Sending Jobs to Other States

Fred:  We should stop importing cheap foreign goods and support US jobs instead.
Mike:  May I ask, what work do you do?
Fred:  I make donuts.
Mike:  Well, I saved $100 last year buying Korean tools.
Fred:  That must stop.
Mike:  If so, I'll have to buy $100 less donuts.

There is much concern about "sending jobs overseas". Some people call for consumers and businesses to "Buy American" even if it costs more. They claim that much of US unemployment is caused by selfish businessmen who buy foreign goods or invest in foreign factories merely to increase their profits. They say that people should be more important than profits.

Maybe these claims don't go far enough.

Read about A Glorious Plan for More Jobs by limiting imports

A Glorious Plan For Jobssarcasm

This plan will benefit all US workers. Each state must stop outsourcing its demand for great products to the two states who happen to be the best producers.

Identify the two states that are the most efficient producers of each product, and ban that product from being shipped to the other states.

If a ban is too sudden, then impose increasing taxes on the production in those two states. The Constitution may currently prevent this ban, but that doesn't make this a bad idea, and we should change the Consititution to benefit us all.

This will redirect demand in all of the other states. Local production will no longer be savagely depressed by the competition of the former top two states. Local producers outside those two states will agree with this. Jobs will be created locally to produce these goods, possibly at lower efficiency. No caring person thinks cold efficiency is more important than warm, local jobs.
 

Yes, there will be some gnashing of teeth from the former cold hearted, most efficient producers. And, there will be some realignment of resources and prices. Prices for goods might go up.

Some former top dogs will need to be dissuaded from manufacturing for a black market. They may attempt to retain jobs for themselves by selfishly selling goods at a lower price, to the harm of all other producers. They should be punished for predatory under-pricing.

Workers could take pride in producing goods less efficiently at higher prices and lower wages, in good local jobs. They would support their counterparts taking the same pride in their work across America.

Apologists for business will argue that the goods from the top two states were cheaper due to hard-won experience and previously high volume. They will argue that cheaper goods allowed consumers to spend the difference on other products, many from the other 48 states. That seems to make sense, but I wouldn't bet on it.
 

In later rounds, we can continue to identify the top producers and limit them also. The increased jobs and wealth will support a grand solution:  No trading between the states. Each state will have local jobs producing fine local products. No more job-stealing by the other states, and certainly not by foreign countries.

If this doesn't produce enough jobs, then we can limit trading between all cities and incorporated areas. Our motto: "Good, local jobs. No scab competition from other states or cities".

We can no longer allow efficiency to sap the strength and eliminate the jobs of this great nation. Maybe we can have special rules for California and Florida strawberries, but that is it.

Reality

The above is sarcasm. In reality, most people understand that producers in any state should be allowed and enouraged to sell their great products to consumers everywhere. Most people do not think it is unfair for companies in Ohio to compete with companies in Tennesee, even if this means (say) fewer jobs in Tennessee making a particular product.

Products don't care about political boundaries. A product purchased from a company in China, or a job outsourced to China, is no worse than purchasing a product from Ohio or moving a job to Ohio. The Chinese or the Ohioans use the dollars they earn to spend them on something else in the US economy. The pattern of production and employment changes, but not spending demand. Overall production goes up and prices come down.

Efficiency Is Prosperity

Efficiency produces prosperity. Whatever you personally produce, whatever is your income, you are better off buying things at lower prices, because you can buy more things which benefit your life. Lower prices result from the invention and work of companies that produce a greater volume of products using fewer people.

Necessarily, other companies and other people will not be producing those products. Either they won't try to produce, or they will reluctantly lose customers and the jobs associated with those products.

Your charitable instinct may suggest that people should not lose their jobs. But, that would require telling you, and everyone else, that you cannot ever do anything better. If you do it better, then someone loses the customer that you gain. If you can never do it better, then you can never increase your income.

In reality, increased efficiency producing one product sends a signal to other people, to work on producing other products. Eventually, that signal of lower prices requires them to work on something else. At the same time, consumers save money which they can spend on those other products. Thousands of such rearrangements result in more and better goods available at lower cost. Everyone becomes more efficient and is able to buy more things.

The Problem Of Regulation

The problem for the United States is not that the Chinese and others are supplying inexpensive goods to us. The problem is that we are preventing business development in the US that would employ people to produce many things that we would like. Limiting trade does not create jobs overall or increase prosperity. We need to free ourselves from suffocating government restrictions on being productive.

Selling us what we won't make ourselves

Why was the IPad manufactured in Asia?

Dallas Weaver:  [edited]  You cannot manufacture products in the US for rapidly changing markets. Our malevolent government permit system and legal parasites slow projects far beyond the point of responding to changed market opportunities.

Romer is Theoretically Correct

Fred: How many stimulus jobs have we created?
CBO: Just a second (runs computer program model).
      2,343,458 jobs.
Fred: Did you just scan a detailed database of collected information?
CBO: No. The model always says that.

Christina Romer is Mystified
09/02/10 - Ann Althouse

Christina Romer has resigned her post as chair of the White House Council of Economic Advisors, a top advisor to President Obama. The quotes below from The Washington Post are supplied by Ms. Althouse. I have edited and paraphrased.

WPost:  Romer acknowledged that she and her colleagues did not realize how quickly and strongly the financial crisis would affect the economy.

Romer:  To this day, economists don't fully understand why firms cut production and labor as much as they did. Almost all analysts were surprised by the violent reaction [1].

Althouse:  Every damned thing that happens is declared "unexpected".

WPost:  That miscalculation, in turn led to her miscalculation that the stimulus package would keep unemployment under 8%. Romer had predicted unemployment of 9.5% without stimulus [2]. The plan passed, and unemployment went to 10%.

Althouse:  Unexpectedly and mystifyingly, it was quite a surprise.

Romer:  The Council of Economic Advisers has reported to Congress widespread agreement that the act is broadly on track.

I will never regret trying to put analysis and quantitative estimates behind our policy recommendations [3].

Althouse:  A negative interpretation: They started with a policy preference, then rustled up numbers to support it. So, it is not surprising that the quantitative analysis was second-rate [4].

Read the analysis ...

[1]  "Almost all analysts were surprised" means "My friends and I were surprised".

Romer just didn't know, but she was willing to guess. She was willing to recommend borrowing and spending $800 billion for a giant experiment on the people of the United States, the people who would have to pay back the borrowed money.

The constant "surprise" in government anouncements gives the impression that the Obama administration had a reliable, practical basis for expecting something better and different.

Their excuse: The bad news is so unusual and unexpected this time. Don't blame us.

[2]  Unemployment would be less than 8% with stimulus, or 9.5% without.

These are precise numbers. It would be a breakthrough to see the analysis in writing, to learn something, study the results, and do better next time.

I don't think Romer's analysis would impress an ordinarily intelligent person. I think Romer and her staff looked at charts of economic quantities during past recessions. They applied the Keynesian theory of the moment, wrote down a few formulas, and recommended giant spending.

Spending is always agreeable to politicians. It is like recommending ice cream to an overweight person, to increase his energy for later exercise.

I would like to be proved wrong on this. Where is the written analysis on which Romer based her recommendations to the President? Why aren't Romer and Obama proud of their work?

[3]  "I will never regret trying to put analysis and quantitative estimates behind our policy recommendations."

Why is Romer thinking about regret? I think every member of Obama's political team came into her office at some time and asked "Why-Oh-Why did you have to put a number on your recommendations, and then be so wrong? We could have advised you. We are wrong all of the time, but it doesn't matter when we don't give a number."

The word "trying" jumps out at me. To quote the character Yoda:  Do or do not, there is no try. Did Romer have analysis, data, and past examples sufficient to risk the U.S. economy? If so, she would have said "I stand by the analysis supporting my recommendations". As it is, she won't regret "trying" to produce a good analysis.

Possibly, I should thank her for taking a chance on something new in government work. She "tried" to put analysis and quantitative estimates into policy recommendations. She implies this was a new thing within the White House Council of Economic Advisers.

[4]  Althouse: It is not surprising that the quantitative analysis was second-rate.

AMG: Just how second-rate is revealed in the following offical report.

Estimate of Jobs Created

Estimates Of Job Creation From The American Recovery And Reinvestment Act Of 2009 - May 2009  (pdf)
Executive Office Of The President: Council Of Economic Advisers.

To estimate the likely impact of the fiscal stimulus on real GDP, we used multipliers that we feel represent a consensus of a broad range of economists and professional forecasters.

The final step is to take the effect on GDP and translate it into job creation. Not all of the increased output reflects increased employment: some comes from increases in hours of work among employed workers and some comes from higher productivity. [And some is wasted -AMG]

We therefore use the relatively conservative rule of thumb that a 1 percent increase in GDP corresponds to an increase in employment of approximately 1 million jobs, or about three-quarters of a percent. This has been the rough correspondence over history and matches the Federal Reserve Bank model reasonably well.

 

Huge Problem

This report is not worthy of being called an analysis. It considers only the possible increased employment from government spending. It does not mention or consider the bad effects of government borrowing and increased taxes, or the → deadweight lossThere is a $200-$300 loss in production (salaries and jobs) from raising tax rates to get an extra $100 in tax collected. This is the Deadweight Loss of taxation. It is what is never produced, or what goes into extra accounting and legal fees, because taxes are raised. We end up with more paper and politics, and less consumer goods and jobs. from collecting more taxes.

Increased employment is possible, but the borrowing and taxes are certain. Any increased employment ends when the stimulus spending ends. The borrowed money plus interest must be repaid regardless, through higher tax collections.

John:  You will love the $20,000 boat I bought.
Mary:  You spent the college fund?
John:  Relax, I borrowed the money.

 

Big Problems

• Multipliers of What?

  The Report lists multipliers for Government Spending (say 1.5) and for Tax Cuts (say 1.0). These multipliers say that Government spending is much better than tax cuts, but better at what?

  First, Romer believes (Kenesian Economics) that $100 of government spending produces (magically, eventually) $150 in increased production and jobs (GDP or Gross Domestic Production). She also believes that $100 in consumer spending does the same thing.

  She wants to get the government involved because the government can force consumers to spend by borrowing and spending the money. The money will need to be repaid, but the benefits in the meantime are supposedly worth it. →They aren't worth it.03/2009 - Cargo Cult Economics
  Obama's and the government's most harmful economic myth is that savings are bad, and that only spending improves an economy. Spending transfers current production, but savings buys the equipment and business expansion that directly produces jobs and future production. The reason that government taxation and borrowing is bad is exactly because these use up savings and direct savings toward bad investments.

  Romer is saying that the government spends all $100 when it collects $100 in taxes. When the government cuts taxes by $100 or leaves the taxpayer with $100, the taxpayer spends $66 and saves or invests $34. So, the government is much better at spending all of the taxpayer's money than the taxpayer is.

  Amazingly, this is the same Christina Romer who authored the study →The Macroeconomic Effects Of Tax Changes - March 2007See Section VI. Conclusions, p.41
  Romer states the equivalent, that a $1 tax increase reduces GDP by $3.   which concludes that $1 of tax cuts raises GDP by about $3. The reason is that people invest and work more when taxes are lower.

  Romer's 2007 study is detailed and thoughtful. What did a top government position do to her? I think Althouse is correct in [4] above.

• GDP As an Accounting Entry

  Greater production is associated with prosperity. The money spent by consumers is a vote about the usefulness and quantity of what is produced. Consumers choose to buy only the things which are useful to them, that were worth producing and buying.

  The freedom of choice to buy or not buy gives GDP its good associations. So, it is crazy to believe that everyone will be better off by forcing them to buy because that raises GDP.

  Government spending adds to GDP by definition on paper. It adds to real prosperity only if the government buys things that are as useful as what an individual would freely purchase. When the government buys something that is only slightly useful, →we call that a waste of resources07/25/10 - LegalInsurrection
  You will recall my now-classic post about the miles of sidewalks leading from Warren, Rhode Island to the Massachusetts state line. A stimulus project., and no one is going to buy more when the government stops buying. Any "stimulus jobs" which produce that item will disappear after the government stops buying.

  Here is stimulus thinking: A prosperous economy supports jobs in restaurants and tourism. Many of those jobs have disappeared due to weak demand. The government will restart the economy by borrowng money to buy more meals and tours. Afterwards, everyone will be better off.

  In reality, taxes go up to pay for the debt created by the government. This reduces the money available to freely buy meals and tours, and that demand collapses even further. Worse, every productive person and investor acts in fear that the government will do this again. They work and invest less, shrinking the economy and lowering useful GDP.

• Spending As An End In Itself

  The Report has things fundamentally, crazily backwards. We don't spend money to create jobs, we organize jobs to provide useful things. We should apply the least resources (money) that we can toward producing those useful things.

  The result of spending is what is produced. That is it. The money is not fairy dust spreading wealth to whoever touches it. The money represents say a basket of groceries that is traded in exchange for producing those useful things.

  At best, government spending buys absolutely necessary things such as military arms that only a government can control. At worst, government passes out money to friends and contributors, producing little of value to the general society, under the cover story of producing jobs.

  Every dollar of government funds has been or will be taken from someone who has produced, or will be expected to produce something useful. He has worked hard for that dollar that the government takes away in taxes.

-----
CBO Creates Jobs On Paper
03/17/10 - Cato@Liberty - Daniel J. Mitchell [edited]:

Doug Elmendorf is Director of the Congressional Budget Office (CBO). He basically agrees with me, that their employment model simply spits out pre-determined numbers, regardless of what happens in the real economy. The CBO recently estimated that so-called stimulus spending generated jobs and growth.

Someone asked Elmendorf, would the CBO model be unable to detect whether the stimulus failed. After hemming and hawing, and a follow-up question, Elmendorf confessed "that’s right".

(See this at 39:00 on the C-Span video at the link)

Our economic future is being analyzed by CBO models that are entirely theoretical and are not compared to the reality that they are supposed to predict. The CBO "scores" Congressional legislation, telling us how much legislation will cost and how much it will "reduce the deficit".

This does not inspire in me a warm feeling of trust.

-----
NY Times and Washington Post: CBO Numbers Stink
03/19/10 - The Lid by Sammy Benoit

[edited]  Democrats worked with the nonpartisan Congressional Budget Office for more than a year, fine-tuning the bill in the last weeks. And, they consulted repeatedly with the bipartisan staff of the Joint Committee on Taxation.

The CBO found that cost and deficit targets would be missed. So, Democrats adjusted parts of the legislation to meet their goal.

Here are two of their tricks.

• The first ten years of increased taxes are applied to only six years of costs.
• $500 billion of Medicare savings are counted twice.

-----
The CBO Scores Congressional Legislation

A fly on the wall:

CBO:  The MedHelp bill spends $1 trillion and increases what you must borrow, the deficit, by $230 billion.

Politician:  What if I tell you that we will stop paying the doctors, saving an additional $400 billion?
CBO:  Can you really do that?

Politician:  Just assume that I can. I'll write it into the margin.
CBO:  Then, the bill spends $1 trillion and decreases the deficit by $170 billion. It raises taxes by $770 billion, and saves $400 billion on the doctors.

Press Conference:  The bi-partisan, non-partisan, mathematical, unbiased, technoid, trustworthy, very smart CBO has just scored the MedHelp bill. Ladies and Gentlemen and Republicans, this bill delivers medical help to everyone, and reduces the deficit by $170 billion. How could any intelligent person be against it?

-----
Spending Hurts, Not Just Deficits
12/15/09 - Cato@Liberty by Daniel J. Mitchell

Politicians fixate on the deficit to pull a bait and switch. They claim that they can raise taxes to solve any problem. That only replaces debt-financed spending with tax-financed spending. The likely result is that the required tax increases will weaken the economy and make us all poorer.

-----
The Real Tax Burden
01/13/09 - EasyOpinions

The real tax burden is everything that the government spends. It is your money, now or in the future. Borrowing delays taxes while paying interest, just like a credit card.

You may think that some other rich guy is paying those taxes, not you. Don't be surprised if those guys buy fewer things from your employer. Where does that leave your job prospects?

Stimulus Give and Take

Useless Stimulus and Phoney Green Jobs
05/05/10 - Aguanomics by David Zetland
Via Knowledge Problem

[edited]  A friend mentioned that he had hired an extra guy under the stimulus program.

"Yeah, they are paying 80% of his wages and overhead. It's a win-win for him and me ... but then I fired another guy; he just cost too much compared to the new guy."

So we get +1 job and -1 job = 0 new jobs, more profits for my friend, and more taxes for us.

This happened because my friend was encouraged to use this new program to "get America back to work." I'm guessing that this is happening across the country.

Bottom Line: You can't make jobs where there's no demand, but you can sure waste money pretending that you know what you're doing!

To paraphrase Thomas Jefferson: A government big and intrusive enough to manipulate incentives for your business, is big enough to screw up your business in other ways. Manipulation does not create jobs.

Anti-Capitalist Policies Are Anti-Job

Anti-Capitalist Policies Are Anti-Job
11/25/09 - BigGovernment by Thomas Del Beccaro

[edited]  There is no secret to capitalism.

• Some people save money for investment.
• They start or grow businesses.
• Businesses employ people.
• Employed people have purchasing power to buy things.
• Trade distributes value to buyers and profits to sellers.
• Profits are partly saved for investment ...

The Left’s political policies destroy that simple and effective economic process. They impose taxes to reduce class differences and to raise revenue. Ironically, the opposite occurs in both areas.

Say it takes $500,000 from two partners to start a restaurant. High taxes take money from them and spread it to tens of thousands of people through government programs. The recipients don’t start businesses, and jobs are not created. Businesses that don't exist or grow also don't pay taxes or don't pay more taxes.

Increasing regulation has a similar effect, raising the cost of starting or expanding a business, reducing business activity, and killing jobs.

There are many other anti-capitalist policies of the Left, including Cap & Trade, the proposed Wall Street regulations, and skyrocketing deficits. All result in fewer businesses, jobs, and purchasing power, killing economic recovery.

Quip: Communist theorist Karl Marx revealed that business owners are leeches on society, draining away the wealth that rightfully belongs to the workers. At least, the ones who have jobs.

-----
The Real Tax Burden
Jan 2009 - EasyOpinions by Andrew Garland

The real tax burden is what government spends, not just the deficit.

-----
Public Tax Meeting
Sep 2008 - EasyOpinions by Andrew Garland

It isn't common knowledge just how much tax wealthy people already pay, and how much is wasted by increased government spending. Ironically, raising taxes on anyone will lower the production of the US, and so will lower the number of jobs.

An excerpt:

John JJ Richman was making breakfast when he heard the crowd outside. They seemed just shy of hostile. He opened his door to see about 65 townspeople, out of a town of 100. Two spokesmen were standing on the porch.

John: Good morning. Why are you all here?

Rob: There are things that need changing, and you are the one to help us.

Obama's Green Jobs Snake Oil

Obama's Green Snake Oil
Obama ignores the cost of his global warming plan.
01/28/09 - Reason Online by Jacob Sullum

[edited]  Obama says that his plan to reduce global warming is actually a way of stimulating the economy. The plan immediately spends for weatherizing buildings, alternative energy production, and more power transmission. He ignores the enormous cost of reducing carbon dioxide emissions. He falsely portrays this economic burden as a boon.

Consider this to see the fallacy: If Obama could snap his fingers and make global warming disappear, should he do it? By his logic, no, because then we'd lose all those wonderful green jobs that will help pull us out of the recession.

Obama: "Climate change could result in violent conflict, terrible storms, shrinking coastlines, and irreversible catastrophe." Does Obama's cap-and-trade proposal make sense? We need to know how likely are those outcomes, how costly they would be, and whether his plan would prevent them.

Critic Bjorn Lomborg wrote "Cool It: The Skeptical Environmentalist's Guide to Global Warming." He argues that adapting to climate change is much less costly than trying to prevent it. Prevention is unlikely to have any measurable impact. I'd like to hear why Obama thinks this criticism is wrong.

----------
Dispelling the Global Warming Myth

There is a close correlation between global temperature and solar output. See the graph.

Minimum Wage Prosperity

Suddenly, McJobs are Good (Link is stale)
07/24/09 - Blogs.DailyMail by DonSurber

[edited] Labor union officials and their handmaidens in Congress, including former congresswoman Solis, derided any increase in employment under a Republican president, calling them "McJobs". They derided them, even if they were above minimum wage, because new jobs do not pay as much as old jobs.

Now that Obanomics has turned a mild recession of 7.6% unemployment into 9.5% unemployment, in just 4 months, we have Solis praising a 70 cents an hour increase in the minimum wage as an economic stimulus.

Solis says that raising the minimum wage to $7.25/hour is going to help the economy and increase employment. I hope she doesn't mean it will help the economy while decreasing employment. Or, hurt the economy while increasing employment.

Where are the studies and information about the ideal minimum wage? Maybe the sky is the limit. Why not set the minimum wage at $50/hour? That would send funds to poor people while lifting the economy, right? (sarcasm)

The minimum wage is just another way of saying: "Fire that person unless you can pay them $7.25 per hour. We would rather that they be out of work, than work for less than we think is polite."

The government cannot help people by restricting their choices.

- -
A Minimum Wage Equals Minimum Jobs
07/30/09 - Reason.com by John Stossel

[edited] Politicians declare that workers should get a raise, and people assume they will actually get it. But, government can increase wages by decree only if employers set wages arbitrarily. You have to believe that employers are arbitrarily stingy.

Say an employee produces $4 of value each hour after all business expenses, and the employer offers just $2. Another employer will hire him away for $3 or more. Competition drives wages up to the the worker's level of productivity.

Several years ago, Santa Monica, CA made the town a workers' paradise by requiring everyone to be paid at least $12.25 an hour. Restaurant owner Jeff King complained to me, that the law would "dry up the entry-level jobs for just the people they're trying to help."

He was right. It's why gas stations no longer hire teenagers to wash your windshield. Wage minimums tell employers: "Don't give a beginner a chance." The people of Santa Monica later woke up and overturned the "living wage."

If minimum-wage advocates really believe wages are set arbitrarily, why do they favor only a $7.50 or $14 minimum? Why not $100? At those levels, even a diehard interventionist knows that workers would be hurt. But, the principle is the same at lower levels. Wages follow productivity, not whim. If the minimum wage is set above productivity, those workers will be harmed.

- -
The Minimum Wage Explains Some Job Losses
03/13/11 - EconLog by David Henderson

Tyler Cohen [edited]:  Many workers are paid very close to what they produce. Their productivity may even be lower than the cost of training, employing, and insuring them. Firing these employees is tough for the workers, and maybe bad for society at large, but it doesn't much reduce profits. It's a cold, hard reality.

Why can't unemployed workers find new jobs for less pay, especially now that business is recovering?

David Henderson [edited]:  The explanation is the minimum wage. On July 24, 2009, it increased by $.70 to $7.25 an hour. The real increase was about 12% when adjusted for inflation.

A 10% increase in the minimum wage causes a 1-3% drop in the number of jobs held by people age 16 to 24 ("youths"). A 12% increase (as above) would cause job losses of 190,000 to 570,000 among 16 million youths. That is from the increase. The previous minimum certainly kept many others from being employed.

If your productivity is low, or the costs of training you are high, then you won't be able to find a job at the minimum wage. This is true even if you know inside yourself that you could learn a job and become productive in a short time.

The government allows you to get training by paying a school for six months, while you may earn nothing. But, it will not allow a business to "exploit" you by paying you a small wage while you get practical training on the job for six months.

- -
Low Skilled Workers Are Not Helped
07/26/09 - Cafe Hayek by economist Don Boudreaux

[edited] Uncle Sam has hiked the minimum wage, raising the hourly cost of employing low-skilled workers by 10.7%. This is always unwise, and more so when unemployment is rising.

Say that Uncle Sam passed a minimum-salary statute for economists, requiring that every employed economist be paid at least $300,000 annually. I would, of course, love to earn this much by teaching economics. My more accomplished colleagues would benefit, such as Tyler Cowen and Walter Williams. But, I would lose my job.

- -
Using the Minimum Wage to Hamper Your Rivals
07/24/09 - Econlog.Econlib by David Henderson

[edited] Forty years ago, politicians who pushed for the increased minimum wage did not hide their motives or their knowledge of who the victims would be.

In a 1957 Senate hearing, Senator (and future President) John F. Kennedy of Massachusetts said:

Having on the market a rather large source of cheap labor depresses wages outside of that group, the wages of the white worker who has to compete.

When an employer can substitute a colored worker at a lower wage, it affects the whole wage structure of an area, doesn't it? There are, as you pointed out, hundreds of thousands of colored workers looking for decent work.

- -
Increases in the Minimum Wage Kill Job Creation
06/15/10 - HotAir by Ed Morrissey

[edited]  The Center for Freedom and Prosperity offers this 4:25 video about the destructive results of the minimum wage.

Democrats increased the minimum wage in steps from $5.15 to $7.25 per hour. They claimed to be helping the young and poor.

The minimum wage did no direct harm when it was less than the usual wage for entry-level jobs. When the minimum wage rose above that wage, employers stopped offering those entry level jobs.

- -
Exploiting the Minimum Wage
07/24/09 - Open Market by Ryan Young

[edited] Young people with little or no work experience may not be able to offer $7.25 per hour worth of productivity. No wonder so many of them are having trouble finding summer jobs. The law says that they have to be paid more than they are worth [if they are hired]. Wage floors reduce the number of jobs.

- -
Raising Rival's Costs
7/24/09 - Marginal Revolution by Alex Tabarrok

[edited] Some employers benefit from an increase in the minimum wage because it raises the cost of labor for their rivals. This is why unions have typically been in favor of the minimum wage even when their own workers make much more than the minimum.

Windmill Jobs are Expensive

Tilting at Green Windmills
06/25/09 - Washington Post by George F. Will (via Cafe Hayek)

[edited] Gabriel Calzada is a professor of economics at Universidad Rey Juan Carlos, Spain. He has produced a report that is inconvenient for Obama's green agenda and for budget assumptions that are dependent upon it.

Spain is the leading country in aggressively supporting production of electricity from renewable sources. Calzada says Spain's huge spending on wind farms and other forms of alternative energy has indeed created jobs. But his report concludes that they are often temporary and have cost $752,000 to $800,000 each in subsidies, and $1.4 million each in the wind industry. Each such new job also destroys 2.2 other jobs in other industries because of the inefficient political allocation of capital.

European media regularly report "eco-corruption" leaving a "footprint of sleaze", such as gaming the subsidy systems and profiteering from land sales for wind farms. Calzada says the creation of jobs in alternative energy has subtracted about 110,000 jobs elsewhere in Spain's economy.

Robert Gibbs is the president's press secretary. It is weird that he dismisses this report as false witout reading it. He can't believe that some American importers are cashing in on the U.S. government's promotion of wind power, despite this being an economically unproductive project.

Calzada has come to conclusions that he, as a libertarian, finds ideologically congenial. And his study was supported by a like-minded U.S. think tank, The Institute for Energy Research, for which this columnist has given a paid speech. Many Spanish critics have impugned his patriotism because he faulted something in Spain which Obama has praised. But, they have not tried to refute the content of his report.

The Department of Work and Production

We Will Improve Your Work and Lower Costs

(a large waiting room in a giant federal building)

Desk Clerk: Ticket 363. Is ticket 363 here?

Joe: I have number 363.

Desk Clerk: (without looking up) Go to office 26, through the gate, turn right, left down the corridor, on the right.

(Joe easily finds his way. He has been here before. The water fountain still doesn't work.)

Official: (behind desk, seated, remains seated) Please close the door and have a seat.

Joe: (sits down, recognizes the official) Hi, how are you doing?

Official: Do I know you (looks through folder) . . . Joe?

Joe: We've met a few times here. I suppose you see a lot of people.

Official: Do you know why you are here?

Joe: Is it GDP again?

Official: As you can see from the sign on my desk, I am now a case officer for the new Department of Work and Production. The government, your government, has decided to remove the inefficiency from various occupations.

We have had great success with the healthcare system, and we are now applying these techniques to professions that affect national security. We want to improve your knowledge, pay, and working hours. Would you like that?

Joe: That sounds good. (a bit suspicious) Does this really apply to me? I'm an accountant.

Read more ...

Official: Yes, I know you are an accountant. (irritated) I see it in your folder. As an accountant you are an important element in producing trustworthy, accurate, and timely measures of efficiency and production. This is a function vital to the economy.

I think you will enjoy being part of a coordinated team of trained professionals, working together to attain the highest efficiency and accuracy. You will no longer be alone in a fragmented, distant company without standards. You will be part of a national group.

Joe: Will I still work for Acme International?

Official: You will physically work there, or somewhere else where you are most needed, but your work standards and pay will be coordinated through your professional license. All accountants will now be federally licensed, for the security of the country and for efficiency. The high, hidden costs of accounting must be reduced if we are to prosper as a nation. I'm sure you agree.

Joe: Well, I, uh . . .

Official: Good. You will be pleased with the changes in your compensation. First, we are going to raise your salary 20% in the amount that you either save or receive.

Joe: A 20% raise is great. What do you mean by "save or receive"?

Official: We take the smart view that your effective salary is what you take home and don't waste. You may remember our accomplishments a few years ago when government investment saved or created 4 million jobs. This applies the same philosophy.

Your new salary is set at 80% of your current salary. Here is a copy of "My Salary Savings". This gives you easy, fun ways to stop wasting 40% of your salary. The result is that you will either save or receive 120% of your current salary, which is a 20% raise.

Joe: Wait a minute. (with self control) You are actually cutting my salary 20%.

Official: No, we don't see it that way. We have arranged for you to save or receive 20% more than you are currently making. You would not have a job without these adjustments. Do you want to impair your professional license? You could always do something else other than accounting.

Joe: (thinks quickly) Yes, I see. That is very good. Thanks.

Official: I think you will enjoy your reduced 38 hour work week with Advancement-Plus. A-Plus is a 6 hours/week program that gives you advanced training, interesting additional exercises, and provides time for you to report your efficiency measures to the central database.

Joe: So I will work 44 hours per week?

Official: Are you sure you are an accountant? Your work week is reduced to 38 hours. We don't consider your training for advancement to be work. That is your personal investment in continued employment. We certainly don't regard your efficiency reporting to be part of your accounting job. That is part of your professional self-management.

Joe: (bites tongue) And, my vacation?

Official: Based on a 38 hour work week, of course your vacation is slightly reduced. The details are in this manual "National Work Standards Panel: Accounting Compensation".   (hands Joe the manual)

Joe: (subdued) Thanks.

Official: Ummm.. (looks through folder) ... Joe. You have a good record in accounting. You could work directly for the Government if you work hard and study our new methods and measures.

We have been able to increase pay by 20%, reduce work hours 5%, and maintain vacations and leisure in every profession that we have managed so far, starting with medical care. Improved accounting has been a major factor in our success.

Joe: It is certainly something to think about.

Official: (closes folder, writes on a form, hands form to Joe) Take this to the front desk. The clerk will give you a "brick". That is our informal name for your efficiency milestone reporting module. He or she will arrange to deduct $295 from your pay to cover the cost. The instructions for using it are conveniently online, along with many useful details about your new work requirements and professional responsibilities.

Leave the door open on your way out.

----------

Phony Jobs Claims
6/9/09 at the Wall Street Journal

Obama and his administration claim to be "saving or creating" jobs by spending massive amounts of money as "stimulus". There is no data that could support or verify that jobs have been "saved". If the economy does not improve, and more jobs are lost, Obama can still say that it could have been worse.

The Department of GDP
You can spend, or government will do it for you.
You owe it to us all to increase GDP.

HHS.Gov - Measures/Codes
Government brings welcome rationality and precision to a profession that was severely lacking in measurement codes. (smile) This is current and real. It is not a drill. Don't think of the work to collect this data, think of the cost reductions when enough is collected. Via Dr. Wes.

New! Status Update regarding CPT II Coding Issues for the 2009 PQRI

CMS has identified a technical problem affecting twenty (20) quality-data codes (QDCs) used for reporting thirteen (13) quality measures through the claims-based method for 2009 PQRI. For further information and guidance regarding this issue, please see the "Status Update on CPT II Coding Issue for the 2009 PQRI and Options for Eligible Professionals (EPs)" document in the "Downloads" section below.

2009 PQRI: This page contains information about PQRI quality measures, their specifications and related release notes, an implementation guide for reporting individual measures through claims or registry-based reporting, measures groups specifications and a related guide to implementing measures groups.

2009 PQRI Individual Quality Measures List: This document, which identifies the 153 quality measures selected for the 2009 PQRI, is available in the "Downloads" section below. (continued ...)

----------

To 911DOC -- Thanks for your comment. My hope for this post was to give everyone a sense of what it might be like for the government to manage their profession. Governments look for capital to steal redistribute. Usually it is money, but they also will redistribute the capital represented by years of study, experience, and excellence, as in medicine.

Reasons I'm Leaving Emergency Medicine #2
911DOC explains how government regulation and the EMTALA law is disrupting emergency medicine and bankrupting hospitals.

Phony Jobs Claims

The Media Fall for Phony 'Jobs' Claims
06/09/09 - Online.WSJ by William McGurn

The Obama Numbers Are Pure Fiction.

[edited] "Saved or created" has become Barack Obama's signature phrase. Obama declared yesterday that the stimulus had already saved or created 150,000 American jobs.

He announced faster stimulus spending so he could "save or create" an additional 600,000 jobs this summer. Obama promised earlier that his recovery plan would "save or create three to four million jobs over the next two years."

Tony Fratto was a senior member of the Bush administration communications office. He sees a double standard at play.

We would never have used a formula like "save or create". To begin with, the number is pure fiction. The administration has no way to measure how many jobs are actually being 'saved.' If we had tried to use something this flimsy, the press would never have let us get away with it.

The inability to measure Mr. Obama's jobs formula is part of its attraction. Never mind that no one actually measures "jobs saved". Neither the Labor Department, the Treasury, nor the Bureau of Labor Statistics does it. The New York Times delicately reports that Mr. Obama's jobs claims are "based on macroeconomic estimates, not an actual counting of jobs." Nice work if you can get away with it.

Harvard economist and former Bush economic adviser Greg Mankiw writes:

The expression "save or create" is political genius. You can measure how many jobs are created between two points in time. There is no way to measure how many jobs are saved. Even if things get much worse, the President can say that there would have been 4 million fewer jobs without the stimulus.

Non-Union Businesses Grow Faster

What Happened to American Unions?
02/12/09 - Econlog.Econlib.org by Bryan Caplan From Brink Lindsey's "Nostalgianomics":

[edited] Henry Farber of Princeton and sociologist Bruce Western of Harvard report that the main cause of declining union membership as a fraction of all workers, has been the slower growth of unionized workplaces compared to nonunionized.

Between 1973 and 1998, employment at
- nonunion companies grew at 2.8% a year
- unionized companies declined at 2.9% a year

Keeping up unions membership would have required organizing new workers at the rates of the early-1950s. But, organizing rates have declined steadily since then. Percent union membership has declined steadily since the 1970's.

What Caused Unemployment in the Great Depression?

Another Great Depression?
12/23/08 - TownHall.com by Thomas Sowell

[edited] You might think:

• The 1929 stock market crash was a failure of the free market.
• The crash led to massive unemployment in the 1930's.
• Roosevelt rescued the economy with the New Deal.

It is a pity to spoil this story with facts, but we should avoid repeating the catastrophes of the past.

The October 1929 crash did not create massive unemployment according to both official government statistics and new statistics by scholars Richard Vedder and Lowell Gallaway in their book "Out of Work."

Vedder and Gallaway follow unemployment month by month. The unemployment rate was 5% in November 1929, a month after the crash. It hit 9% in December, then trended downward to 6.3% in June 1930, 8 months after the crash.

Then, the Smoot-Hawley tariffs were enacted, despite dire warnings by economists across the country. Five months later, November 1930, unemployment rose past 10%.

The rise in unemployment after the crash of 1929 was a blip compared to soaring unemployment reached after a series of unprecedented government interventions by Hoover and Roosevelt. From February 1932 to December 1934 (almost 3 years), the unemployment rate was at least 20%, and was 19.3% in January 1935.

The evidence suggests that it was not the financial crisis in 1929 that caused massive unemployment, but politicians' attempted "solutions". Are we repeating that history now?

----------
The New Deal and the Great Depression We in government don't like risks or new ideas, but we can sure spend money. That will improve things.
09/19/09 - Cafe Hayek by Don Boudreaux

Don Boudreaux [edited]:

Robert Higgs in Investor's Business Daily summarizes his research. Bad policy prolonged the Great Depression, and it did not end with WWII.

Bob Higgs [heavily edited]:

The government tried to spend us out of the Depression, as it has tried several times since. But, these policies delay recovery, rather than trigger it.

Money-losing investments must be reorganized, so good assets can be put to better use. If the government saves failed companies through investments and subsidies, this reorganization is slowed or stopped. The mistakes of the past are locked in place, hindering the creation of future wealth and jobs. Such New Deal recovery efforts had exactly these effects, as do current government policies.

Roosevelt’s recovery program spent billions of dollars with no sound economic logic. But, they made matters even worse when they threatened property rights and called private investors "economic royalists". They pushed through policies attacking the foundations of private enterprise, especially after 1935.

A recovery needs knowledge, investment, and people who can do new things and manage risk. Government can supply money, but it is taken from the entrepreneurs who are vital to the recovery, and given to the people who are in failing businesses. Entrepreneurs can do less, so recovery is slowed.

----------
Waiting for the jobs Obama is building a new society. I'll wait until he is done.
07/02/09 - Instapundit

What is causing job losses now?

Small business owners are standing by the fence and watching, paralyzed by regulatory uncertainty. They aren’t hiring precisely because of government intervention in the economy. So-called stimulus won't change that.

Don't Believe Pundits

Separating Twins is Economically Illiterate
12/22/08 - EconLog by Bryan Caplan

People propose policies and explanations without thought of the consequences or any examination of likely causes. Caplan talks about separating twins in school, and reasons given for economic success or failure.

[edited] Schools ususally put twins in different classes. The main rationale is that they will make new friends. They will, but that doesn't mean you are doing them a favor. Twins put less effort into making new friends because they already have a better friend than most of us will have. The marginal benefit of making new friends is unusually small.

There is no reason to target twins. Do kids benefit from making more new friends than they naturally want to? If you believe that, you would separate as many children as possible from their current friends. Will they thank you later? If you are certain that separation is the right answer, why not try a little self-experimentation? Cut the time you spend with your best friend in half, and tell us how you like it.

-----
A decade ago, pundits said (wrongly) that the Japanese economy was doing well because their factories were destroyed during World War II. So, they built new factories and competed better than the victors with their musty old factories. Economists replied: If that is true, all we need to do is bomb our own factories!

Don't be fooled by pundits or by make-work bias. When the government applies some policy that interferes with people's lives and businesses, officials point proudly at all of the increased activity that results. They ignore the damage that this activity is aimed at correcting.

When you step on an ant hill, and see the ants rush out and mill around, the ants aren't better off because they have been put to work.