Saturday, February 20, 2016

The Democratic Game Plan

And now a word about the Democratic Party. As the Republican Party self-deconstructs, the Democratic Party is undergoing its own agonies. True enough, the Dems, as opposed to the Reps, are not involved in a civil war. Their process does not resemble a reality television show. They know better than to compete with Republicans at a game that the Republicans seem to have mastered.

The Dems have a different kind of problem. They do not have anyone who resembles a credible presidential candidate. Some will say that Her Hillaryness is totally qualified to be president, but that suggests that one does not know the meaning of the word “qualified.”

But, the Democrats have not been winning elections by nominating qualified candidates. They run on a platform of give-aways. Remember when John Kennedy told American not to ask what their country could do for them but to ask what they could do for their country. Well, today’s Democrats, both Sanders and Clinton are telling the low information voters who flock to them that they will give them whatever they want, for free. Promise them anything, and then… blame the Republicans when it does not come true.

Many people are surprised that this message has found such a fertile breeding ground in the minds of college students. If so, one has not been paying attention. The brains of today’s college students have been marinating in unearned praise since kindergarten. Said students have been taught that hard work and perseverance is for chumps or for Tiger Cubs. They have been taught to seek after the Holy Grail called flourishing and have learned that being competitive is bad.  They have come to believe that they cannot compete against their peers around the world. In that, I dare say, they are not wrong.

If you cannot compete, you want free stuff. It’s like second childhood: instead of Mom and Dad, you have Bernie and Hillary… aka, the government.  All you need to do is to tax the rich. If the system refuses to reward you for being an itinerant slug, then the system must be rigged.

You have been brought up to avoid competition, so you know that you are not going to be able to do what it takes to earn a good living. Ergo, you are drawn to free stuff like flies to garbage.

But, if you are capable of competing, the offer of free stuff is a seductive lure. If the government is going to reward those who do not work, why should you work?

Truth be told, the Democratic Party does not openly support lassitude, lethargy and indolence. It prefers to make a federal case of the minimum wage. Because, people who receive the minimum wage are not receiving welfare. They are doing a job, job for which the solons of the Democratic Party have persuaded them that they are being underpaid. The system, you see, is rigged against them and does not pay them enough to support their families. Nowhere does this liberal analysis ask how much value each employee is adding to any enterprise. Why bother with the only pertinent question when you can offer people large dollops of unearned praise.

The low information voters who flock to the Dems love it. They will be receiving more money for doing the same thing. It doesn’t matter what happens to the company’s profitability. Capitalists are all crooks anywhere, so they must be robbing their employees anyway. The Democrats haven’t told their voters that the choice is not between a greater or lesser salary, but between having a job and being unemployed.

They have tried it out in Seattle, and, lo and behold, raising the minimum wage has been shown to be a job killer.

Mary Perry reports for the American Enterprise Institute:

Now that the first Seattle minimum wage increase has been in effect for more than ten months, and as local employers brace for the additional minimum wage hikes that will eventually increase their annual labor costs per full-time minimum wage worker by 61% and by a whopping $11,300 (from the increase in hourly labor costs from $9.32 to $15 an hour), are there any noticeable effects so far on the city’s labor market? Is Seattle’s radical experiment with the highest-ever minimum wage in US history serving as a “model for the rest of the nation to follow”? Or is Seattle serving as an “economic canary in the coal mine” for other cities and states (and the country) considering the “bold action” of imposing higher labor costs on employers by as much as $15,500 annually per full-time minimum wage workers if they enact legislation increasing the minimum wage from $7.25 to $15 an hour?

What effect has this had on employment?

Early evidence from the Bureau of Labor Statistics (BLS) on Seattle’s monthly employment, the number of unemployed workers, and the city’s unemployment rate through December 2015 suggest that since last April when the first minimum wage hike took effect: a) the city’s employment has fallen by more than 11,000, b) the number of unemployed workers has risen by nearly 5,000, and c) the city’s jobless rate has increased by more than 1 percentage point (all based on BLS’s “not seasonally adjusted basis”). Those figures are based on employment data for the city of Seattle only (not the Seattle MSA or MD), and are available from the BLS website here (data are “not seasonally adjusted”). Those three negative employment effects are displayed in the three charts above and I’ll explain each in greater detail below.

What did the labor market look like in Seattle before the politicians got involved and raised the minimum wage:

However, until the first minimum wage hike last April, all three of Seattle’s labor market indicators had been showing ongoing and strong signs of improvement for the previous five years: the city’s employment had been steadily increasing since early 2010, the number of unemployed workers in Seattle had significantly declined from a peak of more than 33,000 in 2009 to fewer than 13,000 by last April, and the city’s jobless rate had fallen steadily from a post-recession peak of nearly 9% to only 3% by last April (unadjusted). But then each of those key labor market variables for the city of Seattle reversed sharply starting last April when the city started suffering significant job losses, which then contributed to a noticeable spike in the number of the city’s unemployed workers and a sharp jump in the city’s jobless rate between April and December. And each of those three reversals in the nine months of last year were the worst examples of labor market deterioration for each of those variables since the Great Recession.

There you have it. Higher minimum wage equals more unemployment. One understands that the Democratic academic elites will trot out studies showing that increasing the minimum wage has no significant effect on employment. The experience of Seattle says otherwise. Are you going to believe the liberal academics or the facts on the ground? Besides, if it doesn’t work out as promised they can always blame it on George W. Bush and the Tea Party.


Ares Olympus said...

To be fair to JFK, even with his lofty "ask not what your country can do for you...", he actually thought universal health care was sensible for modern nations. John F Kennedy argues for universal healthcare

And if Obama hadn't given away his entire game plan "I'm going to change Washington and find bipartisan support for healthcare reform", he would have taken his 2008 democratic sweep and House and Senate majorities and demanded a public option for those of us who are tired of giving tens of thousands of dollars per year to health insurance companies for the privilege of being denied coverage on whatever flimsy excuse their "just say no" work force could make up.

And if the republicans gain the presidency, every single one will repeal the ACA, and replace it with private coverage, which means we're back to square one of preexisting conditions for all, and bankruptsy court for the sick.

I do think Hillary is correct - anything that President Sanders does to promote universal coverage will risk losing everything, that is risk losing a tiny tiny progress in expanded health care coverage that took some 50 years to make, and still fails to control costs.

But perhaps we can at least get that Medicare coverage expansion continuing, like a drip, maybe for age 60? Or 55? Well at least we won't have 60 year olds working at minimum wage McDonalds until 65 so they have health insurance. Then those lazy teen agers can finally get a job to pay for a car, so they can get to their job.

Ares Olympus said...

p.s. On Seattle's $15 minimum wage, it looks like the spin war is still on so everyone gets their own data to decide what's happening.

The AEI's graphs are pretty enough, almost too pretty, but I do agree $15 seems like a big jump.

OTOH, perhaps some resentful employees purposely timed some layoffs, on the imagined groups that they could end the experiment and hire people back later when the minimum wage is lowered again. I admit if I was an employer, I might be so spiteful, but after a while, I still have to decide if my protest layoffs is saving me money, or just improving business for my competitors.

We'll see. Perhaps in the end we'll discover Paul Ryan is right - earned income credit is the way to go to help people on the bottom, without the burdens to employers.

Perhaps we'll even someday separate health care costs from employment, and then we'll really be experimenters on job creation.

Wm Sears said...

"Hillary is living proof of the Peter Principle. It suggests that people are promoted for showing themselves to be incompetent at a job."

This may very well be the case for Hillary or even politicians in general but it is not the Peter Principle. It states that people are promoted to their level of incompetence. That is they are judged on their ability at the lower level job and not on any evidence to perform at the higher level. It is not an easy thing to determine.

Stuart Schneiderman said...

Thanks for the correction... I have altered the text to take it into account.

Sam L. said...

We are not the ones to convince, AE, it's the employers of those minimum-wagers. They have the numbers to work with; they know their costs; they can work out the amounts they have to pay their employees, the FICA amounts, unemployment taxes. They have to guess what the effect of this will be to their suppliers, and how much more they will need to ask to balance their books. Many factors, amounts to be guessed at, prices to be raised to cover greater expenses. Guess wrong, you will wind up broke.

Anonymous said...

Ares Olympus @

"... but I do agree $15 is a big jump."

Why not $20, Ares? Ever had to make a payroll?

Why not $25? $30? Hell, we know everyone deserves $100 per hour because everyone who works works hard and delivers identical levels of value.

Anonymous said...

Ares has never had to make "reality" let alone make a payroll. That's pretty obvious from her comments!

Trust fund babies, or their spouses, are pretty easy to spot, No?

Ares Olympus said...

Like I said, perhaps someday we'll separate health insurance from employment, and that can help reduce the overhead costs of hiring a new worker.

Minnesota might actually get our own "single payer plan", at least its being discussed. The plan would be funded by all Minnesotans, based on the ability to pay, and would cover all health care costs, replacing all premiums currently paid by employees and employers, as well as all co-payments, deductibles, all payments for care by the uninsured or under-insured, and all costs of government health care programs.

Anyway, whatever Seattle learns on their $15 wage, I accept raising the national minimum wage significantly is problematic since the cost of living vary so much between regions.

And I do think things like subsidized health care costs, subsidized mass transit, and subsidized housing will help the working poor more than trying to raise their wages above what the market will bear. Cities can and should offer "economy of scale" solutions that moderates market extremes that otherwise shut out opportunities to those who can't afford to live where they want to work.

In contrast, helping working people live and commute to and from sprawling exurbs 50 miles from their urban jobs, just so they can afford housing is a sad reality for too many, even if gas prices are now temporarily low.

Ignatius Acton Chesterton OCD said...

Ares Olympus @February 21, 2016 at 7:21 PM:

"Like I said, perhaps someday we'll separate health insurance from employment, and that can help reduce the overhead costs of hiring a new worker."

Tying health insurance to employment happened under FDR during World War II wage-and-price controls. Employers couldn't give higher wages, so they sweetened the deal with healthcare. Of course the New Dealers thought that was a dandy for workers, and there you have it.

What political party thinks it would be great to set wage and price controls today, whether up or down?

Be careful what you wish for... you just might get it.

Ignatius Acton Chesterton OCD said...

Ares Olympus @February 21, 2016 at 7:21 PM:

"And I do think things like subsidized health care costs, subsidized mass transit, and subsidized housing will help the working poor more than trying to raise their wages above what the market will bear."

Yes, and you believe that because of SUBSIDY.
Subsidy distorts market realities.

Hmmm... most curious.

Let's take healthcare. People who don't see their bills, or see their bills distorted by subsidy, don't give a shit what they cost. They say "Oh, okay." In market terms, this is the problem with the whole third-payer healthcare system. Under a first-payer healthcare system (like MedicAid), it's a complete disaster. Demand skyrockets, so the only way to maintain budget conformance is to cut provider payouts. This is where it's insane: people like doctors, but wonder why theirs isn't around anymore, or why there are fewer of them. And in the interregnum, they wonder why there are so few who speak English. And then the system collapses. And Lefties are outraged. Outraged! Because people are supposed to care about people, and work for free. Especially something so important as people's healthcare which, mysteriously, no one wants to pay for. Odd.

Let's take public transit. People come to believe a $2.75 subway ride is "too expensive," or "outrageous" when it costs $6.85 to produce. That's a loss of $4.10 per ride. But they never have to realize the costs of their desires, because they're insulated from them. And there are always politicians to pander to their upset. And yet the system had to be run, and (lo!) be paid for.

Let's take public housing. Actually, let's not, as its certifiably insane. It doesn't work. I won't detail it here. Let's just ask a simple question: What "reputable" private housing provider would want to provide public housing without subsidy payments and endless regulations? I'll give you a hint...

Meanwhile, people don't want to subsidize all these things, so they move out of the city. These are called "mean people." And "white people."

You live in an imaginary, tidy, impossible world.

Anonymous said...

Donald Trump Jr is impressive

Ares Olympus said...

IAC, you're certainly right that "urban planning" can never keep up with the needs of people and success attracts more people if people are free to move. So needs will multiply 10 times faster than any top-down solutions, and its all too expensive, and it'll be even more too expensive when our temporary era of cheap credit disappears in the coming decade of mass defaults.

Robert Neuwirth shows the alternative, squatter cities, or "System D", the informal economy, unregulated, and unprotected, but exist because people meet their own needs with whatever resources are available, legal or not. Robert Neuwirth: The "shadow cities" of the future Robert Neuwirth: The power of the informal economy

It does seem terrifying to people who like order and clear boundaries of what people can and can't do. So I agree the days of our "imaginary, tidy, impossible world" are numbered.

Perhaps mass-migrations of refugees we're starting to see will be the prime movers of this brave new world, reinventing humanity on the edges of civilization.

I do wonder what's going to happen to China's ghost cities. But the U.S. also has an overabundance of housing, when you compare how many people per house in the 1950s to today. Like my inner surburb has 25% more housing units, and 75% the population compared to the 70s. So we can clearly compactify our city living arrangements when people find commuting 50 miles each day to the exurbs is no longer feasible.

Also physicist Geoffrey West noticed cities have "superlinear metabolism" so a city twice as large becomes more than twice as energetic, so there's no natural limitations, unless other "organism" which have sublinear growth of diminishing returns.

I tend to assume that cheap one-time energy has made West's observations true, so we don't know what the world will look like when external diminishing returns hit hard limits on cities.

Its all pretty scary, to imagine 7.3 billion people doing their migrating after the fossil fuel party ends. Hopefully Trump will get his walls built before its too late. Or maybe North America will always be "underpopulated" compared to the rest of the world?

Anyway, I'm waiting for the day that American finally decides to give up on "healthcare as a right" and we go back to a "two tier" system - healthcare for people with real wealthy, and healthcare for the masses who will get what they can pay for with petty cash, and private hospitals will be able to say no to people who can't pay.

That'll get a few people to stop eating twinkies in a hurry, knowing no one is going to pay for their diabetes or heart attacks.

So many problems can be solved once we accept people don't have a right to food, shelter, and healthcare unless they can afford it.