as a way for government to artificially improve their profitability by bankrupting, or at least throttling, many of their rivals.
Bottom Line: Kudos to Don Boudreaux for his ongoing and tireless efforts to regularly expose the numerous flaws of the minimum wage law government-mandated wage floor that guarantees reduced employment opportunities for America’s teenagers and low-skilled workers (especially minorities, see chart below).
View related content: Carpe Diem
2014 was a very interesting year for gender-related issues that included former White House press secretary Jay Carney struggling (squirming?) at a press conference in April to defend the 13% gender pay gap at the White House at a time when Obama was busy signing two executive orders concerning fair pay for women working for federal contractors, a perennial debate about how much gender discrimination contributes to the unadjusted 23% gender pay gap nationally, a media frenzy about an alleged campus sexual assault/rape epidemic, an op-ed about the “supposed campus epidemic of rape” by George Will that stirred up a national controversy and elicited a response from four Democratic senators and resulted in Will’s syndicated column being dropped by the St. Louis Post-Dispatch, and a horrific, but later discredited, report in Rolling Stone magazine about a gang rape of a female University of Virginia student by seven different men in a fraternity house while the victim was lying on shards of glass. To help summarize last year’s top gender-related stories, I present here my Top Ten Gender Charts of the Year for 2014.
1. US Rape Rate. In November of last year, the FBI released its final report on crime statistics in the United States for 2013, and the chart above shows the rate of rape in the US per 100,000 inhabitants annually from 1973 to 2013. Remarkably, despite all of the media reports about a “rape epidemic” in the US, especially on college campuses, the rape rate fell to a 40-year low in 2013 at 25.2 cases per 100,000 persons (about 1 for every 4,000 persons) — the lowest rate since 1973, and more than 40% below the peak rate of 42.8 rapes per 100,000 persons in 1992.
How much media attention did the decline in the US rape rate to a 40-year low in 2013 generate? If you answered “none,” that would almost be an overstatement. A Google search of the millions of articles and documents available on the Internet for the phrase “falling U.S. rape rate” incredibly finds not a single result. A search for the term “falling rape rate” yields only four results from all of the millions of documents available. Now try a Google search for “rising rape rate” or “rape epidemic” and you’ll get almost 5,000 and more than 100,000 results, respectively. So much for fair and balanced reporting and media coverage on the historic decline in the US rape rate to a 40-year low in 2013.
2. Department of Justice Report on Rape/Sexual Assault of Young Females. The Department of Justice (Bureau of Justice Statistics) released a report in December titled “Rape and Sexual Assault Victimization Among College-Age Females, 1995–2013.” The report was based on the National Crime Victimization Survey of women ages 18-24 for both reported and unreported cases of rape and sexual assault. Rape and sexual assault include: a) completed and attempted rape, b) completed and attempted sexual assault, and c) threats of rape or sexual assault, so the study provides a pretty comprehensive analysis of rape and sexual assault among young women. The report includes both: a) students (enrolled in college, university, trade school, or vocational school) and b) nonstudents for the 18 to 24 age group, which allows for a comparison of “campus rape/sexual assault” and offenses that take place for that age group among nonstudents. Here are some of the report’s findings:
a. Over the 1995-2013 period, the rate of rape and sexual assault victimization was almost 25% higher for nonstudents ages 18-24 (7.6 cases per 1,000 females) compared to students enrolled in a post-secondary institution in that age group (6.1 cases per 1,000 females), see chart above. So despite all of the media attention on campus sexual assault, women enrolled in colleges and universities are actually significantly safer compared to women in that age group who are not attending a post-secondary institution.
b. Over the 1995-2013 period, the rate of rape and sexual assault victimization for both students and nonstudents has been falling (see chart). For women attending college, the rate of rape/sexual assault has fallen by more than 50% over the last several decades, from 9.2 incidents per 1,000 women in 1997 to 4.4 cases per 1,000 in 2013. According to the media, politicians and gender activists, there is supposed to be a college “rape epidemic” when in fact, the rate of college female victimization has been trending downward for almost 20 years (consistent with the decline in overall US rape rate shown above in the first chart).
3. About 1 in 52 College Women Have Been Victims of Sexual Assault or Rape. What might be the most important statistic in the December DOJ report (and was not actually provided in the report and was not reported by the mainstream media) is that the data reveal that only about 1 in 41 women were victims of rape or sexual assault (threatened, completed and attempted; and reported and unreported) while in college for four years during the entire period investigated from 1995 to 2013, based on this analysis:
6.1 women per 1,000 = “1 in 163.9 women” per year, and over four years attending college would then be = “1 in 41 women” while in college. Because the victimization rate has been trending downward, that same analysis using data from the last four years (2010 to 2013) reveals that 1 in 52.6 women have been sexually assaulted or raped in recent years (see table above).
Those recent DOJ findings contradict the repeated claims made in the media and by the White House that “1 in 5 women has been sexually assaulted while in college,” based on the questionable results from a DOJ-funded web-based survey of 5,400 college women in 2006 at two undisclosed, large public universities. Another DOJ-funded study, quoted frequently by the White House and media, found that “on average only 12% of student victims report the assault to law enforcement.” As George Will pointed out in his controversial June op-ed (based on my analysis of Ohio State crime data, highlighted in the next item below): “Simple arithmetic demonstrates that if the 12% reporting rate is correct, the 20% assault rate is preposterous.” That is, actual campus crime statistics demonstrate that either the actual reporting rate has to be much, much lower than 12% to mathematically support the 20% assault rate, and/or the actual assault rate has to be much, much lower than 20% to mathematically support the 12% reporting rate assumption. See below for further discussion and analysis.
4. If 12% of Campus Sexual Assaults at Ohio State Are Reported, Then the “1 in 5″ Claim Can’t Possibly Be True Mathematically. As mentioned above, the two assumptions publicized extensively by the White House and the media: a) 1 in 5 women is sexually assaulted while in college and b) only 12% of college women report the assault to law enforcement, can’t both simultaneously be true and are in fact mathematically contradictory when actual college crime data on sexual assaults are analyzed.
For example, over the most recent four-year period from 2010 to 2013, there were 104 cases of “forcible sexual offenses” reported to the Ohio State University’s (OSU) Department of Public Safety, which included incidents that allegedly took place on campus, in university residence halls, on non-campus properties including fraternity and sorority houses, and on public property adjacent to or accessible from the campus. Using the White House claim that only 12% of campus sexual assaults get reported, there would have been 763 unreported forcible sexual offenses at OSU during that period, bringing the total number of sexual assaults (reported + unreported) to 867 (see table above).
The Columbus campus of OSU has a total female student population of about 28,000. Dividing the total 867 estimated sexual assaults (104 reported and 763 unreported) over the most recent four-year period into the 28,000 OSU female students would mean that only 3.1% of OSU women, or about 1 in 32.3, would be sexually assaulted while attending college. Certainly that’s still too high, but not even close to the White House claim that one in five (and 20% of) female students are sexually assaulted while in college.
From similar analyses of campus crime statistics, I showed last year that the rate of sexual assault at various major colleges was: University of Florida (1 in 79), University of Wisconsin (1 in 20), University of Texas (1 in 39), University of Michigan (1 in 18.5) and the University of California-Berkeley (1 in 32).
5. For the “1 in 5″ Claim to Be True at OSU, What Percent of Campus Sex Offenses Would Go Unreported? Continuing with OSU campus crime data, we could ask the question: For the “1 in 5 women” claim to be true, what level of under-reporting would support that claim based on the actual reported assaults over the last four years? If one of every five of OSU’s 28,000 female students had been sexually assaulted during the four years from 2010 to 2013, there would have been 5,600 sexual assaults during those four years – an average of 1,400 sexual assaults every year and almost 4 every single day of the year. For that to be true, fewer than 2% of the actual sexual assaults would have been reported, and more than 98% would have to go unreported as the analysis above shows. Further, that rate of sexual assaults on women at OSU and other colleges (5% per year) would mean that the violent crime rate on college campus is significantly worse than the most crime-ridden cities in America like Detroit, where the violent crime rate for rapes AND murder, robberies and assaults was only 2.1% in 2013!
If we’re to believe the “1-in-5″ claim, then we’d have to wonder and explain why parents continue to send their daughters in record numbers to college campuses that have a higher violent crime rate than some of the worst crime-infested neighborhoods in cities like Detroit. Most of those parents wouldn’t even drive through certain sections of Detroit during the day, but they’ll send their daughters to live on college campuses for four years with violent crime rates that are even higher than the Motor City? If you don’t believe that college campuses are more dangerous than Detroit, then you can’t believe the “1 in 5″ claim.
6. Gender Pay Gap at the White House. The White House released its annual report in early July last year with detailed salary data for the 454 employees who work on the White House staff. My analysis of the 2014 White House Staff Salaries revealed the following (summarized in the chart above):
a. The 230 female White House staffers earned a median salary of $65,650 last year.
b.The 224 male White House staffers earned a median salary of $75,750 last year.
Bottom Line: Using median 2014 White House salaries, female staffers earned 86.7% of the median salary for men last year, or 86.7 cents for every $1 men earn. That would mean that there is currently a 13.3% gender pay gap at the White House. If Obama applied his typical approach of comparing aggregate (median) salaries to detect discrimination (“Women are paid 77 cents on the dollar for doing the same work as men.“), he would have to admit that the 13.3% gender pay gap reflects gender discrimination at the White House. Alternatively, if a 13.3% gender pay gap at the White House can be explained by factors other than discrimination, Obama, feminists, gender activists, and progressives should stop using aggregate salary statistics to lecture us about a gender pay gap crisis at the national level.
7. Occupational Fatalities by Gender. Every year the National Committee on Pay Equity (NCPE) publicizes its “Equal Pay Day” to bring public attention to the gender pay gap. “Equal Pay Day” last year fell on April 14, and allegedly represents how far into 2014 the average woman had to continue working to earn the same income that the average man earned in 2013. Inspired by Equal Pay Day, I introduced “Equal Occupational Fatality Day” in 2010 to bring public attention to the huge gender disparity in work-related deaths every year in the US. “Equal Occupational Fatality Day” tells us how many years into the future women would be able to work before they experienced the same number of occupational fatalities that occurred in the previous year for men.
The Bureau of Labor Statistics (BLS) released new data last September on workplace fatalities for 2013, and I was able to then calculate a new “Equal Occupational Fatality Day.” As in previous years, the chart above shows the significant gender disparity in workplace fatalities in 2013: 4,101 men died on the job (93.1% of the total) compared to only 302 women (6.9% of the total). The “gender occupational fatality gap” in 2013 was considerable — nearly 14 men died on the job last year for every woman who died while working.
Based on the new BLS data, the next “Equal Occupational Fatality Day” will occur more than ten years from now – on July 31, 2025. That date symbolizes how far into the future women will be able to continue working before they experience the same loss of life on the job that men experienced in 2013 from work-related deaths. Because women tend to work in safer occupations than men on average, they have the advantage of being able to work for more than a decade longer than men before they experience the same number of male occupational fatalities in a single year. To achieve equal pay, do women really want equal representation in the most dangerous occupations (logging, mining, farming, fishing, correctional officers, fire fighter, etc.) if that means that thousands of women will be killed or injured every year while working?
8. 2014 SAT Math Test Scores by Gender. The College Board released 2014 SAT college-entrance test results in October and confirmed a continuing and uninterrupted trend that dates back to at least 1972 — high school boys outperformed girls on the 2014 SAT math test with an average score of 530 points compared to the average score of 499 for females, see chart above. The statistically significant 31-point male advantage last year on the SAT math test is one point lower than the 32-point difference in 2013, and just slightly below the 34 point difference over the last two decades favoring boys. In terms of percentile ranking, the average test score for male high school students (530) last year represented the 55th percentile of all students. By comparison, the average female test score (499) was slightly below the 45th percentile ranking for all students .
9. 2014 SAT Math Test: Male-Female Ratios by Test Score. Claims have been made by economist and former Harvard University president Larry Summers and others that men have historically out-performed women at the very high end of mathematical aptitude (2-3 standard deviations above average) and the SAT math test results in 2014 confirm that claim. Male students outnumbered female students for all 2014 math SAT scores of 590 (73rd percentile) and above, and those outcomes are represented in the chart above by all of the blue bars higher than the 1.0 Male:Female ratio (red line). As SAT math scores increased by 10-point intervals from 590 to 800, the male-female ratio gradually increased, reaching a peak male-female ratio of slightly more than 2-to-1 for perfect test scores of 800. At the highest level of math performance on the SAT test last year, there were 203 males achieving perfect scores for every 100 females. Maybe that explains why men are over-represented in highly quantitative degree programs and careers like computer science, engineering, chemistry and physics?
Despite the clear and convincing statistical evidence from the math SAT test results by gender, gender activists like Professor Janet Hyde at the University of Wisconsin continue to claim that “There just aren’t gender differences anymore in math performance.” The SAT math test results for 2014 and for every year since 1972 suggest otherwise and “beg to differ,” Professor Hyde.
10. College Classes of 2014. Women have been phenomenally successful in higher education, and have earned a majority of associate’s degrees in every year since 1972, a majority of bachelor’s degrees in every year since 1982, a majority of master’s degrees in every year since 1986 and a majority of doctor’s degrees since 2006, according to Department of Education data. For the graduating college classes of 2014, women continued to dominate highest education at all levels, and the growing college degree gap in favor of women was reflected by the fact that women earned almost 62% of associate’s degrees last year, almost 57% of bachelor’s degrees, nearly 60% of master’s degrees, and more than half of doctor’s degrees. Department of Education forecasts suggest that the college degree gap will continue to widen, see estimates above for the College Class of 2022.
Given the college degree gap that reflects the reality that women have been amazingly successful in higher education to the point that men have now become the “second sex,” wouldn’t you think that feminists and gender activists would declare victory and direct their attention to other issues? Well, that’s apparently not exactly how gender activism and the grievance/victim movement work, here’s a statement from former Chancellor Ruth Person at the University of Michigan-Flint in March 2014 that led to the creation of a new Women’s Commission:
At our campus, more than 60 percent of our employees and students are women. It would seem appropriate, given this demographic, that we begin to focus additional attention on the roles women play on and off our campus and how we might enhance future opportunities for leadership and success. The University of Michigan Flint Women’s Commission … will regularly report on the status and needs of women on campus, identify areas of strength and limitation, and provide recommendations that will sustain and enrich our ability to attract and support the most dynamic women leaders. The commission will recommend policies, practices and procedures that strengthen our ability to attract, support, and develop women students, staff and faculty.
So here’s my understanding of the twisted “logic” of feminists/gender/grievance activists: When women are a minority and are under-represented for outcomes like: college enrollment (back in 1950s, 1960s and 1970s), STEM degrees (except biology), and serving on corporate boards, resources must be mobilized to address the under-representation of women. But when women are in the majority like at UM-Flint where women out-number men earning bachelor’s degrees by a ratio of 2:1, the super-majority status of women also motivates the mobilization of resources to further strengthen the institution’s ability to “attract, support and develop women students”? Wouldn’t simple logic suggest that when 200 women earn bachelor’s degree from an institution for every 100 men that the “status and needs” of women are already being met quite successfully, and that no additional taxpayer-funded resources are needed to strengthen UM-Flint’s “ability to attract, support and develop” a group that already maintains a super-majority status?