Challenges for the teaching economics is in the news. We have, as Steven Hayward has christened it, equal nonsense day, minimum wage increases, and free trade.
Hayward’s piece is a nice debunking of the silliness that is “Equal Pay Day”. As he notes, when you control for relevant differences between men and women the differences disappear. He also cites Mark Perry’s running comment that men have 12 times the number occupational fatalities that women do. Perhaps risk of death has something to do with compensation? Compare the equal pay folks (EPF) with the Warmists, see for example the WSJ. The EPF want you to believe that an extraordinarily simple model that doesn’t control for anything is the best. The Warmists want you to believe that an extraordinarily complex model that fails to predict the future is the best. And of course, the Venn diagrams for EPF and the Warmists are almost completely overlapping.
Minimum wages are going up in a variety of places including New York and California. Here is how Jamie Richardson, an exec at White Castle sees it:
“Candidly, this could create a whole generation of kids who won’t get their first job,” Richardson laments. “We’re in tough neighborhoods — and White Castle hasn’t abandoned those neighborhoods. On the surface, higher pay seems noble, but it’s not — because it denies the reality of the free-enterprise framework that has allowed small businesses like ours to thrive.”
The minimum wage is always zero. Building human capital is crucial for financial success. If folks don’t build it then there will be more problems. We can see why certain parties want higher minimum wages. Unions do because it can have a positive effect on contracts and a negative effect on competition. Government wants it because it means the need for more services to those folks with less human capital.
Free trade is good as we have known for hundreds of years. Yet our alleged free trade agreements cover hundreds of pages. The Administration has left both the free trade groups and the “fair trade” groups unhappy. In the race for presidential nominations, none of the folks left can be described as free traders but Sanders, Clinton, and Trump seem decidedly anti-trade.
So we spend our time trying to fight for the obvious. Don’t worry about equal pay. Don’t worry about raising the minimum wage. Do support free trade. Even better, just eliminate all US tariffs. If you want to worry about free trade, then figure out how the many winners in free trade can help the few losers. Rather let’s look at the important stuff. Entitlements need to be reformed. The tax code needs to be reformed. We hope to have our take on the tax code online shortly.Both of these are crucial to making the federal budget balance.