COVID-19 As A Minimum Wage

The second part of Jim Geraghty’s Morning Jolt reminds us of the problems that COVID-19 and even a post-peak COVID-19 world present to the less skilled and particularly young people.  It is not the COVID-19 is dangerous to them.  It is usually not.  Locally we are seeing most of the new COVID-19 cases as young people:

Below is a list of establishments and the date in which the infected person or persons visited:

  • Legends/Twisted Moose (June 7) [two downtown bars]
  • The Library (June 6) [another downtown bar]
  • The Crow (June 7) [another downtown bar]
  • Brothers (June 6) [another downtown bar]
  • Broncos (June 6) [another downtown bar]
  • Blue Moon Restaurant in Onalaska (June 6-7) [on the river]
  • Pettibone Beach (June 5) [in the river]

Health officials said that these establishments have been listed because of the difficulty of contacting everyone who may have been there on the same days, and in-turn possibly exposed. It does not mean that other establishments or any public place does not also have a risk of spread.

During the weekend, the area confirmed 24 new cases, all of them in their 20s or teens. Since June 8 — two weeks after Memorial Day weekend — roughly 75% of the area’s cases have been in people under 30.

So young people are going to the downtown (we would say student but the colleges are closed) bars and spreading COVID-19 amongst themselves.  Like Jim, we are more worried about their human capital rather than their health.  Jim talks about lost caddying jobs.  From Francis Ouimet to Caddyshack (yes we know the latter is fiction) caddying has been an opportunity for the less wealthy to develop skills and met people.  That is, to develop human capital.   Here is Jim’s summary and his quote:

Summer jobs are not glamorous and usually don’t pay all that well, but for a lot of people, they’re a key first step on the path of their careers. Former Starbucks CEO Howard Schultz wrote in From the Ground Up, “the value of early work experiences can exceed the amount of a paycheck. Work done well — building a house, helping a customer find the perfect new shoes, earning a promotion by serving cups of coffee — imbues us with a sense of self-worth as well as a sense of purpose. With dignity. And if you’re a lost young person with little proof of your potential, work can provide a window into yourself.”

We would emphasize the skills rather than Howard’s self discovery but we recognize that the two are related.  Bad choices like Antifa and gangs become more likely when there is no obvious route to success.  COVID-19 is working like a minimum wage.  It is preventing people from discovering and developing their skills.  And, of course, the penalty will fall more heavily on the less fortunate.  Like many of the important questions, this one doesn’t have an obvious answer.


A Ray Of Sunshine

We are depressed with The Donald raising taxes (tariffs – Hokey smokes, Pete is right) on Americans to show the Chinese.  We are with the editors at NRO:

Trump responded to the setback in talks by raising tariffs, and China reciprocated. The escalation of the trade war poses increasing risk to our economy, as stocks have been signaling. The best course for the U.S. now would be to reach a swift resolution in the current talks — getting back to the deal that seemed to be on the table before China miscalculated — and then switch to a strategy for changing Chinese behavior that does not depend so thoroughly on possibly backfiring tariffs.

Meanwhile, here was a ray of sunshine from Mark Perry at Carpe Diem:

RelatedCNBC reported today that “Walmart’s U.S. store managers earn an average of $175,000 per year and receive benefits including parental leave, health benefits and 401(k) contributions. That’s higher than the average salary of some of the country’s best paying jobs, including dentists, who make an average $174,110 a year, according to U.S. News & World Report, and lawyers, who make an average of $141,890.”

Who-d a-Thunk It? Walmart managers make more than dentists and lawyers on average? And I’d bet [we were sure before the update] many of them started as hourly associates and worked their way up to store manager…. but, but, but I always heard those retail jobs at Walmart were dead end jobs….??

Update: According to Walmart “75% of its Walmart U.S. store operations management team members started as hourly employees.”

It is the natural financial life cycle of humans in our age of abundance.  Folks build skills while working low paid (and often menial) jobs and fighting financial challenges while they are young.  They use these skills to manage their finances and build a career.  There are lots of individual exceptions.  Some folks like Bill Gates go for it and make it big early.  Other folks go for it and fail.  Check out the restaurant turnover in your hometown.  Some folks fail to build skills because of chemical dependency or other issues. Still it is what most people do and a good plan for most folks.

This is why increasing the minimum wage is such an insidious idea.  It doesn’t just throw people out of work but it can ruin their lives.  The ray of sunshine from Mark reminds how well the natural financial cycle does work.


Let ‘Em Rot

And we have a winner.  Well, sort of.  We can’t say we have read every article on NRO but we think Elliot Abrams has authored the worst one of 2018: [The Donald] Should Veto MLB’s Foul Deal With Cuba.  Elliot is unhappy that MLB (that’s Major League Baseball) has negotiated a deal with Cuba where the government gets part of the deal in return for giving the player the right to leave Cuba.  Elliot is unhappy:

Instead, baseball owners have negotiated a deal with the FCB, the Cuban Baseball Federation, in which they bribe the Cuban regime with part of a player’s salary.  [Emphasis added]

We bolded instead because we wanted to note Elliot’s alternative:

The cure for that situation was simple: Change the rules so that any Cuban player who escapes to freedom can sign a contract.

So, as our title suggests, Elliot’s solution is to let ballplayers rot in the Communist hell-hole that is Cuba unless they escape or die trying.  To get folks out of Cuba safely you will need to give the government something because it is a police state.  Money is what they want and need so the deal is going to be players for money.  You can argue that we should let baseball players rot in Cuba because there are more important issues to consider.  It might be that leaving them there will make regime change more likely.  But that solution implies that some players will risk their lives to try to leave Cuba to play baseball elsewhere.

Elliot then disparages MLB owners.  We admit that this is great fun but it doesn’t have anything to do with the money for players proposal.  Here is what he says:

And let’s dispense with sympathy for the billionaire owners of MLB, who cast themselves here as motivated by humanitarian concern for the Cuban players. They’ve certainly never shown such concern before. Moreover, this deal with the Cuban regime has not been their only political move in 2018. The other was sneaking an amazing provision into the 2,232-page appropriations bill passed in March: the “Save America’s Pastime Act [SAPA],” a separate bill that could never have been passed on its own.

This leads Elliot to two odd conclusions for a conservative.  First, as conservatives we hope the the MLB owners are interested in their own well being.  We don’t want our beloved Red Sox to pay millions to set some nice Cubans free.  We want great Cuban players to win another World Series.  We hope that the owners are trying to improve their teams by importing Cuban players. Sure they can play the humanitarian card but we know what is going on.

Second, SAPA is about excluding minor league baseball from the minimum wage.  As conservatives who understand the nasty implications of the minimum wage we should be delighted minor league players are exempt but Elliot is not:

So minor-league players will not get overtime pay, and there will be no limit to the number of hours they can be forced to work. Minor-league players have no union, and their salaries are pitiful. Major-league players receive a minimum salary of $550,000 and an average salary of $4.4 million. Minor-leaguers receive a minimum wage of $1,100 per month, which is just above the poverty line. MLB says it needed this legislation because it just can’t pay more to minor-league players; doing so would put many teams out of business.

To try and counter MLB’s assertion Elliot tells us about MLB salaries and what MLB gross receipts were.  Most of the data suggests that MLB teams are mildly profitable at best, see Chart 1 in this.  We expect better from conservatives.  There are plausible reasons to oppose the deal but Elliot hasn’t found any of them.

Tony Evers And The Minimum Wage

In Wisconsin we have, for some reason, a tightly contested race for governor between Republican incumbent Scott Walker and Democrat Tony Evers.  It seems, based on the news, like it should be a cakewalk for Scott.  For example, the front page of the local paper reports record low unemployment. A regional employer is offering free rides to their place of business to try and attract employees.  Economic growth continues to hum along.  It is hard to see why there is a contest.

Sidebar One: Try Googling Economic Growth In The Third Quarter.  Several of the articles emphasize that growth slowed from 4.2% to 3.5%.  Of the last 16 quarters only the 4.2% is higher.  End Sidebar One.

It appears from the advertising that fills the airwaves some folks are upset that Scott ran for president two years ago.

One silly part of Tony’s platform is his support for a $15 (yup, that is fifteen dollars an hour) minimum wage.  According to the Wisconsin State Journal as reported in the local newspaper:

Sidebar Two: Close to always we go and find Internet sites for this stuff but this seems well established.  End Sidebar Two.

[Tony], who has touted his support for a $15 [fifteen dollars!] minimum wage in Wisconsin, also said he is open to exceptions to the $15 minimum wage in rural areas and for teenagers.

When we see proponents for raising the minimum wage we always wonder if they are knaves or fools.  Tony has created a third category.  The fools think it is a good idea.  They don’t understand that, amongst other things, workers need to accumulate personal capital to be more valuable to employers.  One crucial way to accumulate such capital is working.

The knaves think that raising the minimum wage will benefit some group they favor.  It might create more government dependency and benefit government workers.  Some union contracts have clauses about the minimum wage and an increase in it might help some union workers.  And there are numerous other possibilities.

Tony, the third possibility, appears to see the minimum wage as a purely political play. He seems to recognize that it is a bad idea and that we can’t punish everyone and so we need exceptions but he continues to tout the idea as part of his platform.  We find that his position is more disappointing that either the knaves or fools.

Politics Of Minimum Wage

The Editorial Board at the WSJ has a real man bites dog story that led us to recognize another side to the minimum wage dispute.  In Revolt Of The Tipped Masses the editors describe the conflict between the Washington DC City Council and the workers they are allegedly trying to help.  Here is the part that turned on the light for us:

Before the measure passed in June, many restaurant workers wore buttons asking patrons to “save our tips” and “vote no on 77.” When Washingtonians passed the measure anyway, the workers pushed for repeal. Though restaurants pay a $3.89 hourly wage to tipped workers, “we choose these jobs because we make far more than the standard minimum wage” from tips, bartender Valerie Graham told the City Council.

As Valarie says, especially in an elite establishment in a big city like DC folks can be making a tidy sum on tips.  A high minimum wage effectively eliminates tips.

Sidebar One: Many of them are not declaring the full amount of tips to the IRS.  It is not relevant to us here but it does increase the incentive to fight City Council.  Partially taxed higher amount is way better than fully taxed lower amount.  End Sidebar One.

Sidebar Two: We are heading for China later this year.  One thing every person emphasizes is that there is no tipping in China.  End Sidebar Two.

What we recognized is that there are two groups of workers adversely affected by minimum wage legislation.  We always emphasize the folks who will lose their jobs and it is a bigger deal to lose your job than to take a pay cut.  The pay cut is a pretty big deal too.  Remember what Valarie said: “We chose these jobs…”  She is a person worth listening to.

A Significant Step?

Bernie Sanders has proposed as stop Bezos bill to get employers to fire employees on public assistance.  We have already weighed in on the what is Bernie thinking side.  Catherine Rampell describes the bill:

The bill, introduced Wednesday by Sen. Bernie Sanders, I-Vt., and Rep. Ro Khanna, D-Calif., would establish a “corporate welfare tax” on firms with at least 500 employees. Companies would pay a tax equal to 100 percent of the value of safety-net benefits their employees receive, including Medicaid, housing subsidies, food stamps and subsidized school lunches.

It is an astoundingly bad idea.  The shocking part is Catherine’s conclusion as to why she doesn’t support the bill:

As economists repeat ad nauseam: Incentives matter. No number of strident news conferences vilifying billionaires and big corporations will ever change that. [Emphasis added]

Catherine now on record as saying incentives matter.  It is just a small step from embracing markets.  Her conversion, however, is incomplete on the issue of incentives.  In the previous paragraph she says:

If you want to help workers, there are lots of alternatives less likely to backfire than this. Raise the minimum wage. Eliminate noncompete clauses. Increase other kinds of benefits (such as paid family leave). Make it easier for workers to unionize. Of course, these proposals need to be designed carefully, too, to make sure they help more workers than they hurt.

She hasn’t yet internalized incentives matter because it doesn’t matter how careful you are in design of higher prices for employees because, well, incentives matter.   We like her description of “less likely to backfire” so she seems to know the is a likelihood of bad outcomes from increasing the cost of employees.  That outcome is less employees.   Perhaps she can add one that is really less likely to backfire like less regulation for hair cutting and the like.

We are delighted to see Catherine taking small economic steps.  We don’t hold out much hope for Bernie but Catherine might be progressing from being so progressive.  It might help that her mom is an accountant. We wish her a good journey.



Stopping Low Unemployment Rates

It seems that attempts to increase unemployment and misery by increasing the minimum wage have come to a standstill.

Sidebar: Just to remind everyone why increasing the minimum wage is such a terrible idea.  Folks need to start somewhere and if they have low skills they start at low wages.  Most of the folks with low skills are poor or young.  Very few people stay at the minimum wage in our dynamic economy because the develop skills that deserve and receive more money.  We are pretty sure we worked for $1.25 an hour fifty some years ago.  Preventing people from developing the personal capital to succeed is a terrible idea.  End Sidebar

When folks fail on one front they try to open another.  We just heard about the second front in the attack on low skilled individuals today. from Jack Crowe at NRO:

Senator Bernie Sanders of Vermont introduced a bill on Wednesday that would require large corporations to reimburse the government for welfare benefits extended to their employees.

The bill, dubbed the “Stop BEZOS Act” in reference to Amazon founder Jeff Bezos, would implement a 100 percent tax on any government welfare distributed to employees of corporations with more than 500 workers. In essence, it would require such corporations to pay the government one dollar in taxes for every dollar Washington spends providing its employees with federal welfare benefits.

We want to make it clear that we are not making this up.  They could be trying to stop Bezos but it will only stop the low skilled like the young and the poor.  Yes, corporations with over 500 employees would be forced to cover 100% of any [federal?] government welfare distributed to their employees.  Jack notes that it is not a partisan issue as Fox News was embarrassed by one of its readers:

Fox News host Tucker Carlson targeted Bezos and his ultra-wealthy peers in a segment earlier this week, praising Sanders as the only politician willing to address what he views as an “indefensible scam.”

It appears that they want corporations (with over 500 employees) to fire folks receiving government benefits.  As benefits depend upon family size it would be a tricky job for both the corporations and the IRS.

The only rational reason we can see for the new front is that folks might think that raising the minimum wage is less foolish then this new assault on individuals trying to work their way up the ladder.  Don’t be fooled.

A Less Bad Idea?

David Neumark is trying to sell a new minimum wage idea in the WSJ.  First let’s talk about a strange headline and sub-headline.  The header is:

Let The Taxpayers Pay The Minimum Wage

That makes some sense.  If taxpayers are foolish enough to want to increase the minimum wage then they ought to foot the bill.  Fair enough.

The sub-headline is:

Employers shouldn’t bear the brunt of redistributive policy.

Well, at best employers share the brunt of a silly policy with employees.  We’re not convinced that David’s idea is less bad enough to support.  That is, sometimes you support a policy or a candidate because the alternative is so bad that less bad is way better.  We don’t see that higher taxes or bigger deficits are good ideas.