More on the ‘economic death wish’ of the DC city council
From an editorial in today’s WSJ:
The Congressional Black Caucus met with President Obama Tuesday to discuss black unemployment, which was 13.7% nationwide in June. Good subject, but what do you think the chances are that these powerful politicians discussed the latest damage from their own policies?
This week the Washington, D.C., city council voted 8-5 to create a super-minimum wage of $12.50 an hour for certain big retailers. Wal-Mart promptly announced it is canceling plans to build three stores in the district, and it will review plans for three others that are currently under way.
The District of Columbia is 50% black, its jobless rate is 8.5%, and the city has invested millions of dollars to revitalize shopping areas to attract anchor stores like Wal-Mart. Each Wal-Mart store offered the prospect of 300 new jobs and $1 million in tax revenue. Not to mention lower prices for such daily staples as food and clothing. Now all of that is in jeopardy.
Mr. Obama and black liberals in Congress all support minimum wage laws that do great harm to African-Americans in places like D.C. Not that they much notice.
If they were really concerned about black jobs, they would pillory the President for his performance over the last five years. See http://thinkprogress.org/wp-content/uploads/2012/11/black-unemployment-chart-2.jpg
For various reasons blacks are toward the end of the employment line. The only way we’re going to see significantly less black unemployment is to see significantly higher growth. Keeping Wal-Mart from more store openings is just one of the anti-growth policies of this administration.
I don’t understand the focus on $12.50 minimum wage only being applied to certain big retailers. Has there been any sort of reasoning as to why they’re only targeting big retailers?
It’s really of bill of attainder against Wal-Mart. As one of the councilmen so arrogantly put it, “”We’re at a point where we don’t need retailers. Retailers need us.” My guess is that sentiment is not shared by his constituents.
“…minimum wage laws that do great harm…”
If the minimum wage increased to $12 an hour for every firm, to level the playing field, Walmart wouldn’t of pulled-out, and the higher wage would’ve decreased the demand problem, that worsened in the 2000s.
You keep saying that, but the evidence shows otherwise.
Demand increases comes after, not before, production increases.
If you have evidence, real tangible evidence, to support your case than please present it. But considering I have been asking for nearly three days now and all you have given are ambiguous statements, half-baked theories riddled with holes, and claims of teenagers fleeing to Canada, I’m guessing you have nothing.
I don’t know what kind of “analyst” you are, but you cannot consume a good, until it’s produced.
And, no one will produce more goods when there’s a high level of inventory and no customers.
Demand can clear the market and increase production.
You haven’t disproven anything I stated. All you’ve shown is a shallow and limited understanding of economics.
I’m the kind of analyst who provides evidence for my assertions, not ramblings and half-baked theories about teenage emigration to Canada.
You cannot consume a good until it is produced. That is absolutely correct. So, why then, do you insist in the very next sentence that it is untrue?
I have proven that demand indicators lag production ones (I have offered up the evidence, but since you did not ask to see it, I assume you accept this to be true. Again, if you’d like to see it, let me know and I will gladly provide it).
Here is what we know and can empirically show (the theory is in parentheses):
Artificially high wages lead to fewer jobs (downward sloping demand curve).
Production leads demand (Say’s Law).
Now, again if you have evidence to support your claims, please present it (obviously, I am unconvinced by your statements alone). If you cannot do this, then please take your ramblings elsewhere.
You are utterly convinced in your statements. if they are true, you have every right to be. But surely you can provide some evidence, just a shred, to back you up? Theories are all well and good, but without anything to back them up, they are nothing more than a meaningless statement.
I have given you my theories and the data to back it up. All I am asking is the same from you. Surely, as two rational, scientific men, that is the very least we can expect from one another, eh?
Everything in economics fits together. My statements are supported by mathematical and empirical models. That’s why you found no contradictions in my statements.
I suggest, you begin reading some of the labor economics literature for an idea of what I’ve been talking about (I’ve taken labor economics classes at the grad level, although my fields of specialty are Money and Central Banking and International Trade).
Robert Solow, who won the Nobel Prize for his analysis of economic growth, stated:
“The main thing about the (minimum wage) research is that the evidence of job loss is weak. And the fact that the evidence is weak suggests that the impact on jobs is small.”
I stated before, the (positive) income effect may be stronger than the (negative) employment effect, and explained how a higher minimum wage can be “absorbed,” leading to faster economic growth, particularly under the changing economic conditions over the past three decades.
You can’t solve a problem, until you identify it. Yet, some people remain in denial that a problem exists.
Actually, Robert Solow shows that the problem does exist. As you said, he states that minimum wage impact on job loss is small. I have no qualms to this statement. In fact, I accept it. There are approximately 3.1 million jobs in the Washington DC Metro area. The 600 jobs lost in DC due to the arbitrary minimum wage hike represents just 0.019% of those jobs. That impact is small. But the impact remains! Economists think at the margin and that is why we oppose such arbitrary things as minimum wage hikes. On the margin, they make people worse off.
And this is where science and scientism differs. This is how to tell a good analyst from a poor one. A poor one says “The impact is small, therefore there is no impact.” A good one says “The impact is small, but there is still an impact.”
It really is amazing. Liberal mantras trump actually helping their constituents every time. Of course, after harming the poor in their city, they will go ahead and tell you how hard they are fighting for the poor. In politics, apparently words mean more than actions.
Imagine you are in a hospital with a roommate. The nurse who attends you both coos over you with great sympathy and holds your hand. Your roommate is thrilled with this attention and talks about the nurse in glowing terms. You, on the other hand, keep asking the nurse to tell you about your treatment. You ask what medication she is giving you and why and constantly ask her to show you your charts. To the hospital, YOU are the a**hole.
Much stronger growth could’ve been achieved, since Dec 2007, if we had a large tax cut initially, then raising the minimum wage, with further tax cuts or an overhaul of the federal tax system, and removing or scaling back $1 trillion of the $2 trillion a year in federal regulations.
I stated in Feb 2009 [the tax cut should’ve been $5,000 per worker for the 150 million workers at the time or $750 billion]:
1. Obama should change his stimulus plan to a $2,000 tax cut per worker, along with increasing unemployment benefits by a similar amount. This will help households strengthen their balance sheets (i.e. catch-up on bills, pay-down debt, increase saving, spur consumption of assets and goods, etc.). This plan will have an immediate and powerful effect to stimulate the economy and strengthen the banking system. When excess assets and goods clear the market, production will increase.
2. Shift “toxic” assets into a “bad bank.” The government should pay premiums for toxic assets to recapitalize the banking industry and eliminate the systemic problem caused by global imbalances. The Fed has the power to create money out of thin air, to generate nominal growth, boost “animal spirits,” and inflate toxic assets.
3. Government expenditures should play a small role in the economic recovery. For example, instead of loans for the auto industry, the government should buy autos and give them away to government employees (e.g. a fringe benefit). So, automakers can continue to produce, instead of shutting down their plants for a month. Auto producers should take advantage of lower costs for raw materials and energy, and generate a multiplier effect in related industries.
The recession that began in Dec 2007 and the depression that began in Jun 2009 (when the recession ended) reflected both cyclical and structural problems in the economy.
Bold tax cuts would’ve improved the cyclical problem (a less severe recession and stronger recovery), and a higher minimum wage, overhauling the tax system, and deregulating would’ve improved the structural problem (a more sustainable and stronger expansion).
If we just shift all our bad assets to a bad bank we’ll have no problems!!!!