Topic: General

New Study Finds Minimum Wage Increases Hurt Low-Skilled Workers

A new working paper from the National Bureau of Economic Research finds that significant minimum wage increases can hurt the very people they are intended to help. Authors Jeffrey Clemens and Michael Wither find that significant minimum wage increases can negatively affect employment, average income, and the economic mobility of low-skilled workers. The authors find that significant “minimum wage increases reduced the employment, average income, and income growth of low-skilled workers over short and medium-run time horizons.”  Most troublingly, these low-skilled workers saw “significant declines in economic mobility,” as these workers were 5 percentage points less likely to reach lower middle-class earnings in the medium-term. The authors provide a possible explanation: the minimum wage increases reduced these workers’ “short-run access to opportunities for accumulating experience and developing skills.” Many of the people affected by minimum wage increases are on one of the first rungs of the economic ladder, low on marketable skills and experience. Working in these entry level jobs will eventually allow them to move up the economic ladder. By making it harder for these low-skilled workers to get on the first rung of the ladder, minimum wage increases could actually lower their chances of reaching the middle class.

Most of the debate over a minimum wage increase centers on the effects of an increase on aggregate employment, or the total number of jobs and hours worked that would be lost. A consensus remains elusive, but the Congressional Budget Office recently weighed in, estimating that a three year phase in of a $10.10 federal minimum wage option would reduce total employment by about 500,000 workers by the time it was fully implemented. Taken with the findings of the Clemens and Wither study, not only can minimum wage increases have negative effects for the economy as a whole, they can also harm the economic prospects of  low-skilled workers at the individual level.

Four states approved minimum wage increases through ballot initiatives in the recent midterm, and the Obama administration has proposed a significant increase at the federal level. This study should give them a reason to reconsider.

Recent Cato work on this topic can be found here and here

Final Essays in Cato Growth Forum

Here are the final five essays in the Cato Institute’s online forum on reviving growth:

1. Reihan Salam wants to end the bias in favor of corporate debt – and expand school choice.

2. Peter Howitt calls for flat taxes on consumption and wealth.

3. Ben Wildavsky thinks we are subsidizing the wrong college students.

4. Philip Auerswald targets barriers to home healthcare delivery.

5. George Selgin explores alternatives to the monetary policy status quo.

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New Essays in Cato Growth Forum

Here are today’s new essays in the Cato Institute’s online forum on reviving growth:

1. Edward Glaeser targets land use restrictions – and five other barriers to growth.

2. Susan Dudley wants to reform the regulatory process.

3. James Pethokoukis takes aim at the crony capitalist alliance.

4. Andrew Kelly calls for better integration of school and work.

5. Bowman Cutter looks for a path to the “good economy.”

Cato’s Online Growth Forum

Here are today’s new essays in the Cato Institute’s special online forum on reviving growth:

1. Richard Florida says that cities are our future.

2. Megan McArdle takes aim at regulatory complexity.

3. Dane Stangler wants more immigration and better teachers.

4. Scott Winship focuses on expanding opportunity for the disadvantaged.

5. Michael Mandel calls for hacking the regulatory state.

6. Brad DeLong waves his magic wand three times.

You Ought to Have a Look: The Weather According to Maue, Comments on EPA Power Plant Rules, the Government Bogarts the Weed

You Ought to Have a Look is a feature from the Center for the Study of Science posted by Patrick J. Michaels and Paul C. (“Chip”) Knappenberger.  While this section will feature all of the areas of interest that we are emphasizing, the prominence of the climate issue is driving a tremendous amount of web traffic.  Here we post a few of the best in recent days, along with our color commentary.

Patrick J. Michaels and Paul C. Knappenberger

One of the planet’s most prolific weather and climate Tweeters is Florida State PhD and WeatherBell wizard Dr. Ryan Maue (rhymes with zowie). Ryan’s initial claim to fame was his analysis of tropical cyclone (e.g., hurricane) activity that shows, over the past 45 years, lots of variability but no overall change.  Originally published in 2009, it flies in the face of global warming doomsayers who predict increases in all manner of extreme weather events including hurricanes and their tropical brethren. As a young scientist, going against the grain is not typically a good career move (which is why the global warming establishment is self-perpetuating), but Ryan is driven more by the truth than by political correctness. In fact, political correctness is an antonym of Ryan.

He has risen to prominence as the creator of the amazing analyses and graphics produced by the private weather forecasting firm WeatherBell Analytics. Many of these products find their way onto Ryan’s Twitter page along with some insightful (and often witty) commentary. His analysis of current weather events is unparalleled. If you’ve heard of the “polar vortex,” you can thank (or blame) Ryan: he first popularized this arcane professional term last winter.

This past week he has been active, covering the humongous lake-effect snows burying parts of greater Buffalo, the cold outbreak setting all-time monthly low temperature records in the Eastern United States, and pushing back against the growing tide of media that so desperately wants to link it all to global warming.

From our standpoint, Ryan is one of the best young weather/climate guys out there. If you don’t want to limit yourself to only encountering  Ryan’s analysis on the Drudge Report (which actually isn’t too limiting since his work is frequently featured there), then you ought to have a look for him on Twitter and become another of his more than 13,000 followers. To tune in to Ryan telling it like it is, check out @RyanMaue.

Union Reforms to Improve Seaports

International trade boosts our economy, but U.S. seaports need major improvements to maximize the benefits of trade. Bloomberg reported a couple months ago that congestion at West Coast ports is so severe that shippers are diverting a growing share of traffic to Canada. The Wall Street Journal reports today that the problems are continuing.

One issue is the aggressive labor union that controls the West Coast ports:

For more than a month, a rotating cast of about a dozen container vessels, bulk ships and tankers has sat anchored just outside the ports of Los Angeles and Long Beach, some waiting as long as eight days to berth.

… Uncertainty over contract negotiations between terminal operators and the West Coast Longshoremen’s union has further aggravated the congestion, local officials and economists say.

Businesses up and down the West Coast that rely on the ports for importing and exporting goods have expressed concern over the protracted negotiations between the International Longshore and Warehouse Union, representing workers at West Coast ports, and the Pacific Maritime Association, which represents carriers and terminal operators. ILWU members have been working without a contract since a six-year pact expired July 1.

In recent weeks, the PMA has accused the union of slowdowns at the ports of Seattle and Tacoma, Wash., and withholding some critical workers in Los Angeles and Long Beach, contributing to the current congestion. Some longshoremen walked off the job Oakland, Calif., last week, aggravating concerns over a widespread labor disruption during the holiday shipping season.

Port employers as well as retailers and manufacturers say their greatest fear is the possibility of a total shutdown across West Coast ports—similar to a 10-day worker lockout in 2002 after labor talks failed. The shutdown cost the U.S. economy several billions of dollars, industry groups say. Mr. Louttit of the Marine Exchange said the disruption at one point left 65 ships sitting at anchor off the Southern California coast.

The solution to these labor problems is straightforward: Congress should repeal “collective bargaining,” which is a euphemism for monopoly unionism. In other words, it should repeal the National Labor Relations Act (NLRA), which confers unjustified powers on unions and encourages them to disrupt workplaces.

The share of the private-sector workforce that is unionized has plunged for decades because unions make no sense in the modern fast-paced economy. But the unions that hang on in some industries cause a lot of trouble, as we’ve long seen with the high-paid longshoremen on the West Coast. I don’t imagine that NLRA repeal is on President Obama’s agenda, but it is a reform that policymakers should pursue down the road.

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Growing Prosperity and Knowledge Aid Space Exploration

There has never been a better time to be alive on this planet. While many measures of wellbeing are already on a positive trajectory, humanity’s innate curiosity and enterprising spirit continue to push many individuals to seek the stars. The Rosetta mission’s successful comet landing was just the latest development. Privately-funded initiatives, such as SpaceX and Mars One, are taking the lead on a bolder project: a mission to Mars. Greater availability of knowledge and resources is enabling ever-more ambitious space exploration.

Successful space exploration requires expertise. Today, more people pursue advanced degrees globally, many of them in critical fields like physics, math, computer science, geology, and engineering. Furthermore, scientific knowledge compounds over time, and so each generation understands more than the last.

With a higher quantity and quality of scientists, mathematicians, and engineers than at any point in history, humankind is better equipped than ever to tackle the complex challenges of extraterrestrial travel.

Space exploration also requires a tremendous investment of resources. Throughout most of history, even if humankind had possessed the technical knowledge for space travel, scarcity would have prohibited the endeavor. Fortunately, wealth and prosperity are rising rapidly while poverty is in decline. Increasing abundance makes it possible to take on previously unthinkable projects like space exploration. 

Increasing abundance and scientific advancement are expanding humanity’s capacity to pursue ambitious undertakings. Not only has there never been a better time to be alive on this planet, but, thanks to growing prosperity and knowledge, there has also never been a better time to attempt exploration beyond Earth.  

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