He can make more on the street

Is it a robot conspiracy?

J.D. Tuccille writes in Reason,

In recent weeks, Illinois mandated a huge increase in the state minimum wage, Pennsylvania's governor proposed to double his state's minimum wage, and New Mexico lawmakers moved forward with a plan to raise the minimum wage there, too. Hiking the cost of labor is a popular cause once again—even among people who've demonstrated in the past that they know perfectly well this is a recipe for limiting opportunity and trapping people in poverty.

It's tempting to say that people are actually getting stupider about economics. But maybe, instead, it's all part of a conspiracy by robots who are poised to be the big beneficiaries of an artificially crippled job market.

Read more here.

The saddest aspect of the minimum wage story

Walter Williams writes at Right Wing News,

...in the wake of higher minimum wages, surviving companies will be those that find ways to economize on labor usage.

...The saddest aspect of the minimum wage story is the damage it does to human beings. The current hourly wage for a fast-food restaurant cashier is $7.25 to $9 per hour. That produces a yearly salary of $15,000 to $20,000, plus fringes. That’s no great shakes, but it is honest work and a start in life. It might be the very best some people could do. Enter the arrogance and callousness of the elite. Their vision of what a person should earn, expressed by higher minimum wages, destroys people’s best alternative without offering a superior one in its place. Maybe the elite believe that welfare, unemployment compensation and possibly engaging in illegal activities are a superior alternative to earning an honest and respectable living on a cashier’s salary. That is a despicable vision.

Read more here.

Why Sports Authority is throwing in the towel

Kevin Smith reports in the San Gabriel Valley Tribune that Sports Authority has decided to throw in the towel and close all its stores. When they filed for bankruptsy, they thought they could get by with just closing the stores that had been unprofitable.

In a hearing in U.S. Bankruptcy Court in Wilmington, Delaware, an attorney for the Englewood, Colorado-based sporting goods chain indicated that the only option for the company was to close all of its stores.

“It has become apparent that the debtors will not reorganize under a plan but instead will pursue a sale,” said the attorney, Robert Klyman.

Phil Lempert, a Santa Monica-based analyst of consumer behavior and marketing trends, figures consumers haven’t seen the last of major retailers shuttering. Just last week, Sport Chalet announced the closure of all 47 of its stores in California, Nevada and Arizona. That chain is based in La Cañada Flintridge.

“With the minimum wage going up to $15 an hour and more people turning to online shopping, more stores are going to close,” Lempert said. “It’s fine to say that everyone should have a living wage. But the money has to come from somewhere.”

Lempert said a growing number of retail outlets have fallen victim to “showrooming,” where customers will walk into a store, try on the shirt or jacket they like and then order it online at a significant discount.

“These stores have to look at not at how they will compete with other brick-and-mortar stores, but how they will compete with Amazon,” he said. “It’s become a holistic environment where people can buy things on their mobile phones and then have the products delivered by the time they get home.”

Matt Carlson, president and CEO of the National Sporting Goods Association, said Internet sales have fueled increased competition for brick-and-mortar retailers. And online retailers have a big advantage. Their overhead costs are far less and their customers often don’t have to pay sales tax on their purchases.

Read more here.

How two media outlets report the same story

Justin Holcomb reports at Town Hall that

UC Berkeley Forced to Cut 500 Jobs After $15 Minimum Wage Hike

Nanette Asimov reports at SF Gate,

Chancellor Nicholas Dirks sent a memo to employees Monday informing them of the job reductions and said they will amount to “a modest reduction of 6 percent of our staff workforce.”

Berkeley employs about 8,500 staffers, from custodians to administrators. Faculty members will not be affected. Dirks said the reductions will be done in part through attrition and did not mention layoffs.

But the campus is in the process of laying off about 60 employees, spokesman Dan Mogulof said without identifying the departments they’re from.

Unions getting exemptions from minimum wage laws

An editorial in CarolinaCoastOnline points out,

In California, where Gov. Jerry Brown signed a bill raising the state’s minimum to $15 an hour by 2022, the Los Angeles city council will hear a proposal next week to exempt union members from the $15-hour minimum that unions spent years fighting for.

...After the Los Angeles city council agreed last year to increase the city’s minimum wage to $15 by 2020, he asked that union members be exempted. Saying issues were “in need of further review,” he said other cities in California, San Jose, Oakland, Richmond, San Francisco and Long Beach, have included similar clauses exempting unions in their wage bills. Put on hold, his proposed amendment is again up for consideration.

Read more here.

Another thing Obama is wrong about

...when you raise the price of something, in this case labor, less of it will be demanded, or in this case hired.

This makes complete sense to me. Do you buy grapes or blueberries when the price triples? No, we wait until the price comes back down a bit. David Neumark writes in the Wall Street Journal,

Economists point to a crucial question: Will a higher minimum wage reduce the number of jobs for the country’s least skilled workers? President Obama says “there is no solid evidence that a higher minimum wage costs jobs.” On the contrary, a full and fair reading of the evidence shows the opposite. Raising the minimum wage will cost jobs, particularly those held by the least-skilled.

Economists have written scores of papers on the topic dating back 100 years, and the vast majority of these studies point to job losses for the least-skilled. They are based on fundamental economic reasoning—that when you raise the price of something, in this case labor, less of it will be demanded, or in this case hired.

Among the many studies supporting this conclusion is one completed earlier this year by Texas A&M’s Jonathan Meer and MIT’s Jeremy West, which reaffirmed that “the minimum wage reduces job growth over a period of several years” and that “industries that tend to have a higher concentration of low-wage jobs show more deleterious effects on job growth from higher minimum wages.”

The broader research confirms this. An extensive survey of decades of minimum-wage research, published by William Wascher of the Federal Reserve Board and me in a 2008 book titled “Minimum Wages,” generally found a 1% or 2% reduction for teenage or very low-skill employment for each 10% minimum-wage increase.

Found here.

Demand side, supply side, tax and regulatory side

Charles Lipson writes,

BIGGEST UNNOTICED MISTAKE IN THE REPUBLICAN DEBATE
Trump said "wages are too high." That's wrong; it is a bad message; and it is noxious when it comes from a multi-billionaire.

The Republican message should be three-fold: a demand side, a supply side, and a tax-and-regulatory side. The demand side is that wages rise when the need for workers rises because the economy is growing. The supply side is that we need an education system (and families and neighborhoods) that produce people who will be good workers at the entry level and have the skills and incentives to move up the ladder to better jobs, not remain stuck at the bottom. (The libertarians would add that it is none of the government's business to tell an employer and an employee, who voluntarily agree to a wage, that they cannot keep that bargain.) The tax-and-regulatory side is partly about fostering economic growth and partly about lowering the burdens on the least-well-off.

What will NOT work is a government mandate to raise wages. That may help some low-wage workers, but it does so at the expense of the least-skilled at the lowest end of the ladder. Employers will calculate that the lowest-skilled workers are simply not profitable for them to hire, so they never get a foot onto the jobs ladder. Over the medium-run, of course, it also speeds the on-going process of substituting robots and software for unskilled jobs.

Making a difference nationwide

Tom Blumer writes at Bizzy Blog,

In February of last year, Gap Inc., which operates Gap, Old Navy, Banana Republic and Athleta stores, announced that it would raise its minimum hourly rate of pay for all U.S. employees to $9 in June 2014 and $10 in June 2015. As a result, it won “praise from President Obama who is pushing to raise the nation’s minimum wage by a similar amount.”

The linked CNN Money report quoted an apparently confident Lynn Albright, a vice president at Old Navy, as follows: “We’re coming from place where we can afford to make this investment.” Maybe the company could afford it then, but based on today’s store closure announcement, that’s not so much the case now:

Gap closing 175 stores to be more ‘vibrant’

Gap announced Monday it will close a quarter of its stores and cut 250 corporate jobs as it tries to chart the clothing brand back toward growth.

The company will close 175 stores across North America, not including outlets or factory stores, based on store performance. There will be additional store closures at European locations. About 140 stores will close this year. Gap will continue to operate about 500 Gap stores, plus 300 outlet stores.

At the time of the company’s minimum-wage announcement, President Obama issued a statement, which said in part:

Today, I applaud Gap Inc. for announcing that they intend to raise wages for their employees beginning this year. But only action from Congress can make a difference nationwide.

I don’t suppose we’re going to see anyone in the press ask him or his hapless Press Secretary Josh Earnest what he or his administration thinks of today’s announcement.

Excuse me for suggesting that companies around the country letting people go as a result of a steep rise in the minimum wage in the midst of continued tough business conditions, as the law of supply and demand would certainly predict, is not the kind of “difference nationwide” most people would welcome.

Read more here.

Will rises in minimum wage spur automation?

Randall Parker writes at FuturePundit,

A gradual rise to $15 per hour puts LA on course to a $15 per hour minimum wage along with San Francisco and Seattle.

I expect this move will spur more venture capital funding for start-ups trying to automate fast food restaurants, janitoral work, retail stores, movie theatres, and other places that employ lots of minimum wage workers. This will widen an already large gap in employment rate by educational level. But it will only change the rate at which this gap is widening.

At any give moment in time there is a gap between the average productivity in an industry and the potential highest level of productivity given current technology. The size of the gap varies with time. A recession or other external shock can cause a sudden shift in business practices to narrow the gap by quickly adopting the latest tech. For example, automated ordering kiosks are slowly getting rolled out to fast food restaurants. McDonalds rolled out ordering kiosks in Europe a few years ago but has been slow to do it here. A high minimum wage will change that.

One of the biggest changes for customers will be a reduction in interactions with service workers. No more telling counter help at Carl's Jr what you want. You'll type in your order in a kiosk pad and slide a card or wave your phone (or maybe smart watch) to make your payment. Or, even better, you'll order your burgers and fries on your smart phone before you get to CJs (saving time just like you can already do with Domino's Pizza). By the time you arrive your order will be done. Your order will be popped out after an automating id'ing machine (palm reader or iris reader perhaps) determines it is you.

Read more here.

Fight night!

Look! It's a steel cage death match between President Obama and the economy! Is there any doubt who will win?
To find out, go to one of the web's finest satirists.

Are Republicans willing to learn?

On March 25 Thomas Sowell addressed the issue of how Republicans can reach out to black voters.

Too many Republicans seem to think that the way to “reach out” is to offer blacks and other minorities what the Democrats are offering them. Some have even suggested that the channels to use are organizations like the NAACP and black “leaders” like Jesse Jackson — that is, people tied irrevocably to the Democrats.

The issue on which Democrats are most vulnerable, and have the least room to maneuver, is school choice. Democrats are heavily in hock to the teachers’ unions, who see public schools as places to guarantee jobs for teachers, regardless of what that means for the education of students.

There are some charter schools and private schools that have low-income minority youngsters equaling or exceeding national norms, despite the many ghetto public schools where most students are nowhere close to meeting those norms. Because teachers’ unions oppose charter schools, most Democrats oppose them, including black Democrats up to and including President Barack Obama.

New York Mayor Bill de Blasio’s recent cutback on funding for charter schools, and creating other obstacles for them, showed a calloused disregard for black youngsters, for whom a decent education is their one shot at a better life.

But did you hear any Republican say anything about it?

Many people today would be surprised to learn that there were once years when the unemployment rate for black 16-year-olds and 17-year-olds was under 10 percent. But their unemployment rates have not been under 20 percent in more than half a century. In some years, their unemployment rate has been over 40 percent.

Why such great differences between earlier and later times? In the late 1940s, inflation had rendered meaningless the minimum wage set in 1938. Without that encumbrance, black teenagers found it a lot easier to get jobs than after the series of minimum wage escalations that began in the 1950s.

Young people need job experience, at least as much as they need a paycheck. And no neighborhood needs hordes of idle young men hanging around, getting into mischief, if not into crime.

Republicans have failed to explain why the minimum wage laws that Democrats support are counterproductive for blacks. Worse yet, during the 2012 election campaign Mitt Romney advocated indexing the minimum wage for inflation, which would not only guarantee its bad effects, but would put an end to discussing those bad effects.

Any questions?

Found at the Looking Spoon

The robot future

Jonah Goldberg writes,

People don’t go into business to create jobs; they go into business to make money. Labor is a cost. The more expensive labor is, the more attractive nonhuman replacements for labor become.

None of this is necessarily bad. Machines make us a more productive society, and a more productive society is a richer society. They also free us up for more rewarding work. As Wired’s Kevin Kelly notes, “Two hundred years ago, 70 percent of American workers lived on the farm. Today automation has eliminated all but 1 percent of their jobs, replacing them (and their work animals) with machines.”

He gives some examples of machines taking the place of workers, and suggests some possible solutions.