The Costs of a $15 Minimum Wage

In the 1970s, when oil prices jumped, most liberals embraced a simple solution: price controls. It should be illegal, they thought, to sell oil or gasoline for more than a certain amount. Americans should be able to drive without being fleeced by oil companies and foreign governments.

The impulse was understandable. Gasoline is an essential commodity for most people. When the cost rises, it imposes a heavy burden on consumers, most of whom have few transportation options.

In 1971, in an attempt to tame inflation, Republican President Richard Nixon imposed controls on almost all prices. By 1974, he had lifted most of them. But those on gas remained. Under Democratic President Jimmy Carter, they led to widespread shortages and long lines at service stations -- and didn't keep prices from rising. But the controls lasted until his successor, Ronald Reagan, lifted them in 1981.

Liberals learned an unforgettable lesson: Price controls on gasoline don't work. In recent decades, when gas prices have soared, Democrats have shown no desire to repeat the lesson.

But they embrace a similar approach for another problem: low pay for many workers. Chicago decided last year to boost the minimum wage to $13 an hour by the middle of 2019. Seattle, San Francisco and Los Angeles have gone even higher, raising the floor to $15 an hour in the next few years, and other cities may follow suit. It's a price control on labor.

Their intentions are good. Full-time employment at the current federal minimum of $7.25 an hour provides an income of just $14,500 a year. For an adult supporting one child, that's well below the poverty line of $15,930.

The problem is that a higher legal minimum wage is at odds with the prevailing supply of and demand for labor. If you set the minimum too high, you will get a shortage of jobs. Forbidding employers from paying $9 or $12 an hour means that many of their workers won't get $13 or $15 an hour. They will get zero per hour, because those jobs will disappear.

Via: Real Clear Politics

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A Return to Keynes?

The nomination of Janet Yellen to become head of the Federal Reserve System has set off a flurry of media stories. Since she will be the first woman to occupy that position, we can only hope that this will not mean that any criticism of what she does will be attributed to sex bias or to a "war on women."

The Federal Reserve has become such a major player in the American economy that it needs far more scrutiny and criticism than it has received, regardless of who heads it.

Ms. Yellen, a former professor of economics at Berkeley, has openly proclaimed her views on economic policy, and those views deserve very careful scrutiny. She asks: "Will capitalist economies operate at full employment in the absence of routine intervention?" And she answers: "Certainly not."

Janet Yellen represents the Keynesian economics that once dominated economic theory and policy like a national religion -- until it encountered two things: Milton Friedman and the stagflation of the 1970s.

At the height of the Keynesian influence, it was widely believed that government policy-makers could choose a judicious trade-off between the inflation rate and the rate of unemployment. This trade-off was called the Phillips Curve, in honor of an economist at the London School of Economics.

Professor Milton Friedman of the University of Chicago attacked the Phillips Curve, both theoretically and empirically. When Professor Friedman received the Nobel Prize in economics -- the first of many to go to Chicago economists, who were the primary critics of Keynesian economics -- it seemed as if the idea of a trade-off between the inflation rate and the unemployment rate might be laid to rest.

Via: TownHall

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California Can No Longer Coast

Poor Gov. Jerry Brown. He apparently still thinks it’s the 1970s.

He’s been saying lately that California’s progressive legislation – environmentalism, greater rights for immigrants, wealth redistribution – is setting the trend for the entire nation. A template for all to follow.

“We can do a lot of things in California to shift the (political) climate throughout the whole country,” Brown was quoted as saying last week.

Sorry, Jerry, but you may be stuck in a time warp. America doesn’t work like that anymore.

Oh, sure, there was a time, a glorious era that lasted a few decades, when California was indeed the shining example for the whole country. The state’s terrific (and affordable!) university system and its environmental legislation – back when the whole country was desperate for a clean-up – were models for the country. Believe it or not, California’s roads and highways were once the envy of America.

But everything began changing about 30 or so years ago. A group of states began drifting left and another group took a step or two to the right. Steadily, over the years, these two groups marched further apart. Today, Brown may look behind him and see Massachusetts, Illinois and some other states following California’s lead. But he apparently hasn’t noticed that other parade, the one led by Texas.

Increasingly, each group is made up of True Believers. The California-led group thinks their opposites are mostly benighted rubes who have hateful tendencies. The Texas ilk thinks the California types have come untethered from reality and are pushing their group of states along a tragic trajectory. (None of this is meant to be a judgment, by the way. Just a statement of obvious fact.)

Go ahead. See what happens if you get these two groups together to decide any…well, I guess they do that. It’s called Washington.

The point: America really has become two warring camps, worse even than Charlie Sheen and Denise Richards. And Brown’s California is leading only one of them.

Via: California Political Review

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