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Minimum wage effect? January to June job losses for Seattle area restaurants (-1,300) largest since Great Recession
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In June of last year, the Seattle city council passed a $15 minimum wage law to be phased in over time, with the first increase to $11 an hour taking effect on April 1, 2015. What effect will the eventual 58% increase in labor costs have on small businesses, including area restaurants? It’s too soon to tell for sure, but there is already some evidence that the recent minimum wage hike to $11 an hour, along with the pending increase of an additional $4 an hour by 2017 for some businesses, has started having a negative effect on restaurant jobs in the Seattle area.
The chart below shows that the Emerald City MSA started experiencing a decline in restaurant employment around the first of the year (when the state minimum wage increased to $9.47 per hour, the highest state minimum wage in the country), and the 1,300 job loss between January and June is the largest decline over that period since 2009 during the Great Recession (data here). The loss of 1,000 restaurant jobs in May following the minimum wage increase in April was the largest one month job decline since a 1,300 drop in January 2009, again during the Great Recession. In contrast to the January-June loss of restaurant jobs in the Seattle area: a) restaurant employment nationally increased by 130,700 jobs (and by 1.2%) during that same period (data here), b) overall employment in the Seattle MSA increased 1.2% and by 21,800 jobs (data here) and c) non-Seattle MSA restaurant employment in Washington state increased 3.2% and by 2,800 jobs (data here).
Perhaps Seattle’s restaurant employment will recover, or perhaps it will continue to suffer from the upcoming full 58% increase in labor costs for the city’s restaurants that will be phased in during the coming years – time will tell. What we know for sure is that there are now 1,300 Seattle area restaurant workers who were employed in January who are no longer employed today, so it looks like the Seattle minimum wage hike is getting off to a pretty bad start.
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Here are some excerpts below from a very thoughtful essay that appeared in today’s Inside Higher Ed written by Lee Burdette Williams, who was formerly Vice President for Student Affairs and Dean of Students at Wheaton College, and Dean of Students at the University of Connecticut. In her essay “The Dean of Sexual Assault” Ms. Williams documents how she went from being “Dean of Students” for several decades to being forced into the role of “Dean of Sexual Assault” in recent years because of misguided pressure from the Office of Civil Rights and the Obama administration as part of their hysterical campaign against the alleged campus rape culture, to eventually resigning as Dean of Students and becoming a “Dean of None.” The excerpt below starts with the period in 2011 when “the world started to change” for Ms. Williams and many other college administrators (emphasis added):
The community in which I did my work was breached by those on the outside who understood very little of what my day-to-day work entailed. In 2011, the Department of Education’s Office for Civil Rights sent a Dear Colleague letter clarifying its expectations for how we were to handle sexual assault.
I read the letter, nodding at some parts and shaking my head at others. It felt like a group of well-intended but misinformed interlopers had shown up to tell me how to do a job I had done for years. Absent any input from people in jobs like mine, this group of lawyers and policy specialists created a blueprint for an already existing structure, disregarding the years of effort undertaken to build it. We needed some renovation. They were requiring a gut rehab.
Why did this happen? There were institutions that had not treated their students well, and quite possibly there were some incompetent people at the helm of those institutions’ efforts. But many of my counterparts and I had been doing the hard work of managing these cases for years and knew a lot about what worked well and what needed changing. Didn’t our judgment, our input, count for anything?
For weeks, I pored over the various documents available online — letters of agreement and results of investigations that the Office of Civil Rights made public. I was disturbed by the ways some institutions had ignored longstanding harassment and tolerated truly unsafe conditions. I believed they were in the minority, but the existence of any undermined confidence in us all. I made my peace with that, and with renewed determination to do this important work well, helped my campus examine and improve our policies, our outreach, our educational efforts.
I started talking more openly with parents during orientation, encouraged our college to hire a skilled Title IX coordinator without other time-consuming responsibilities, successfully applied for a grant from the Department of Justice to enhance our efforts. In short, I did everything I could to do my job well and help my campus support the students in my care. I even stopped griping about the Dear Colleague letter and tried to see it as it was probably intended: a rebuke to some, a reminder to all of the importance of our work and the students for whom we are responsible.
But clouds continued to gather on the horizon. For reasons that baffled us all, OCR released a list of colleges and universities under investigation for alleged Title IX complaints, despite the fact that these institutions had not yet been found to be in violation of anything. It was merely a list of institutions in the OCR queue to be investigated for what at least one student believed was a failure of the institution to meet its Title IX obligations related to sexual harassment.
The fact that these were either open investigations or had not even been fully shared with the institution didn’t matter. Colleges and universities were pilloried in the press, their administrators accused of “covering up” something that they themselves had perhaps not even fully investigated yet. The reasons for releasing this list were unclear, but the damage was indisputable. The presumption of our role — student advocates — changed, and we were now presumed to be standing in the way of student safety and accountability, two things our profession holds dear.
Then the Obama administration began a well-meaning but relatively shallow campaign to hold institutions accountable, and momentum built. Everyone was talking about sexual assault on campus — an outcome any dean of students would have been grateful for in the past. But the lines had been drawn, and somehow we ended up as targets of enmity instead of comrades in this important battle.
Media coverage, some by the best newspapers and magazines in the country, was constant, each reporter looking for an example from a campus to use as the lead-in to the story. Blogs and other online posts and comments became an increasingly powerful mode of “discussion,” which devolved into accusations of incompetence and cover-ups by allegedly self-interested colleges and universities.
Meanwhile, on our campuses, sexual assaults were still happening, and we were still responding to them as capably as we could. I still stood at the door, trying to protect a process that served all of my students in a way I could still call “educational,” because that was what I was — an educator — but the outside groups demanding access, explanation and redress had grown, dwarfing the community I was charged with protecting.
In the space of a year, it felt like my work had gone from being appropriately scrutinized by the members of my community who knew me and cared about our students and who had every right to expect me to answer to them, to being the object of uninformed opinions expressed by people who couldn’t have found my campus on a map.
In addition to the lawyers of OCR and DOJ, my counterparts across the country and I had to worry that each decision we made in a sexual misconduct matter would be made public, mostly by social media, vilified by clueless pundits, turned into slick justifications by “advocates,” would attract the attention of one of the high-powered lawyers making the rounds of cable TV talk shows and press conferences, and become the incident that would end our careers, or at the very least, sully our reputations. Federal laws and our own deeply rooted professional guidelines prohibited us from fighting back publicly, even if we wanted to. We remained silent while the battle raged around us.
But I found myself thinking, I didn’t sign on for this. Unlike professional athletes or musical performers or reality TV stars, people who become deans of students are not usually interested in the spotlight. Our work goes on behind closed doors where the hearts of students are laid bare and need to be repaired, or in campus forums where our students get to question our decisions and we can defend them, or change them. These things happen in the context of community, and that is what provides meaning and validity. That is how change, and improvement, occur.
And now our work is the subject of bloggers and activists who are so driven by agendas that they cannot consider an alternative viewpoint. Our efforts to serve our campuses are being pushed aside by the cottage industry of “consultants” and lawyers who prey on the fear of presidents and boards, worried that their institution will be the next one featured in The New York Times.
Did we need to be challenged about sexual assault response? Yes, and we were, and we worked hard to improve.
Did we need to be better as a profession? Yes. I have never believed I had it all figured out, and don’t know any other deans of students who would make that claim. But when swept up in a tidal wave of uncivil and often uninformed opinion offering, unfounded accusations, questionable Title IX complaints and spurious litigation, it is hard to do anything other than keep from drowning.
Eventually, I found myself thinking of a new variation on my title. I had become, I realized, the Dean of Sexual Assault. Every case became an all-out crisis, and the cases were coming more frequently as awareness grew. Some cases were clearly appropriate uses of the process, while others were not, but it didn’t matter. I had little time to do the other parts of a job that has many other parts. I was consumed by situations involving two or three or four students and had hardly any time left for the rest of those on my campus who needed and deserved my attention.
Very little has been written about or by those of us who work on the front lines of this issue, and when something is written, like Rolling Stone’s travesty of journalism last November, we are often portrayed as unfeeling idiots who care about nothing: not our students, not our institutions, not the law. Of course, the reverse is true: we care about each, and nothing trumps the affection we feel for our students. That affection is what made me so proud, so honored, to have a title that made clear to everyone what my first priority was, every single day I went to work.
It’s a title I no longer have. When I realized I didn’t want to be Dean of Sexual Assault, I decided to step away from a profession and identity I had treasured. When it became clear to me that being Dean of All Students was no longer possible without the constant threat of litigation, media coverage and Internet trolls, I thought it best to be dean of none. I hope there are others in this noble work who can weather this storm and emerge on the other side of the tumult. I won’t be among them, but I understand their anguish, and I wish them well.
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In 1991 Nobel economist Milton Friedman (pictured above giving a talk at AEI, exact year unknown) was interviewed by Emmy Award-winning drug reporter Randy Paige on “America’s Drug Forum,” a national public affairs talk show that appeared on public television stations. In the interview, Milton Friedman discussed in detail his views on America’s War on Drugs, legalization of drugs, the role of government in a free society, and his pessimistic view of America’s future if we continue moving in the direction of socialism. Videos of the entire 30-minute interview appears below in three parts, and here is the transcript of the interview.
Here are some of my favorite parts of the interview (emphasis added):
1. Paige: Let us deal first with the issue of legalization of drugs. How do you see America changing for the better under that system?
Friedman: I see America with half the number of prisons, half the number of prisoners, ten thousand fewer homicides a year, inner cities in which there’s a chance for these poor people to live without being afraid for their lives, citizens who might be respectable who are now addicts not being subject to becoming criminals in order to get their drug, being able to get drugs for which they’re sure of the quality. You know, the same thing happened under prohibition of alcohol as is happening now.
Under prohibition of alcohol, deaths from alcohol poisoning, from poisoning by things that were mixed in with the bootleg alcohol, went up sharply. Similarly, under drug prohibition, deaths from overdose, from adulterations, from adulterated substances have gone up.
2. Paige: For us to understand the real root of those beliefs, how about if we just talk a minute about free market economic perspective, and how you see the proper role of government in its dealings with the individual.
Friedman: The proper role of government is exactly what John Stuart Mill Said in the middle of the 19th century in “On Liberty.” The proper role of government is to prevent other people from harming an individual. Government, he said, never has any right to interfere with an individual for that individual’s own good.
The case for prohibiting drugs is exactly as strong and as weak as the case for prohibiting people from overeating. We all know that overeating causes more deaths than drugs do. If it’s in principle OK for the government to say you must not consume drugs because they’ll do you harm, why isn’t it all right to say you must not eat too much because you’ll do harm? Why isn’t it all right to say you must not try to go in for skydiving because you’re likely to die? Why isn’t it all right to say, “Oh, skiing, that’s no good, that’s a very dangerous sport, you’ll hurt yourself”? Where do you draw the line?
3. Paige: Is it not true that the entire discussion here, the entire drug problem is an economic problem to…
Friedman: No, it’s not an economic problem at all, it’s a moral problem.
Paige: In what way?
Friedman: I’m an economist, but the economics problem is strictly tertiary. It’s a moral problem. It’s a problem of the harm which the government is doing.
I have estimated statistically that the prohibition of drugs produces, on the average, ten thousand homicides a year. It’s a moral problem that the government is going around killing ten thousand people. It’s a moral problem that the government is making into criminals people, who may be doing something you and I don’t approve of, but who are doing something that hurts nobody else. Most of the arrests for drugs are for possession by casual users.
Now here’s somebody who wants to smoke a marijuana cigarette. If he’s caught, he goes to jail. Now is that moral? Is that proper? I think it’s absolutely disgraceful that our government, supposed to be our government, should be in the position of converting people who are not harming others into criminals, of destroying their lives, putting them in jail. That’s the issue to me. The economic issue comes in only for explaining why it has those effects. But the economic reasons are not the reasons.
Of course, we’re wasting money on it. Ten, twenty, thirty billion dollars a year, but that’s trivial. We’re wasting that much money in many other ways, such as buying crops that ought never to be produced.
4. Paige: There are many who would look at the economics–how the economics of the drug business is affecting America’s major inner cities, for example.
Friedman: Of course it is, and it is because it’s prohibited. See, if you look at the drug war from a purely economic point of view, the role of the government is to protect the drug cartel. That’s literally true.
Paige: Is it doing a good job of it?
Friedman: Excellent. What do I mean by that? In an ordinary free market–let’s take potatoes, beef, anything you want–there are thousands of importers and exporters. Anybody can go into the business. But it’s very hard for a small person to go into the drug importing business because our interdiction efforts essentially make it enormously costly. So, the only people who can survive in that business are these large Medellin cartel kind of people who have enough money so they can have fleets of airplanes, so they can have sophisticated methods, and so on.
In addition to which, by keeping goods out and by arresting, let’s say, local marijuana growers, the government keeps the price of these products high. What more could a monopolist want? He’s got a government who makes it very hard for all his competitors and who keeps the price of his products high. It’s absolutely heaven.
Legalization is a way to stop–in our forum as citizens– a government from using our power to engage in the immoral behavior of killing people, taking lives away from people in the U.S., in Colombia and elsewhere, which we have no business doing.
5. Paige: So, you see the role of government right now as being just as deadly as if Uncle Sam were to take a gun to somebody’s head.
Friedman: That’s what he’s doing, of course. Right now Uncle Sam is not only taking a gun to somebody’s head, he’s taking his property without due process of law. The drug enforcers are expropriating property, in many cases of innocent people on whom they don’t have a real warrant. That’s a terrible way to run what’s supposed to be a free country.
6. Paige: What scares you the most about the notion of drugs being legal?
Friedman: Nothing scares me about the notion of drugs being legal.
Friedman: What scares me is the notion of continuing on the path we’re on now, which will destroy our free society, making it an uncivilized place. There’s only one way you can really enforce the drug laws currently. The only way to do that is to adopt the policies of Saudi Arabia, Singapore, which some other countries adopt, in which a drug addict is subject to capital punishment or, at the very least, having his hand chopped off. If we were willing to have penalties like that–but would that be a society you’d want to live in?
7. Paige: Last question. You have grandchildren.
Friedman: Absolutely. I have a two-year-old granddaughter named Becca.
Paige: When you look at Becca, what do you see for her and for her future?
Friedman: That depends entirely upon what you and your fellow citizens do to our country. If you and your fellow citizens continue on moving more and more in the direction of socialism, not only inspired through your drug prohibition, but through your socialization of schools, the socialization of medicine, the regulation of industry, I see for my granddaughter the equivalent of Soviet communism three years ago.
Part I (below). Milton Friedman interview on “America’s Drug Forum” (1991)
Part 2 (below). Milton Friedman interview on “America’s Drug Forum” (1991)
Part 3 (below). Milton Friedman interview on “America’s Drug Forum” (1991)
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From the article “50 Amazing Netflix Statistics and Facts“:
Netflix is an amazing digital success story. Starting out almost 15 years ago as a predominantly DVD subscription service, Netflix was able to pivot along the way and take advantage of rapidly evolving mobile technology and ever-improving internet speeds to become one of the largest video distribution networks on the planet.
The success of Netflix is an excellent example of “creative destruction,” a term originated in the 1940s by economist Joseph Schumpeter, who described it as the “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new structure. This process of creative destruction is the essential fact about capitalism.” In fact, Netflix has been so disruptive to existing industries, that its impact is now being referred to by some as the “Netflix effect.” Here are a few examples of the “Netflix effect” and the industries that have been “Netflixed.”
1. Video Tape and Disc Rental Industry. The chart above shows how Netflix has almost driven the video tape/disc rental business, along with companies like Blockbuster, into extinction. (Interestingly, Blockbuster passed up a chance in 2000 to purchase Netflix for $50 million — it’s now worth $54 billion.) By the time the BLS started tracking the number of jobs in the video tape rental business in 1985, there were more than 80,000 employees nationwide, and that number more than doubled to 170,000 by early 1999. Blockbuster was the dominant firm in the industry and employed nearly 60,000 employees at more than 9,000 stores at its peak in 2004. But in the last decade, employment in the video/disk rental industry has collapsed from 153,000 jobs in 2005 to fewer than 11,000 in May of this year – that’s a 93% decrease in a decade! That could arguably be the largest percentage employment decline in any US industry over the last decade — even employment in the newspaper industry hasn’t cratered nearly that fast over the last ten years!
2. Traditional Media Companies. After challenging Blockbuster, which filed for bankruptcy in 2010 and was subsequently acquired by Dish Network at auction in 2011, Netflix (along with other online viewing platforms like Hulu, Amazon and Apple TV) is now challenging cable networks, traditional network TV channels, and pay-TV services. The “Netflix effect” can be seen in the chart above that compares the year-to-date stock returns for Netflix (up by 157%) to Disney, which owns the cable networks ESPN, Disney Channels and ABC Family (+15%), CBS (-6.3%), Time-Warner, which owns CNN, HBO and Cinemax (-21.5%), and FOX (-22.75%).
Here are several recent news reports that provide some details about the “Netflix effect” illustrated in the chart above.
3. The Street: “Cord-Cutting Fears Spark Big Selloff at Disney, Fox, CBS“:
Call it the Netflix effect, or fear of streaming, but media companies are shaking like never before. Investor concerns about the changing nature of video viewing have morphed into fear and loathing on signs that consumers are fast ditching pay-TV for streaming video. It’s not just Netflix, of course, but the increasing amount of time people of all ages are spending on Facebook, Google‘s YouTube and countless other Web sites that supply video.
Walt Disney shares tumbled 9.2% on Wednesday after the company reported record profits but acknowledged there had been “modest subscriber losses” at ESPN during the second quarter. The decline resulted from some households switching to so-called skinny bundles — smaller cable packages that don’t include the high-priced sports network, according to Disney CEO Bob Iger
Disney’s nosedive triggered broader investor worries about consumers opting for skinny bundles or dropping cable TV completely as shares of other traditional media giants also plummeted. Time Warner, despite beating revenue and earnings expectations for the quarter, closed down 9%. Viacom was down 7.5%; 21st Century Fox fell 7%; and CBS, 4.6%.
Compare that with Netflix, whose stock climbed 2% Wednesday to more than $123 a share. The company’s stock had more than doubled this year before it announced a seven-to-one stock split in June. Netflix stock was rising in Thursday trading.
The contrast with Netflix highlighted investor jitters about the viability of the traditional cable bundle in the face of heightened competition from on-demand video services like Netflix, Hulu and Amazon, which are investing heavily in high-quality programming.
Nearly half (46%) of U.S. homes have access to a streaming service as of July, according to Nielsen data. That figure rises to 62% for homes with people age 18 to 34, underscoring the allure of on-demand video especially among Millennials.
4. Wall Street Journal: “Cord-Cutting Weighs on Pay TV (Stocks of media firms with cable channels are hit on subscriber losses)”:
Cable TV’s signal is getting shaky on Wall Street. The latest round of earnings from major media companies is stoking fears that as more consumers drop their traditional pay-TV services, the long-term health of the industry’s biggest players will be threatened. The growing unease about the state of the pay-television ecosystem has been on display this week, as media stocks have gotten battered.
For years, a key driver of media companies’ earnings and stock prices has been the promise of steadily rising subscription fees from pay-TV providers. Even as the U.S. TV market matures, the theory goes, pay-TV distributors will continue to dole out increases in per-subscriber fees to carry cable TV networks. But if the number of subscribers in the ecosystem shrinks substantially due to cord-cutting, those growth assumptions start to fall apart, putting significant pressure over time on revenue and profits.
Many consumers, particularly millennials, are opting for online platforms such as Netflix, Hulu, Amazon and Apple TV over a traditional cable or satellite subscription. That, in turn, is hurting traditional distributors and programmers.
Viewers are gradually being conditioned to seek out online platforms for their favorite network shows rather than watching them on linear TV, which means lower ratings and audience cannibalization.
“Netflix is the most powerful content aggregator in the world today and there’s nobody that’s even close,” Dish Chief Executive Charle Ergen said Wednesday on the company’s earnings call. He said kids are “happy to watch SpongeBob from 2007 and that’s just as fresh to them as SpongeBob from 2015. So the world has changed.”
5. Reuters: “Wall Street slumps as media stocks hemorrhage“:
Wall Street slumped on Thursday (today) as weak earnings reports from media companies raised fears that more viewers are ditching cable TV, dragging the sector to its worst two-day loss since the financial crisis.
MP: The ultimate winners of creative destruction and the “Netflix effect” are the consumers, who reap the benefits of intense, disruptive, cut-throat market competition in the form of a constantly-evolving, never-ending bonanza of innovative consumer products that get better, faster, and cheaper all the time. Thank you Netflix for the gale of market disruption you have brought to the media industry, and thank you to the yet-to-be-identified disruptive Firm X in the future that will eventually challenge Netflix with something that might be called the “Firm X effect.” We live in a much better world because of the “essential fact about capitalism” known as creative destruction, illustrated in recent years by the “Netflix effect.”
Hillary Clinton’s glass ceiling: Women working on her campaign earn 87.6 cents for every $1 paid to her male staffers
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Brent Scher at the Washington Free Beacon analyzed public payroll data submitted by the Hillary Clinton campaign to the Federal Election Commission for the months of May and June and has uncovered a gender pay gap for Clinton’s staff. Women working for Mrs. Clinton earn about 12.4% less, and about $7,000 less on an estimated annual basis, compared to the men working on her campaign (see chart above). Here are some excerpts of Brent’s article “Hillary Clinton’s Campaign Has a Gender Pay Problem“:
Hillary Clinton’s presidential campaign has consistently paid its female staffers less than it has paid males, according to a Washington Free Beacon analysis of the campaign’s public payroll records. In both May and June, the only two full months of available data since the campaign launched, the median salary of a female on Clinton’s staff was found to be far smaller than that of a man.
In May, women on her staff earned 88 cents for each dollar that was earned by men. In June, the campaign staff grew by 55 employees and women fared even worse, earning just 87 cents for each dollar earned by men. When projected out to reflect annual salary figures, it was calculated that the median annual salary for a woman would be about $7,000 less than the median male salary (see chart above).
Clinton has chosen to make the issue of equal pay for women a central theme of her presidential campaign. “It’s way past time to end the outrage of so many women still earning less than men on the job,” Clinton said during her major July economic policy address.
Mark J. Perry, an economics professor at University of Michigan and scholar at the American Enterprise Institute, said Clinton should direct her “outrage” at her own campaign. “Hillary Clinton must be pretty outraged to learn now that women working on her own presidential campaign earned 12 percent less than male workers in May, and 13 percent less in June,” Perry said. “It’s very likely that the typical female staffer working for Hillary will earn almost $7,000 less than her male counterpart over the next year, giving Mrs. Clinton every right to be outraged.”
Perry, who recently calculated the gender pay gap in President Barack Obama’s White House (see my CD post “Glass Ceiling at the White House: Female Staffers Earn $12,350 (and 15.8%) Less than Their Male Counterparts“) said he was not surprised by the Free Beacon’s findings about Clinton’s campaign staff. He called it the “ultimate in political hypocrisy.”
“It is the ultimate in political hypocrisy when pay gap activists like Mr. Obama and Mrs. Clinton lecture us about gender pay disparities, but yet have glass ceilings in their own organizations,” Perry said. Perry, who argues that gender pay disparity is due to factors beyond discrimination, said the real outrage is the decision by Clinton to continue to grandstand about closing the gender pay gap.
“The biggest outrage is that the statistical fraud and political demagoguery about the gender pay gap continue to be used for political purposes by politicians who have gender pay disparities and glass ceilings within their own organizations,” Perry said.
Seattle’s $70,000 man and local politicians get an economic lesson in the law of unintended consequences
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In our op-ed in Thursday’s Investor’s Business Daily (“Seattle CEO Who Raised Pay To $70K Couldn’t Defy Economic Gravity“), Michael Saltsman and I point out one of the unintended consequences that inevitably result when companies or governments impose artificially high wages that are not based on workers’ productivity, skills and experience – the adverse effect on worker morale, especially among the hardest-working, most ambitious employees. Exhibit A: Seattle-based Gravity Payments’ CEO raising the company’s minimum wage to an artificially high level of $70,000. Exhibit B: Seattle’s city council raising the minimum wage to an artificially high $15 per hour. Here’s a slightly shortened version of our IBD op-ed:
He was hailed as the country’s best boss. Dan Price, the 31-year-old founder of Seattle-based Gravity Payments, received flattering news coverage this year after he announced his company would raise its minimum wage to $70,000 per year. Three months later, the party’s over, and Price is fighting an economic hangover better known as the law of unintended consequences.
The New York Times reported this past weekend on the fallout from Price’s announcement. On the plus side for the company, dozens of progressive-minded businesses became clients following the big announcement of the $70,000 minimum wage. But to accommodate this new business — which won’t boost the company’s bottom line for a year or more — Price had to hire 12 employees at the newly inflated wage rate.
The salary divide between less-experienced employees and more-veteran staff is where the story gets interesting. The Times reported that two of the company’s best employees quit after Price’s raise, chafed by a policy that would “double the pay of some new hires” while leaving the paychecks of more-senior employees mostly untouched. The company’s former financial manager explained it this way: “Price gave raises to the people who have the least skills and are the least equipped to do the job, and the ones who were taking on the most didn’t get much of a bump.”
Similarly, a former Web developer for Gravity Payments was upset at a pay policy that “shackles high performers to less-motivated team members.”
This negative response from more experienced employees to a dramatic pay hike isn’t limited to Gravity Payments and the tech sector. In the same city that Price’s company calls home, a recently enacted minimum wage increase to $15 an hour has some veteran restaurant employees seeing red.
In an interview with Seattle alt weekly the Stranger, one fast-food staffer who spent years working her way up the ladder described it this way: “I want everyone to be paid a living wage, but that wage should not be expected, but earned. Deserving it should be more than just showing up.”
Another line cook confessed his frustration with the policy: “Man, I just spent all this time climbing through the ranks to get to $15 an hour, and now some random person is going to come in and make the same wage at a far-less stressful, demanding job.”
Who can blame them? A wage of $12-$15 an hour isn’t princely, but it represents the second or third step on the career ladder for employees who eventually want to be earning $30, $40 or $50 an hour, sometimes by using their experience to run their own business. Setting an artificial minimum wage at this high a level won’t just wipe out opportunities for those at the bottom of the ladder whose skills aren’t yet worth $15 an hour. It will also diminish the hard work of those more experienced employees who have already started climbing the ladder.
Gravity Payments’ founder has no one but himself to blame for the fallout from his $70,000 experiment, and that’s as it should be. Other Seattle-based businesses coping with the consequences of the city’s coming $15-an-hour minimum wage have to blame the politicians who forced it on them. The City Council will soon learn the hard way that you can require local businesses to pay $15 an hour — but you can’t require experienced employees to hide their contempt when their less-skilled counterparts are suddenly overpaid, thanks to government fiat.
MP: The negative effect on worker morale from an artificially high $70,000 wage is an example of the economic law of unintended consequences that CEO Price learned the hard way. That same unintended consequence is already starting to surface as a result of Seattle’s $15 minimum wage law, and the city will also experience the inevitable consequences of an artificially high wage that is not directly connected to the abilities, experience and productivity of low- and un-skilled workers.
Update: From a related Bloomberg story today “An Unintended Consequence of Wal-Mart Pay Raise: Unhappy Workers” (ht/Michael Saltsman):
When Wal-Mart CEO Doug McMillon announced plans to boost store workers’ minimum wage earlier this year, he said the move was intended to improve morale and retain employees. Yet for some of the hundreds of thousands of workers getting no raise, the policy is having the opposite effect.
In interviews and in hundreds of comments on Facebook, Wal-Mart employees are calling the move unfair to senior workers who got no increase and now make the same or close to what newer, less experienced colleagues earn. New workers started making a minimum of $9 an hour in April and will get at least $10 an hour in February.
It is pitting people against each other,” said Charmaine Givens-Thomas, a 10-year veteran who makes $12 an hour at a store near Chicago and belongs to OUR Walmart, a union-backed group that has lobbied for better working conditions. “It hurts morale when people feel like they aren’t being appreciated. I hear people every day talking about looking for other jobs and wanting to remove themselves from Wal-Mart and a job that will make them feel like that.”
Some workers also said they suspect their hours are being cut and annual raises reduced to cover the cost of the wage increase for newer workers.
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1. Chart of the Day I (above). Remember back in January of 2010 during President Obama’s State of the Union speech when he pledged to double US exports within five years? Well, that was a completely unrealistic goal – total US exports have increased less than 12% between January 2010 and June 2015, based on data released today by the BEA. Although it probably wasn’t what Obama had in mind when he set his goal, he would be able to brag about one rather remarkable US export success story — the phenomenal increase in American-made petroleum products. Thanks to America’s shale revolution that dramatically boosted domestic oil output starting in about 2007, US exports of refined petroleum products like gasoline, diesel, jet fuels, and heating oil have doubled since Obama’s 2010 State of the Union speech, from an average of about $4 billion per month during 2009 to $8 billion per month this year, and that’s after adjusting for inflation – the nominal increase in petroleum exports is even higher at 122.5%.
2. Chart of the Day II (above) is in response to a comment on CD that I should be placed in the middle of a Venn diagram if I don’t post about the stall and decline in US oil production after many previous posts about the increase in US oil output. Actually, US oil production really hasn’t fallen much, and is going “shockingly well, considering that the price of oil has fallen in half over the last year,” as another CD regular commented. The chart above shows weekly oil production through the last week of July, based on EIA data released this morning. For the week ending July 31, daily US oil production was 9.465 million barrels, which was an increase from the previous week, but slightly below the production during the previous 9 weeks. On a monthly basis, July oil production averaged 9.52 million barrels per day, which except for June was the highest US monthly output since the early 1970s. So let’s hold off on the Venn diagram with me in the middle for now.
3. Venn Diagram of the Day (above). For now, let’s put the “diversity worshipers” in the middle of the Venn diagram above, inspired by Walter E. Williams’s column today titled “Legal and Academic Equality Nonsense,” here’s a slice:
If one were to list the world’s top 30 violinists of the 20th century, at least 25 of them would be of Jewish ancestry. Another disparity is that despite the fact that Jews are less than 3% of the U.S. population and a mere 0.2% of the world’s population, during the 20th century, Jews were 35% of American and 22 of the world’s Nobel Prize winners. Are Jews taking violin excellence and Nobel Prizes that belong to other ethnicities? If America’s diversity worshipers see under representation as probative of racial discrimination, what do they propose be done about over representation?
4. Markets in Everything: New Japanese luxury bus seats only 10 passengers for tours from Tokyo to all over Japan.
5. Punctuality. From Forbes contributor Brent Beshore’s excellent article “5 Minutes Early Is On Time; On Time Is Late; Late Is Unacceptable“:
I have a magic pill to sell you. It will help you make more money, be happier, look thinner, and have better relationships. It’s a revolutionary new pharmaceutical product called Late-No-More. Just one dose every day will allow you to show up on time, greatly enhancing your life and the lives of those around you.
All joking aside, being late is unacceptable. While that sounds harsh, it’s the truth and something that should be said more often. I don’t care if you’re attending a dinner party, a conference call, or a coffee meeting – your punctuality says a lot about you.
A timely article following an experience I had on Monday night. I made plans to meet a friend for dinner – I suggested 7 p.m., he strongly preferred 6 p.m. So I showed up on time at 6 p.m. — he called at 6:45 to say he was late and on the way, with a very nonchalant attitude about being 45 minutes late and not calling or texting earlier! He obviously needs a prescription for “Late-No-More.”
6. More on the Insourcing/Reshoring Trend from: a) the Washington Post, “Why it’s now cheaper to produce some goods in the South than in China,” and the New York Times, “Chinese Textile Mills Are Now Hiring in Places Where Cotton Was King.”
As I reported on CD back in 2011, Boston Consulting Group was predicting then that “Sometime around 2015, manufacturers will be indifferent between locating in America or China for production for consumption in America.” That now seems like a pretty accurate prediction.
7. Map of the Day (above). Liquid natural gas (LNG) prices around the world in June, showing that the US has the lowest LNG prices in the world, by far, at less than $2 per million BTUs compared to the rest of the world where prices are 3-4 times more expensive. That’s one reason for the insourcing/reshoring of manufacturing back to the US discussed in the item above.
8. Chart of the Day III (above). The chart above shows electricity costs (cents per kilowatt-hour) as a function of per capita installed renewable capacity (wind and solar only, excludes hydropower) in 20 countries, via the Watts Up With That? blog (guest post by Willis Eschenbach). Here’s more:
Per capita renewable capacity explains 84% of the variation in electricity costs. Not a big surprise given the crazy-high costs of renewables, but it is very useful for another calculation. President Obama said that he wanted 28% of America’s electricity to come from renewable energy by 2030. Currently, we get about 4% of our electricity from wind and solar. He wants to jack it to 28%, meaning we need seven times the installed capacity.
Currently we have about 231 kW/capita of installed wind and solar. So Obama’s plan will require that we have a little less than seven times that, 1,537 kW/capita. Assuming that we can extend the relationship in the chart above, this means that the average price of electricity in the US will go up to 43 cents per kilowatt-hour. Since the current average US price of electricity is about 12 cents per kilowatt-hour…that means the true price of electricity is likely to almost quadruple in the next 15 years.
9. Incentives Matter. Just like in America, there are many people in Iran who are on a kidney waiting list. But unlike America, they aren’t waiting to receive a kidney, they’re waiting to DONATE a kidney. Because unlike America where we ban compensation, kidney donors in Iran are paid $5,000. Source: New York Times article “Need a Kidney? Not Iranian? You’ll Wait.”
10. The Federal Reserve Joins the War on Drugs, according to George Selgin:
The Fed’s involvement in drug prohibition became official last month, when the Federal Reserve Bank of Kansas City informed Denver’s Fourth Corner Credit Union — a non-profit cooperative formed by Colorado’s state-licensed cannabis manufacturers — of its decision to deny its application for a master account.
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Here’s the abstract from a research paper titled “Alcohol as a Gateway Drug: A Study of US 12th Graders” that was published in the Journal of School Health in August 2012 (emphasis added):
BACKGROUND: The Gateway Drug Theory suggests that licit drugs, such as tobacco and alcohol, serve as a “gateway” toward the use of other, illicit drugs. However, there remains some discrepancy regarding which drug—alcohol, tobacco, or even marijuana—serves as the initial “gateway” drug subsequently leading to the use of illicit drugs such as cocaine and heroin. The purpose of this investigation was to determine which drug (alcohol, tobacco, or marijuana) was the actual “gateway” drug leading to additional substance use among a nationally representative sample of high school seniors.
METHODS: This investigation conducted a secondary analysis of the 2008 Monitoring the Future 12th-grade data. Initiation into alcohol, tobacco, and other drug use was analyzed using a Guttman scale. Coefficients of reliability and scalability were calculated to evaluate scale fit. Subsequent cross tabulations and chi-square test for independence were conducted to better understand the relationship between the identified gateway drug and other substances’ use.
RESULTS: Results from the Guttman scale indicated that alcohol represented the “gateway” drug, leading to the use of tobacco, marijuana, and other illicit substances. Moreover, students who used alcohol exhibited a significantly greater likelihood of using both licit and illicit drugs.
CONCLUSION: The findings from this investigation support that alcohol should receive primary attention in school-based substance abuse prevention programming, as the use of other substances could be impacted by delaying or preventing alcohol use. Therefore, it seems prudent for school and public health officials to focus prevention efforts, policies, and monies, on addressing adolescent alcohol use.
MP: Certain weeds in the cannabis family that are currently proscribed arbitrarily by government policy frequently get blamed for being the main “gateway drug” to more powerful substances, which then is used to justify the government’s immoral, senseless, cruel and costly War on
Drugs Otherwise Peaceful Americans Who Choose to Ingest Weeds and Plants Not Currently Approved of by the State, Which Will Put Users and Sellers of Those Weeds in Cages if Caught, Sometimes for Life. And yet, according to this study, there is evidence to suggest that America’s most popular legal intoxicant – alcohol – is actually the main gateway drug that leads to the use of more addictive and powerful substances. Since we ended the immoral, senseless, cruel and costly War on Alcohol more than 80 years ago, can we now agree that it’s time to end the War on Weeds?
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…. is based on this paragraph from Jonah Goldberg’s article in National Review “Huckabee’s Hitler Comparison That Wasn’t“:
Barack Obama, Hillary Clinton, and John Kerry don’t take the Iranians at their word when they say they want to kill Jews, no matter how clearly and consistently they say it. But they trust the Iranians to stick to their word on this nuclear agreement (which would be a bad agreement even if Iran could be trusted).