Preaching to the choir

What was the president hoping to achieve with this line in the state of the union?

And to everyone in this Congress who still refuses to raise the minimum wage, I say this: If you truly believe you could work full-time and support a family on less than $15,000 a year, go try it. If not, vote to give millions of the hardest-working people in America a raise.

What's the target demographic for this line?

I don't need to go all Don Boudreaux on this line, which I see as grossly flawed economic logic, but I don't know what it's purpose was?  It clearly wasn't to convince anyone, as his opponents reject the idea that people try to support families on minimum wage or that raising it would help poor families. In fact, we see it as putting many of them out of work.

So then who was it for? Was it to mobilize his supporters with some kind of populist image of an evil white-haired Republican overload trying to scrape by on little money? Would he have lost points for not mentioning the minimum wage, as it only came up one other time in the whole speech and that second time was a mere passing reference.

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Odd, I checked and I'm not homeless

For years I've seen left-wing advocates share maps claiming that there are no places in America where someone can afford to live in an apartment on minimum wage. Well, it turns out their logic is grossly misleading.

Click on the blue map above and to the left for the actual numbers of the claim.

I always mistakenly rejected this on the assumption that they simply mean that's what is costs for a person living without roommates must earn. As Bryan Caplan wrote on the social safety net and roommates:

To put it more concretely: Before anyone starts collecting welfare, it is more than fair to ask them - for starters - to try to solve their own problem by taking on some roommates. Is it beneath their dignity to live like college students? I think not.

That always seemed to satisfy me, and refute a lot of the Nickel and Dimed crowd bellyaching about it being impossible to live on minimum wage. These were people who weren't willing to make lifestyle sacrifices and wanted the government to subsidize their Starbucks and beer.

Well, it turns out I was giving the activists too much credit. A piece I stumbled across this week showed the numbers being used are dishonestly mislabeled:

It’s conventional wisdom in personal finance that housing costs shouldn’t exceed 30% of your income. What this chart is actually measuring isn’t how many hours you would have to work at minimum wage to afford a two bedroom apartment, it’s measuring how many hours an individual would have to work for an apartment meant to house two people – and have it only consume 30% of their income. 

The chart thus doesn’t measure how many hours of work it takes to pay for rent, it measures the amount of hours it takes to earn rent – times three!

Hmm, sometimes figures are presented misleadingly and we gloss over the fine points when we read a chart or graph. However, in this case the chart merely states "Hours needed to afford apartment" and later on says this is in a week, not a month. That's a completely dishonest way to say one needs to keep the rent in the 30 percent bracket.

Notice another detail that was left out - this is for a two-bedroom apartment, not a single apartment. That's an easy way to inflate figures, but not relevant when most minimum wage workers aren't the sole earner in a household.

But wait, there's more.

Politifact didn't respond to this map, but last month it did respond to a related viral image that claims "There is no state in the U.S. where a 40-hour minimum wage work week is enough to afford a two-bedroom apartment," While it rated this "mostly true," it went into the 30 percent detail that was glossed over and exposed another crucial detail: This is the average Fair Market Rent, not the average rent people pay.

The group left out a key distinction from the study they cite: Minimum wage workers can’t afford a two-bedroom apartment at Fair Market Rent, a number determined by the federal government for each region set at the 40th percentile of all rents in that area. 

That means that in some areas, minimum wage earners would be able to find and afford housing that is cheaper than the Fair Market Rent. Though, in states where rent is more expensive, minimum wage earners would not be able to afford apartments even well below the Fair Market Rent.

I'm a little confused why they generously rated this as "mostly true" when Megan Bolton of the National Low Income Housing Coalition, a spokesperson for the activist group that crunched the numbers for this claim, admitted that someone can live alone for minium wage. Using their 30 percent figure, that gives a full-time minimum wage worker $377 to spend on rent in a month.

"Absolutely, certainly there are places with rents at $377, especially if you’re in smaller areas, and they may be of okay quality," Bolton said. "If a minimum wage earner can get an apartment at that price, it would be affordable for them."

So there are indeed places where in American where someone can afford an apartment on minimum wage. Sounds like "mostly false" to me.

The above chart being passed around represents 2012 numbers. Click here for the 2014 numbers from the National Low Income Housing Coalition. Notice that the chart starts by saying, "In no state can a minimum wage worker afford a two-bedroom rental unit at Fair Market Rent, working a standard 40-hour work week, without paying more than 30% of their income." That lakes the bite of the popular claim that no one can afford to live in an apartment on minimum wage, but at least they are being upfront about what the numbers represent.

However, I'm still not convinced it's accurate. Matt, Palumbo, showed that the numbers don't make sense in New Jersey where he lives. Looking at their related chart of what a full-time worker needs to make to pay rent, I can see that in my apartment in Massachusetts I must make $24.08 to be able to pay my rent.

When I first moved here in 2011, I was making $13.50 an hour, hardly minimum wage but still below what they say is needed to live. I was also living in a one-bedroom apartment. With what I'm making now, this chart says I'm still only making five-eighths, or about 62.5 percent, of what it would cost to have a second bedroom, despite the difference in rents between single-and-double apartments being rather small.

So how come I'm not homeless? I'll admit, I'm still on my parents cell phone plan, but I'm not getting any government assistance or regular outside source of income. Perhaps these numbers are horribly skewed by the high rents in Boston. Either way, I've been living below what they say is possible for a long time.

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Hamburger robots need to be addressed

Plenty of people have mocked the ridiculous proposal to create a $15 minimum wage for fast food workers by showing pictures of international McDonald's order kiosks that replace workers in countries with expensive labor.

The economics are straightforward here: Business owners have to decide if a task will be completed by a worker, a machine or a combination of the two. More robots and machines means fewer jobs for humans, but that is a consequence of technology and progress. We want production to be more efficient, as that brings down costs and frees up people to work in other fields, so in the long term it's good to replace workers with machines. In the short term, it can be bad for individual workers who lose their jobs.

Automating jobs with machines requires capital investments and may naturally be more expensive than hiring humans, but as labor costs go up, it becomes more and more tempting to replace workers with automation. This is bad thing overall, as jobs are automated not because it's efficient but in response to a political constraint. It doesn't save the customer any money by bringing down prices.

See the difference? The first example is beneficial to society overall, but the second one is not.

Modern technology allows us to automate more and more jobs, including ones we thought could never be replaced. Fast food cashier is once one of those jobs, and now those workers should be concerned about being replaced by machines.

Okay, so there will still be people out back making the food, right? Well, not always.

A company just invented a machine that makes hamburgers from scratch, with a full-cooked and packaged burger coming out ready to eat every 10 second.

Momentum Machines cofounder Alexandros Vardakostas told Xconomy his "device isn’t meant to make employees more efficient. It’s meant to completely obviate them." Indeed, marketing copy on the company's site reads that their automaton "does everything employees can do, except better."

That doesn't mean that every company will buy a hamburger robot, but it does mean those robots will become a real consideration in the future.

Hat tip to Nate for the link.
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I like what Obama complained about

Am I the only one who caught president Barack Obama's crazy statement about the minimum wage today?

Jump to 6:30 mark for the full context. Basically, Obama was justifying his use of executive order to mimic the legislation he is not able to get through congress and its checks and balances, a hallmark of his administration I find worrisome and disturbing. He made a list of things he identifies as problems and when he wanted to lament the lack of a federal minimum wage increase he said something that made me squint in confusion:

States and businesses are raising the minimum wage for their workers because this congress is failing to do so.

Uh, what?

IKEA, for example, just announced that it's raising its starting pay in America, which is something companies do when they want to attract better workers. That's a good thing.

I understand why Obama's argument about state minimum wage increases is logical, but complaining about businesses raising wages when congress did not? That's a ridiculous statement and he should fire whoever put that line in his speech.

The president just said, as a complaint, that the market and capitalism are raising peoples wages instead of waiting for the federal government to do so. That's what he said.
Obama has had economic rock stars in his administration, Larry Summers, Christina Romer, Cass Sunstein,
Timothy Geithner, Alan Krueger, etc., yet I rarely get the impression that he listens to them. Instead, he speaks as if the economy is something that can be subdued and leashed with legislation, when it's really a rebellious, uncooperative organism.
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Higher wages are amoral

Too many people mistake self-interested business decisions for moral action.

NPR did a piece on IKEA of America raising its starting wage by 17 percent to an average of $10.76, depending on the area.

"By taking better care of our coworkers," says Rob Olson, the acting president of Ikea U.S., "They will take better care of our customers, who will take better care of IKEA. We see it as a win-win-win opportunity."

He said the money will come out of profits, as they won't reduce staff or raise profits, but feels it will pay off in the long run with increased sales. 

Proprs to NPR for bringing in economist David Neumark, who said they may attract better workers who will increase sales, but that same strategy wouldn't work at a fast food restaurant with inelastic sales.

Olson of IKEA said this is the right thing to do for the employees, and I got the sense that NPR liked that they were paying unskilled workers more money, but I want people to refrain from looking at wage increases as a moral decision and think of it instead as a business decision for most companies.

Liberals love to cite Apple retail stores for keeping a large pool of staff on the clock at any given time and Costco for paying high wages. I don't see them praising engineering firms for paying high wages to their workers. Why is that? I think they want to see companies agree to treat wages as a form of charity to workers and set wages above the market-clearing rate for labor. That is to say, they want employers to ignore the invisible hand and just give money and jobs to people.

Of course, they always coach that in terms of how it will be good for business by improving worker performance, but as Neumark said, if employers believe raising wages will bring up their profits they will do it on their own.

Wages and compensation packages such as health insurance are not gifts employers share to be nice. They are payments used to attract the finite pool of workers. Wages are set by supply and demand, not empathy and charity.

If you're not convinced, look at this Walmart recruitment poster from oil-rich North Dakota that was shared by the American Enterprise Institute last month:

Does anyone believe Walmart is paying these high wages because of compassion or kindness?

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Accounting vs. Economics

I've never been a big Scott Sumner follower, but I read something he wrote earlier this month and I haven't been able to get it out of my head.

Here's a common theme I see. Most liberals prefer to think like accountants, not economists. The dismal science focuses too much on the "no free lunch" concept. The idea that there are trade-offs, that incentives affect behavior. The idea that making failure less costly, also makes it more likely to occur.

That was a huge eureka moment for me. A few days after I read that I attended a left-wing anti poverty conference for work. I wasn't impressed with the framing most of the issues received, and I felt like Scott Sumner was yelling in my ear the whole time. The policies they advocated assumed a static world, where people will keep doing what they're doing now ever after new policies are introduced that will change their incentives.

For example, the minimum wage was introduced as a way to help the impoverished. It came up over and over again as a basic transfer of wealth from the business owners to workers. There was zero pushback, such as concerns about jobs being cut, people with more impressive resumes taking the jobs away from unskilled poor workers or price increases that will harm poor consumers. They simply assumed a static world, except with money moving from one pile to another.

Frédéric Bastiat famously wrote:

There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.

Sumner did not call liberal economists bad economists. In fact, he praised them for coming around in the 1990s and championing market-based policies - something left wing economists still embrace. Instead, he was talking about the left in general.

It's normal for non-economists to have terrible, warped view on economic matters. It is the default, sadly. But what's troubling here is the way progressives attempt to mettle with economic matters by treating it as a series of accounting issues. They don't seem to realize that their attempts at moving money around changes the way people behave, and it explains why so many of their policies don't work as planned.

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If you don't like being laughed at, don't be a Marxist

Boston Globe, what are you doing?

This week the Globe printed a ridiculous one-sided crybaby piece from someone who chose to become a public figure but didn't like having her own words used against her.

Wellesley College economics professor Julie Matthaei was one of 600 academic economists who signed a letter of support for raising the federal minimum wage to $10.10 an hour. A right wing group called the "Employment Policies Institute" printed this critical ad in the New York Times quoting Mattaei and seven other people who signed the letter of support that shows those people saying radical things that expose them as Marxists, socialists, Stalinists or 9-11 conspirators.

In Matthaei's example, they took a quotation from her Wellesley webpage where she described herself as a “Marxist-feminist-anti-racist-ecological-economist.”

In short, the Employment Policies Institute (which is not a real institute) is saying that the "600 economists" who lined up to support raising the minimum wage has some crushed drywall mixed in with its cocaine for bulk.

Matthaei didn't express any disagreement with that conclusion, but tried to play it off as persecution for her beliefs. The Boston Globe reporter and headline writer sprinkled in scare terms like "echoes of the cold war" and "This flashback to the Cold War..." It also said:

The Times ad, taken out by the nonprofit Employment Policies Institute in Washington, had a distinctly 1950s flavor, employing excerpts from quotes that used derivatives of “Marx” four times, praised Soviet-style socialism, and questioned official accounts of the Sept. 11 attacks.

Keep in mind that it was the reporter declaring the ad had a "distinctly 1950s flavor" and not Matthaei. There is no issue with the Globe quoting Matthaei as saying things like “I felt I was being red-baited” because that's a statement attributed to her, the focus of the piece. The problem is when the reporter used similar opinionated language to paint a picture, and the reporter here most definitely did.

The Employment Policies Institute did not prove that all 600 economists who signed the letter are batty. It instead said what people who lack supporting data always do and hid behind vague wording. It said "Many" of the 600 economists are radical researchers. That's not a slam dunk, and it ignores people like Kenneth Arrow, one of six Nobel Prize winning economists who signed on.

But what's completely fair game is holding people responsible for their actual words and beliefs. Matthaei really is an anti-capitalism Marxist who lives in a commune. Just like alternative medicine nonsense has infiltrated higher education despite being completely at odds with reality, so has Marxist economics. Matthaei is part of that sect of academic Marxist economics, and they should be seen as a separate group, like we see doctors and witch doctors as separate groups.

For what it's worth, economists now have a lot of debate on the minimum wage, and as Greg Mankiw said, there are hundreds on both sides of the argument.

One of the radicals quoted in the ad actually said something true about Marxist economics. That was Renee Toback, who said “Marxist analysis is as useful today as it ever was.”

I couldn't agree more.

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Sometimes, it is OK to blame the victim

This week free market video blogger and investor Peter Schiff went on the Daily Show to defend the minimum wage and gave them plenty of ammunition to mock "our side" with. As expected, they used editing tricks, anecdotal examples and a cherry-picked expert to argue against their point. They even included a passing reference that called important social safety net policies like the earned income tax credit "corporate welfare."




Well Peter, what did you think would happen? As Mike Munger wrote after viewing a different Daily Show  segment last month:

At this point, these are not ambush interviews, because it's obvious what is going to happen. If cannibals ask:  "Can you come to dinner?" it means YOU are going to be cooked. If Aasif Mandvi asks if you want to do an interview, it means YOU are going to be smoked and hung out to dry. 

I understand that we're not supposed to "blame the victim" but I don't care. Sometimes, the victim was being careless. This is another great example of Ken's Law, where the awfulness of one side does not mean the other side is forgiven for being awful as well.

Did Schiff need to increase his exposure to the world? He's found much more flattering venues before. On his blog he said he thought going to the show was a "risk" to help get his message out. No Peter, there was no risk here. It was a done-deal from the start.
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Who benefits from a minimum wage increase?

David Henderson has some solid numbers that show how little proposed minimum wage increases would actually target people in poverty.

. Only 11.3 percent of workers who would gain from the increase live in households officially defined as poor.
. A whopping 63.2 percent of workers who would gain were second or even third earners living in households with incomes equal to twice the poverty line or more.
. Some 42.3 percent of workers who would gain were second or even third earners who live in households that have incomes equal to three times the poverty line or more.

That's not even controlling for poor people who were priced out of the job market.
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SeaTac is the canary in the coalmine

It looks like we have a natural experiment on our hands, although not the best one.

Voters in Washington state approved a $15 minimum wage for SeaTac airport employees. Sort of.

This is being misreported as a minimum wage for all of Seattle or all airport employees. SeaTac is technically a city, but this is mostly about the airport. The wording for Proposition 1 is long and complex, and the exceptions are getting lost in the shuffle.

This new minimum wages does not affect restaurants outside of the airport, grocery stores, most small businesses and hotels with both less than 10 rooms and 30 rank-and-file employees. It doesn't even affect some small businesses inside the airport.

While I look forward to a natural experiment to show the effects of the minimum wage, such as pricing low-skilled workers out of the job market, this experiment has a lot of variables that will soften the damage.

It's bad enough that Seattle voters accepted a socialist economic instructor who supports rent control (this is like a Republican biology professor who supports creationism) but their golden opportunity at a natural experiment is bogged down in compromises. The harm from this policy will still be real, but it won't be as acute and jagged as an actual across-the-board $15 hourly wage would. I fear that more people will have to suffer when the experiment is inevitably repeated.
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Where do wages come from?

We've all heard the imaginative tales innocent children will concoct when they try to figure out where babies come from. Does the mother's belly open like a breadbox to deposit the child when it's ready? Do storks or pixies or ancestral spirits bring the child from another realm? Kids don't know so they make up the best answer they can, despite lacking important information.

That's a perfect parallel to what happens when many adults try to explain where wages come from. There are oodles of stories surfacing about how workers of major corporations often collect some kind of government assistance, and they make the claim that the company is costing the government money because its wages aren't high enough.

Here's a typical example, with its description of Domino's:

Domino’s has more than doubled its net income since 2008, when the company posted $54 million in earnings. Many of Domino's employees are likely enrolled in government programs. According to [the National Employment Law Project], the company could have raised employee wages rather than spend that money expanding aggressively overseas and investing heavily in technology aimed at easing the ordering and delivery process. The stock has surged over the last five years with the share price up more than 900%. Meanwhile, the compensation of J. Patrick Doyle, Domino’s CEO since 2010, amounted to more than $6 million in 2011 and more than $9 million in 2012.

Somewhere in America, a writer thinks that wages come from the stork.

How else could you explain this reckless assumption that Domino's would have dumped its investment money onto its low-skilled employees? To the economically-ignorant, wages are a gift employers give to employees because they are nice. To those with economic understanding, wages are determined by the market and will reach the dollar amount required to attract a competent workforce

I was a Domino's driver in college and it was best money I had made at that time. It paid more than the small businesses and large corporations I had worked at before. It also took little skill and there were tons of people qualified to do the same job. If wages were raised, I doubt I would have been able to keep my job, as adults with more work experience would leave their fields and take the positions away from people like me. Without these kinds of low-paying jobs, young workers can not get a break into the workforce.

Noticeably, the article's estimate for what the government gives in assistance to Domino's Workers ($126 million) is more than the companies annual profits ($112 million) and CEO compensation ($9.1 million) combined. The author insists that the company should have avoided expanding their business and making capital investments and instead give cash gifts to employees.

Does this person also believe in unicorns? What a downright idiotic thing to write.

By the way, since the writer is so bitter about the $3 million increase in the CEO's compensation package between 2011 and 2012, why not simply divide it between all the employees. I'm sure that annual increase of $40.58 per employee would go a long way.

Welfare programs that cut off benefits when workers find some work trap people in poverty. If someone has low skills and few offers, they can lose money if they take a job and sacrifice their government benefits. It's a positive thing that these people are working while on government assistance. The alternative these shallow activists seek would lead to higher government assistance costs and more people blocked from working.

By the way, anyone worried that Domino's pizza workers aren't making enough money can try giving a generous tip.


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NPR loves this stupid idea

I get a lot of my news NPR and it's blatantly clear that their reporters and producers want to give as much attention to the activists who are demanding that McDonald's pays their low-skill workers $15 an hour. That's more than many reporters make, but the good people at NPR like to present this lunacy like it should be taken seriously and considered.

Come on guys, don't you have friends from journalism school who are limping along in the low wages of the field who would jump for joy to receive $15 an hour? Do NPR reporters secretly plan to become fry-cooks to boost their income if this impossible suggestion is met?

One of the many forms of media bias is story selection and NPR has put a lot of resources into bringing this story up over and over again. The latest example is an activist crashed a corporate event and yelled a bunch
of slogans, saying she's worked there for a decade and makes $8.25 an hour and "that's just not fair."

Not fair? That's what a whiner says when they're out of compelling arguments. I imagine she has been a part-time employee for that decade, and seeing as how she couldn't get a raise or another job years before the recession hit I imagine that she's simply not a capable or reliable employee.

I've already written about how obnoxiously ignorant these mathematically-challenged arguments are, where we are told that the employees are paid little while the company itself is rich, so therefor the company can afford to pay limitless sums to more than a million employees. Tom Blumer has already done the math - something the activists skip over in their talking points.

Yelling and making public spectacles to demand that notoriously unskilled jobs should have some of the best starting wages is a fringe cause, and NPR's shallow coverage of these ridiculous idea reveals the organization has an agenda. That's more than fair to say.
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High school drop outs want what?

Here's a headline I want to see:

Activist who wants McDonald's to pay workers $15 an hour interviewed by reporter who makes $13 an hour
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Happily mislead

I keep hearing ridiculously inflated numbers that are supposed to be adjusted for inflation, but when one digs deeper they find it was something else.

Elizabeth Warren's $22 hourly minimum wage claim is the latest example, but I've seen plenty of others. Here's a run though of what happened.

Warren said that if someone took the minimum wage of 1960 and held that proportion of the economy constant, it would be $22, so why isn't the minimum wage at that number?

Progressives who only read the headline or possess a limited understanding of economics interpreted that as a claim about inflation.

Those same progressives get it into their brains that adjusted for inflation, the minimum wage of 1960 would be $22. Elizabeth Warren does not go out of her way to correct this.

That number is incredibly easy to check. One simply needs to find the minimum wage of 1960, which is $1 an hour, and run it through an inflation calculator. It comes out to $7.65, slightly more than the current minimum wage of $7.25 but still less than the $9 the president wants.

So be careful with those inflation claims, lefty readers, those surprising numbers you're picking up may be saying something else.
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What economists think of the minimum wage

Last month President Barack Obama rekindled political discussions about the impact of increasing the minimum wage. Unfortunately, those discussions draw very little wisdom from academic economists and are instead based on the whims and guesses of the public.

Here's a short history of the economist perspective on the minimum wage. There was a scientific consensus that the minimum wage harms low-skill workers by pricing them out of the labor market. These upstart workers lack soft skills and have trouble competing with experienced workers so their labor is not worth very much to employers. When the government tells employers they have to pay them more than what their labor is worth, some employers will opt to not hire them instead of raising their wages. That hurts the very people the law is supposed to help and most economists opposed it.

That consensus is now gone because of a 1992 study by David Card and Alan B. Krueger in New Jersey that compared fast food employment with and without a minimum wage. The study showed that the workers were able to receive higher wages without losses in employment. The Card and Krueger study has plenty of critics, but it clearly broke the consensus.

Economists are now divided on the issue, with about a third in support of the laws, a little more than a third in opposition and the rest unsure.

The way the issue is framed in the public realm is very different as well. The popular opposition claims that the problem with the minimum wage is that small businesses will be harmed. I'm tempted to dismiss this as a tactical approach, but claiming it harms the poor would seem to be an equally effective tactical approach and comes packaged with academic support. I think the real issue here is columnists and politicians who don't study economics are just spouting whatever pops into their head and sounds reasonable.

I never want to do that. Even though I fully oppose the existence of a minimum wage, for reasons described by Bryan Caplan and Don Boudreaux, honesty requires that I admit my perspective does not have a consensus and the issue is up for debate.

One footnote to that thought: The pro-minimum wage arguments assume the wage is set at a modest rate. If it went up to something absurdly high like $20 an hour then you would have a strong consensus about its harm to employment levels.
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Jim Crow and the minimum wage

I was rereading one of Dylan's post on racial issues over at Blindsight 20/20 and I got to thinking about how any legislature that impacts blacks negatively more than other groups - crack-cocaine punishments, welfare reform, public housing cuts, etc. - are presented as racist in nature and motivation.

Under Jim Crow laws, this was absolutely the case. Legislation that said in order to vote, you must ace a difficult voting test unless your grandfather was a voter was designed to target blacks without actually mentioning them.

Jim Crow laws were a horrible blight on our record, which makes it politically convenient for some lefties to invoke them to smear modern laws that would impact blacks more than whites.

So with that template in mind, shouldn't minimum wage laws fall under the 21st century Jim Crow umbrella?

I've added emphasis to the minimum wage entry on the Concise Encyclopedia of Economics:

At current U.S. wage levels, estimates of job losses suggest that a 10 percent in crease in the minimum wage would decrease employment of low-skilled workers by 1 or 2 percent. The job losses for black U.S. teenagers have been found to be even greater, presumably because, on average, they have fewer skills. As liberal economist Paul A. Samuelson wrote in 1973, “What good does it do a black youth to know that an employer must pay him $2.00 per hour if the fact that he must be paid that amount is what keeps him from getting a job?”

This has been well-understood for a long time. The white labor unions in South Africa under apartheid pushed for minimum wages to push blacks out of jobs. It doesn't matter that the proponents today are no longer motivated by racism when the results are identical.

If one is in the habit of calling racism on any legislation that makes things difficult for minority members more than anyone else, than they should see the minimum wage as nothing less than a Jim Crow law.
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"Training Wages" would benefit Maine teens

Maine State Rep. David Burns (R-Whiting) is sponsoring a bill to lift minimum wage requirements for Maine teens during their first six months of employment.

LD 1346 would also reduce limitations on hours worked by teens in school. Opponents are spinning this as a return to child labor. It always amazes me how laws designed to keep children out of dangerous factories and coal mines are still used to keep kids away from air-conditioned offices.

Minimum wage laws are a ban on the hiring of workers with low skills, and teenagers are some of the biggest victims on these well-intentioned laws. It's a price floor, and like all price floors, it distorts and lowers demand. Minimum wages raise the wages of workers who have jobs, but it also reduces the number of jobs and increases unemployment for those with skills to low to justify the artificial wage.

By allowing teens to sell their labor cheaper, this legislation would help the young workforce market itself better in the future.



This bill is a rare treat - a direct and faithful economic principle as a template for legislation. I hope this passes and Maine becomes a natural experiment in the employment level of teenagers.

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Do video games have a liberal bias?

This morning as I was exploring the galaxy in the space opera Mass Effect 2 on my Xbox, my ship arrived at the planet Anhur and I was greeted with this cringe-inducing description:

"A garden world with heavy populations of humans and batarians [an alien race], Anhur was home to one of the ugliest violations of sapient rights in modern human history. A consortium of corporations and corrupt politicians, fearing batarian economic competition due to their custom of legal slavery, passed a resolution that abolished the minimum wage - effectively relegalizing slavery on a human-dominated world."

I understand that when an artist creates a world, that world runs exactly the way the artist believes it would. In American Beauty, a gay basher is secretly gay. The 18th century painting The Bostonians Paying the Excise-Man shows ugly, cruel Americans abusing a British customs official. Likewise, the Mass Effect universe is filled with evil corporations.

In the first Mass Effect game, every time you encounter a corporate researcher, they are covering up some unethical experiment. The planet Noveria is populated with scrupulousness corporate laboratories performing illegal experiments where the government can't see and the mission to planet Feros reveals a corporation is running an evil experiment on their own colonists. You can't bump into a single private company in this universe without finding a closet full of skeletons. No opportunity to wallow in the inhumanity of capitalism was skipped.

While I'm at it, the short description of planet earth in the game included:

"Sea levels have risen two meters in the last 200 years, and violent weather is common due to environmental damage inflicted during the late 21st century."

I will give the Mass Effect writers credit for the capitalist character Ratch, who demonstrating the Beckerian idea that merchants are harmed if they act on racial prejudices. Ratch is the only character who is kind to you on a hostile world, simply because he wants you to buy from his store.

Don't get me wrong, I love the Mass Effect games and I plan to keep playing them. I just have to tolerate a lot of eye rolling, such as when the privatized space prison is lead by a brutal, corrupt warden. I feel comfortable concluding that this individual game has a liberal bias, but what about the stories of most video games?

Most video games are politically neutral - Tetris had nothing to say about the abortion debate and Mario only weighed in on the death penalty when it dealt with marauding turtles. I freely admit that I don't have a study, my sample size is limited to the games I encounter and all my observations are vulnerable to recall bias. Despite these limitations, I feel it's reasonable to believe video games have a liberal slant when they do introduce politics.

Other examples include the opening scene to Mirror's Edge and the corrupt right-wing Enclave in Fallout 3.

Grand Theft Auto IV, however, did it right. The conservative talk radio station We Know The Truth (WKTT) features the Rush Limbaugh parody "Richard Bastion." Bastion says things like:

"In old America, the America I fell in love with, we dealt with stupid people very discreetly, OK? Now, now I don't know if it's - if it's something in the water, or - or the lack of separate water fountains, uh, but it's like a plague has taken over."

Or:

"What we've been given from our forefathers - the freedom from thought. That, for my money, is real freedom. Knowing you're always right - that's real freedom!"

These parodies of conservatives are pretty harsh. Bastion calls the ideal conservative world a "limited-access paradise." These writers were not kind to the right.

But they weren't kind to the left either. The public radio parody station features a vain self-indulgent Hollywood actor who says his extreme environmental expertise is because he went to acting school. A radio ad for luxury cars featuring a pepped-up guru who says:

"I play to win, if you don't play to win, you play to lose - like a liberal."

Grand Theft Auto is hard on conservatives because it's hard on everyone. The jokes can be pretty harsh, but the writers made sure to give everyone a healthy dose of ridicule.

As for the claim from Mass Effect 2 that eliminating the minimum wage is an evil act akin to slavery, economic science doesn't agree. Most economists believe that one consequence of the minimum wage is an increase in unemployment. There was a contrary study released in 1994 by David Card and Alan Krueger that got a lot of attention, but it was criticized for using a small sample size and unreliable data collection.

The basic argument is that unskilled workers are shut out of employment because it's not worth hiring them at a high wage. If there is a $10 minimum hourly wage, a teenager with little experience or skill who is expected to only produce $9 of value an hour will not be hired. Thus, most economists argue that minimum wages hurt the people they are supposed to help.

I don't mean say this ends the minimum wage debate. Card and Krueger's study was approved by people like Paul Krugman, and as a result the opposition to minimum wages from economists no longer enjoys an overwhelming majority. The general public, however, doesn't seem to know very much about this issue, and the simplistic story the writers of Mass Effect presented is painfully ignorant.

Update: Visitors to the city of Nos Astra in Mass Effect 2 are cautioned not to sign anything because the city has "free trade." They clearly mean "a free market" because the city is awash in drugs, slavery, prostitution, and greed - but no word on punitive tariffs or trade barriers.

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