Archive for the ‘Milton Friedman’ Category

From the New Yorker:

For decades, business owners have resisted higher minimum wages by arguing that they destroy jobs, particularly for young people. At some theoretical level, high minimum wages will distort job creation, but the best empirical evidence from the past decade is aligned with common sense: a minimum wage drawn somewhat above the poverty line helps those who work full time to live decently, without having a significant impact on other job seekers or on total employment.

Except it’s wrong, ignores the loss of jobs that are never created and the subsiziding impact of welfare and low-income benefits that also siphon funds away from job creation and into government redistribution.

I’ll let Orphe Divounguy explain it again:

(For example, a study of pairs of neighboring counties with differing minimum pay found that higher wages had no adverse effect on restaurant jobs.)

Of course, he doesn’t cite the study, the amount of difference in pay, or an analysis of what jobs were lost, not created, or where these counties were.

Even so, a federal minimum wage of ten dollars or more will not solve inequality. It will not stop runaway executive pay or alter the winner-take-all forces at work in the global economy.

And here we see the true intentions.  The objective is to make equality of outcomes.  The ideology is a belief that executive pay is “runaway” and that the economy is a “winner-take-all” scenario, rather than one of mutual cooperation for benefit.  Apparently the New Yorker’s Steve Coll doesn’t understand where pencils come from.

Coll continues:

Yet it will bring millions of Americans closer to the levels of economic security and disposable income that they knew before the housing bubble burst.

No, it won’t.  It will artificially increase wages, which will then result in employers increasing their expenses to customers.  There will be a transfer of wealth from the many to the few.  There will be a visible result of a handful of people with minimum wage jobs making more money, but it will result in a less visible loss of wages by everyone who uses those services, by employers whose payrolls will be adjusted in favor of old employees versus new ones – meaning jobs that would be created will not be created, and it will result in overall economic loss.

Coll starts his piece by talking about increases in wages for baggage handlers at SeaTac airport, where the minimum wage was bumped from $10/hour to $15/hour by a ballot initiative.  Businesses spent money pushing against it, and Coll celebrates that leftists emerged triumphant, that the “grassroots left, which seemed scattered and demoralized after the Occupy movement fizzled, has revived itself this year—with help from union money and professional canvassers—by rallying voters around the argument that anyone who works full time ought not to be at risk of poverty”.

Union money was sent in by union people who can now look forward to extracting union dues from those $15/hour workers at a higher amount than when they were $10/hour workers.  Professional canvassers are leftist marxist agitators and professional shit-stirring revolutionary groups who serve no function but to create conflict that they exploit for their own personal profit.  The businesses involved opposed it as best they could, but the leftists in Seattle & Tacoma voted for it.

What that means is that the expenses against the airport have gone up, and they’ll have to come up with something to balance it out.  That may mean layoffs, it may mean no new hires, but most likely it will mean increased rates and fees to customers.  The customer is hurt at the expense of the visible aid to the fictional oppressed proletariat.

…life on fifteen thousand a year is barely plausible anymore, even in the low-cost rural areas of the Deep South and the Midwest. National Republican leaders are out of touch with the electorate on this as on much else, and they are too wary of Tea Party dissent to challenge their party’s current orthodoxies of fiscal austerity and free-market purity.

Life on $15,000 per year is not something that someone manages alone.  First off, there are massive government handouts to those of that low income group; second, as Orphe explained, a lot of times, those workers are entry-level workers just getting started – like teenagers.

The Tea Party is composed of people who understand how economics work – that you can’t just arbitrarily say “we’ll make your employer pay you more” without that money coming from somewhere.  Again, Margaret Thatcher’s famous quote comes to mind:

thatcher socialism

Coll finishes with this bleeding heart plea:

The case for a strong minimum wage has always been, in part, civic and moral. Minimum wages do not create new “entitlement” programs or otherwise enjoin the country’s sterile debates about the value of government. They are designed to insure that the dignity of work includes true economic independence for all who embrace it.

The case for strong minimum wage laws has been couched in some people’s idea of what other people are entitled to.  If you pay the neighbor kid $5 to mow your lawn, it’s not moral for the neighborhood to tell you that you MUST pay him $20.  The result will be that the neighbor kid goes without the $5 and you mow your own lawn.  There’s nothing moral about dictating to people how much a worker has to sell his labor for or how much an employer has to pay for that employee’s labor – because it destroys entry-level jobs and harms the community.

The tut-tutting busybody who wants to put the government’s gun to someone’s head and make them do what they feel should be done is not moral.

Minimum wage laws inflict an entitlement by force.  The dignity of work comes from what people put into it – and earning a paycheck, not having the government hold a gun to your employer’s head – leaving you either paid more than you’re worth or unemployed entirely.

There is no “true economic independence” for a $10/hour job, a $15/hour job.  Idle rich and trust fund babies have “true economic independence” – and even they can lose it if economies change.  Economic independence comes from having one’s own skills that are marketable in different job environments.

If Coll and clowns who publish his Marxist drivel want to provide “dignity” and “true economic independence”, why not mandate a $100/hour minimum wage?  If people made $8000 every two weeks, they’d be doing pretty well.  Why not a $1000/hour minimum wage?  Or a $10,000/hour minimum wage?  You could work for a day and pay off student loans and buy a new car all in one.

If he’s got intellect greater than that of a grapefruit, he’d respond with “but businesses can’t afford to pay $10,000/hour.”  And just the same, they can’t afford to pay any other artificial minimum wage without modifying their business model.  Some businesses could handle $10,000/hour minimum wages, but it would harm them severely and result in cutting many employees, hiring no more employees, and passing costs off to customers.  Some businesses can handle a bump to $15/hour minimum wages, but it will harm them as well, it will harm future employment, and the business will pass costs off to their customers.

He wonders why the Midwest and South have a lower cost of living – and that is due in no small part to not having to deal with wage inflation – those costs are passed on to businesses, which pass them back on to us.

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Update: Some leftist union organizers have decided to stage strikes for higher fast food wages across the country.  When they get the government to force their employers to pay them $15/hour, they’ll find that those businesses can’t stay open because no one wants to pay $17 for a Whopper or $13 for a Big Mac.  They won’t be able to afford the Taco Grande meals they make.

The fast-food effort is backed by the Service Employees International Union and is also demanding that restaurants allow workers to unionize without the threat of retaliation.

It’s like I should just write “the usual suspects are at it again”.

Beating a dead horse – if they’re not worth the pay, they’re not worth the pay.  That’s not a measure of their value as a human being, just their respective value in their chosen job.   Demanding more wages because you’ve chosen to make an entry-level job a career is a problem with the individual’s ambition and drive and desire to sit on the bottom rung of the economic ladder, not a question of whether their employer is a greedy robber baron capitalist pig-dog.

Milton Friedman’s distilled short version of why vouchers work:

HotAir has the news roundup on Alabama’s introduction of a voucher system, where the left reacted with rage.

Milton Friedman’s elaborate, thorough version of why vouchers work, why centralization is a problem, and why decentralization and freedom to choose solves many educational problems:

Around 18:40, he begins to discuss “the modern view”, which is much of what Cass Sunstein and the masters-of-men anointed elite regulators believe.  Friedman then goes on to explain how that relates to schooling, and the collectivist vs. individualist view of the purpose of education.

From the NYT:

WASHINGTON — President Obama called on Congress to raise the federal minimum wage to $9 an hour from $7.25 and to automatically adjust it with inflation, a move aimed at increasing the earnings of millions of cooks, janitors, aides to the elderly and other low-wage workers.

And it will do nothing to help anyone looking for a job.

The White House said that the move would have profoundly positive effects for low-income families without unduly burdening businesses or raising the unemployment rate. It cited research showing “no detectable employment losses from the kind of minimum wage increases we have seen in the United States.”

There are always losses as the cost of hiring employees goes up.  Thus employers hire fewer employees, and employees at entry level don’t get the skills they need to get the next rung up on the ladder.

The White House also pointed to companies like Costco, the retail discount chain, and Stride Rite, a children’s shoe seller, that have previously supported increasing the minimum wage as a way to reduce employee turnover and improve workers’ productivity.

As employers, they can increase wages on their own.  This is what Costco did.

As Costco Senior Vice President Jeff Long said recently in support of increasing New York state’s minimum wage, “At Costco, we know good wages are good business. We keep our overhead low while still paying a starting wage of $11 an hour. Our employees are a big reason why our sales per square foot is almost double that of our nearest competitor. Instead of minimizing wages, we know it’s a lot more profitable for the long term to minimize employee turnover and maximize employee productivity and commitment, product value, customer service and company reputation.”

And they’re also a very large business.  Y’know what a raise in the minimum wage does to them?  Nothing.  Y’know what happens to their competitors?  Their competitors have to spend more on employees.  It creates a barrier to entry.  This prevents their competitors from entering the marketplace with the advantages of being able to hire lower-wage workers.  This prevents unskilled workers from getting a stepping-stone job.

This makes life easier for Costco, who get to increase the expenses of their competitors through governmental fiat.  This is crony capitalism for Costco.

It hurts the people it’s supposed to “help”, driving them to unemployment and dependency on the government and right into the hands of political parties that will give them handouts.  The special interests in this case are the big businesses who benefit from destruction of smaller businesses, and the government officials who benefit from manufacturing more unemployment to create more people dependent on government handouts.

From the UK Sun:

A SKIVING couple told last night how they claim £17,680 a year in benefits — and don’t even bother looking for work because it would leave them worse off.

Danny Creamer, 21, and Gina Allan, 18, spend each day watching their 47in flatscreen TV and smoking 40 cigarettes between them in their comfy two-bedroom flat.

It is all funded by the taxpayer, yet the couple say they deserve sympathy because they are “trapped”.

They even claim they are entitled to their generous handouts because their hard-working parents have been paying tax for years.

The couple, who have a four-month-old daughter Tullulah-Rose, say they can’t go out to work as they could not survive on less than their £1,473-a-month benefits.

The pair left school with no qualifications, and say there is no point looking for jobs because they will never be able to earn as much as they get in handouts.

Financially, they as individuals can see what’s in their best interest.  It’s in their best interest to take from the taxpayer.

Gina admits: “We could easily get a job but why would we want to work — we would be worse off.

They’re just a symptom.  The disease is the governmental policies that enable and support them.

Consider the American Welfare Cliff:

welfare cliffThe blue is take-home wages after taxes, and the rest are handouts from various sources.  There are greater rewards to less work.  In Britain, it’s become so bad that there are greater rewards for no work at all.

The welfare-taker is just exploiting a system that’s set up for exploitation.  It works the same in the US.  The working stiff is busting her butt for 8-10 hours a day, while the welfare-taker is at home on his butt playing Xbox for 8-10 hours a day, then going out to party at night.  He doesn’t have bills to worry about, as they’re all paid for by people who are working.  She does have to worry about bills.  He has an entire political party dedicated to telling him that he’s downtrodden and oppressed, and that only they, who give him free stuff, will help him.  She’s got a choice between two parties – one that says they support her, but that takes her money and gives it to the welfare-taker, and the other that “compromises” because they don’t want to look like meanies… and so mostly does the same thing.

The welfare-taker (or zero-liability voter, as Andrew Wilkow likes to call them) is voting himself largesse from the public treasury, and one party wholly supports him – because they know they have his vote for as long as they give him plunder from other citizens.  The working stiff has her tax money diverted from legitimate functions of government (national defense, post roads, etc.) and sent to the welfare-taker.

At some point, solely looking at the bottom line, it becomes clear that one is the winner – having their life provided for by the state, and one is the loser – being taxed by the state to provide for others they have no obligation to.  In the long run, the system implodes.  In the short term, the politician who provides welfare is the one who gets benefits – being able to demonize those who oppose welfare as “heartless”, directly giving handouts to people to pay for support, and they get the constant reassurance that their meddling is “necessary” because they are the only ones who can “save” the little people.  It’s Munchausen by proxy on a massive scale.  And it serves the interest of the politicians’ Curley Effect.

An old interview, but nonetheless still very applicable.

Seems HotAir and Michelle Malkin, just to name two, have noted what would be Milton Friedman’s 100th birthday.  He’s celebrated for a reason.

Worth revisiting The Incredible Bread Machine on his birthday:

The other day, Obama said to business owners that they didn’t build their business, someone else did.  He may as well have said to workers that someone else built that house, that car, that tractor, because the worker didn’t make the tools that made it possible, nor mine the raw materials.  Obama took the division of labor that makes greater things possible and turned it on its head, claiming that no one can be great because no one makes something from beginning to end.

He took Milton Friedman’s Lesson of the Pencil and turned it on its head.

The thing is, cooperation between free individuals means we can create greater things.  We do create something great by working together.  Henry Ford made the Model T.  He didn’t mine the steel or tap the rubber trees, but he did make the Model T.  That the steel and rubber were important goes without saying.  To claim that the steel and rubber were responsible for the Model T is, however, absurd, and turns the entire understanding of division of labor on its head.  Division of labor is done so that higher things can be achieved, so that the Model T or the 747 or the FN SCAR can be developed, not so that the dirt farmer can be glorified for building the Burj Dubai; or so that wasteful government spending repaving roads that don’t need it in order to justify their overinflated budgets can claim that all your business are belong to them.

Every individual contribution builds something great.  That they contribute does not deny their part, nor does it deny the greatness of the completed work.  Shakespeare didn’t create the English language, others came up with the words… ergo he didn’t write his plays?

Marxist nonsense.

From “On the Other Hand” by the western Canadian Frontier Centre for Public Policy:

What these Canadians intially note about inflation and how governments fight inflation isn’t quite true, given quantitative easing and how the fractional reserve banking system works in the US.  They note later on that the US is operating on the “mistaken assumption that the money supply can stimulate the economy and create jobs”.

Milton Friedman discussed this several times, explaining that it’s basically a hidden tax:

“Inflation is the one form of taxation that can be imposed without legislation.”

 

Broken down:

Part 1 of 8:

Economist Milton Friedman debating and discussing economic issues with Icelanders & Icelandic socialist types in Iceland.  Interesting to see how the same things come about again and again.

Milton Friedman discussing Friedrich Hayek’s the Road To Serfdom back in 1994.  As relevant again today as ever.

Part 1:

Part 2:

Part 2 is perhaps the more interesting of the two, especially around the 12 minute mark on.  Friedman points out that experience may be more important than the influences of books or television; and how people have seen the failures in the former Soviet Union and the successes in Asia and the Pacific where unfettered economies succeeded.  Arguably the internet and the 24 hour news cycle has become even more important, because it shortens the memory and lessens experience, but as he mentions, it’s a sophisticated question not easily answered.

Some important quotes:

If an experiment in private enterprise is unsuccessful people lose money and they have to close it down.  If an experiment in government is unsuccessful, it’s always expanded.

Particularly relevant to the health care debate:

The founders of our country believed in individual freedom, believed in leaving people be, letting them be alone to do… whatever they wanted to do.  But our government has been increasingly departing from those Constitutional principles.  You know there’s a provision in the Constitution that congress shall not interfere with interstate commerce.  That provision had some meaning at one time.  But it has no meaning now at all.  Our courts have ruled that anything you can think of is interstate commerce and so the government exercises extensive control over things that it has no business interfering with.

Around the 17 minute mark, Friedman begins dissecting the Federal Reserve.

At the 19 minute mark, Friedman discusses the collapse of the nation under debt.  His belief was that the changes in public perception were going to allow the people to halt the expansion of government.

In response to why socialists would be happier about the history of the last 50 years (before 1994, though it works the same today) at the 21 minute mark:

Because the story they tell is a very simple story – easy to sell.  If there’s something bad, it must be an evil person who’s done it.  If you want something done, you’ve got to do it – you’ve got to have government step in and do it.

The story Hayek and I want to tell is a much more sophisticated and complicated story.  That somehow or other there exists this subtle system in which without any individual trying to control it there is a system in which people in seeking to promote their own interests will also promote the well being of the country – Adam Smith’s invisible hand.  Now that’s a very sophisticated story.  It’s hard to understand how you can get a complex interrelated system without anybody controlling it.  Moreover the benefits from government tend to be concentrated.  The costs tend to be dispersed.  To each farmer the subsidy he gets from the government means a great deal.  To each of a much larger number of consumers it costs very little.  And consequently those who feed at the trough of government tend to be politically much more powerful than those who provided the wherewithal.

Eloquently stated and encapsulating the relationship between people and government very succintly.

Afterwards he breaks down what parties mean what – bringing up liberalism as classical liberalism, and states he’s libertarian in philosophy, though not party.  He mentions Hillarycare in passing as incredibly socialist.  The EIC that he mentions at the end he supported as a replacement for all welfare programs with the EIC, a “negative income tax”, that helps to establish a baseline income.  He ended up fighting against it, because as we all know, the EIC just became another welfare program, not a replacement for the patchwork of welfare that was already in place.

Well worth watching.

And as a reminder:

No, the other Hayek.