Charles Koch wants to eliminate minimum wage

[hippifried]

Every time the subject of raising the minimum wage comes up, we get bombarded with the same old doom & gloom scenarios about how people will be put out of work, or that businesses will fold, or that prices will skyrocket, etc... The debunked Austrian School gets dusted off, amid the hand wringing & whining, & everybody gets buried in long winded diatribes & lists of bullshit talking points.

Time for a reality check:
Despite all the pseudo-theoretical economic caste theology, a raise in the minimum wage has never had any effect whatsoever on the rates of unemployment or inflation. Regardless how well put together the argument seems, I can't think of a single reason to seriously pay attention to prognostications that never pan out.

[paulclifford]

>Every time the subject of raising the minimum wage comes up, we get bombarded with the same old doom & gloom scenarios about how people will be put out of work, or that businesses will fold, or that prices will skyrocket, etc... The debunked Austrian School gets dusted off, amid the hand wringing & whining, & everybody gets buried in long winded diatribes & lists of bullshit talking points.

No one mentioned anything about the "debunked" Austrian School.

>Despite all the pseudo-theoretical economic caste theology, a raise in the minimum wage has never had any effect whatsoever on the rates of unemployment. Time for a reality check:

Yep. Here goes.

See:

http://epionline.org/downloads/KruegerStudy.pdf

And see:

http://www.economics.uci.edu/files/e...Neumark-08.pdf

"In the end, our view is that the weight of the empirical evidence is generally consistent with the view of traditional economists that the low-wage labor market can be reasonably approximated by the neoclassical competitive model."

[Note that the authors say nothing about Austrian economics; they mention "traditional economists" and the very mainstream "neoclassical" ways of looking at economic data. And what is the "neoclassical competitive model" held by traditional economists? It's the commonsense one that anyone who has ever run a lemonade stand understands: if the cost of one of your ingredients goes up in price, and if you cannot successfully pass along that cost increase to the customer, you'll use less of that ingredient. As far as lemonade goes, that includes water, lemons, sugar, and labor. Substitute any other business for "lemonade stand" and you've got the idea.]

"As a result, we also believe that raising the minimum wage leads to economic distortions and often has unintended adverse consequences for the employment opportunities of low-skilled workers. Of course, as we have argued elsewhere, the effects of the minimum wage on employment represents only one piece of the analysis necessary to assess whether minimum wages are a useful policy tool for improving the economic position of those at the bottom of the income distribution— which we believe is the ultimate goal of minimum wage policy. In particular, a more comprehensive review that includes the implications of the minimum wage for the levels and distributions of wages, employment, incomes, and human capital accumulation, as well as consideration of alternative policies, is ultimately needed to assess whether raising the minimum wage is good economic policy."

"Of course, if minimum wages do not generate disemployment effects among low-skilled workers, it is far more likely that they have beneficial effects at the bottom of the income distribution. But given that the weight of the evidence points to disemployment effects, the wisdom of pursuing higher minimum wages hinges in potentially complex ways on the tradeoffs between the effects of minimum wages on different workers and other economic agents, and whether other policies present more favorable tradeoffs."

And see:

http://online.wsj.com/article/SB1000...278669840.html

October 2009

"Earlier this year, economist David Neumark of the University of California, Irvine, wrote on these pages that the 70-cent-an-hour increase in the minimum wage would cost some 300,000 jobs. Sure enough, the mandated increase to $7.25 took effect in July, and right on cue the August and September jobless numbers confirm the rapid disappearance of jobs for teenagers."

[I suppose we're supposed to put this down to coincidence? Bad luck? A right-wing conspiracy in reporting the data?]

"The September teen unemployment rate hit 25.9%, the highest rate since World War II and up from 23.8% in July. Some 330,000 teen jobs have vanished in two months. Hardest hit of all: black male teens, whose unemployment rate shot up to a catastrophic 50.4%. It was merely a terrible 39.2% in July.

The biggest explanation is of course the bad economy. But it's precisely when the economy is down and businesses are slashing costs that raising the minimum wage is so destructive to job creation. Congress began raising the minimum wage from $5.15 an hour in July 2007, and there are now 691,000 fewer teens working.

As the minimum wage has risen, the gap between the overall unemployment rate and the teen rate has widened, as it did again last month. (See nearby chart.) The current Congress has spent billions of dollars—including $1.5 billion in the stimulus bill—on summer youth employment programs and job training. Yet the jobless numbers suggest that the minimum wage destroyed far more jobs than the government programs helped to create."

[Remember: the main thing about advocating minimum wage is to feel good about it because it supposedly indicates good intentions. One can always ignore any attempt to closely analyze the effects it might have on groups other than the lucky ones who get the wage increase and manage to keep their jobs by invoking some "magic talisman" names that drive away all skepticism: "Rand!" "Koch!" "Austrian School!"]

[Ben]

[hippifried]

No one mentioned anything about the "debunked" Austrian School.

I did. Nobody else was sourcing the basis of this bogus economic theology.

As for the links:
First one's an Op-Ed. Who cares?
Second is too, but tries to be precise. There's these pesky phrases that keep popping up in the quoted reports to screw with the preconceived conclusions. Things like "imprecise data", or "negligible employment effect", or even "positive employment...", & the models pose their own set of problems. Modeling precise economic segments requires a stable overall economic model to measure against. Doesn't exist. Pinpointing a specific cause for fluctuating numbers in a fluctuating economy is a fool's errand.

[trish]

Healthcare understood as medical insurance is often independent of healthcare understood as the science and scientific practice of medicine. The best country in the world for healthcare of the latter kind can be the worst country in the world for the former. You got cancer and you have a decent middle range income, you might want to go to Mayo Clinic; no matter where you’re from. It’s not at all surprising patients come to the U.S. for healthcare of the latter kind. They certainly aren’t coming to the U.S. for healthcare of the former kind.

An insurance program pools the money collected by its clients. When a client gets sick, he is given a check for part of his medical expenses drawn from the pool. If every client got sick (or just a number beyond a certain threshold), the company would go belly up, because medical costs are way greater than the amount any client can even afford to put into the pool. So too few clients, the probability that more than the threshold number of clients get sick moves toward certainty.
That is one reason why having hundreds of thousands of small insurers just doesn’t work. A viable insurance company has to have a large number of clients paying into the common pool. Even large companies do their best to skimp on the payoffs and maximize profits. They find ways to drop clients with chronic illnesses, who are aging etc. They refuse to accept clients with previous conditions. Some have tricked clients with long term conditions to drop their insurance and then refuse to renew because of their “previous” condition. Insurance agencies decide which procedures recommended by your doctor will be covered. If you can get by with a less costly more risky procedure, they may not approve the safer, more reliable procedure. These schemes and dozens of others are why medical insurance companies are regulated. The smaller the pool available to a company the greater the pressure to cut expenditures; i.e. the greater the need to short-shrift the client. Selling insurance across State borders is not a way to increase competition; it’s a procedure for getting out from under one particular State’s regulatory regime.

The desire, on the part of insurance companies to make a profit, is one driver to price of medical insurance. Another is the cost of pharmaceuticals and medical procedures. Pricing lists at private hospitals (there weren’t any privates to speak of four decades ago) are essentially constructed willy-nilly, charging ten dollars for a cotton ball one week and a dime the next. Each insurance company insists on its own forms to be filled out by the doctor. Large staffs of people are hired by doctors and hospitals just to fill-out, send-in and file insurance forms. There obviously needs to be more enforced uniformity and more regulation, not less.

National healthcare is for people who can’t afford healthcare. There are lot’s of people in this Nation who put off trips to doctor because the cost of a trip to a general practitioner would wipe out their budget for the month. It can be uniform. It can be simple. It can have the leverage to negotiate with pharmaceutical companies. It can regulate pricing in hospitals. It can have a large pool that everyone pays into. It will answer to the people, not an isolated set of shareholders who were never elected to determine which of your medical procedures will be approved.

[paulclifford]

>>>Healthcare understood as medical insurance is often independent of healthcare understood as the science and scientific practice of medicine.

Not "often independent", but always independent. Health insurance and health care are two different things. For empirical proof, just ask the poor slobs waiting and waiting and waiting in lines in Canada and the UK. They have lots of insurance (translated as, "the right to get in line and wait") and not enough health care (translated as "treatment for their conditions").

>>>The best country in the world for healthcare of the latter kind can be the worst country in the world for the former. You got cancer and you have a decent middle range income, you might want to go to Mayo Clinic; no matter where you’re from. It’s not at all surprising patients come to the U.S. for healthcare of the latter kind. They certainly aren’t coming to the U.S. for healthcare of the former kind.

Except that the former kind is utterly useless in itself: all the best, cheapest, most generous insurance policies in the world won't cure you of your diseases. Only the latter kind of medical care can do that. The purpose of the former is to be able to get the latter. So which is more important: access to a piece of paper called a "policy" with lots of small print on it that says you are "guaranteed" all kinds of wonderful benefits at public expense for every imaginable condition; or the actual care that will treat you, or cure you, of one or more of those conditions?

Most people would say they prefer the latter, especially if they understood that there is no necessary connection between "easy access to pieces of paper called policies" and "easy access to high quality medical care that could actually treat them."

Hint: Britons don't get it. Their thinking goes like this: "Nanny government promises me free care. All I know is that if I get a heart attack, I'm guaranteed — at some point — to be taken to a free hospital and hooked up to all kinds of tubes." That's all they know. That's all they want to know. If you told them, "But the care you'll get sucks, as proven by your crappy survival rates after a heart attack — survival rates that are much higher in the US, despite having no such 'guarantees'". They'll shrug. The shrug really means, "I don't care about survival rates. I care about the fact that the ambulance ride, the hospital stay, and the tubes are free!"

There's obviously no arguing with that.

[trish]

So which is more important: access to a piece of paper called a "policy" with lots of small print on it that says you are "guaranteed" all kinds of wonderful benefits at public expense for every imaginable condition; or the actual care that will treat you, or cure you, of one or more of those conditions?

Of course if you can't afford to pay for a doctor's care, then it doesn't matter how distinguished and knowledgeable he is. Affordable care is what one chiefly needs.

[broncofan]

People come to the Mayo Clinic because they can afford care that most people cannot. This is not evidence that our healthcare system provides better care on average to the average person.

Insurance has always been regulated. As a system it is almost unworkable if there are no regulations. Before PPACA it was regulated by each state with its own set of laws effecting the risk pooling arrangement. There were laws regulating what providers could participate, surcharges against certain patients to be used to subsidize others, and mandates for community rather than experience rating for certain types of insurance.

Without such regulations the system will tend to fall apart. Although adverse selection is generally a problem with community ratings, where the better than average risks will opt out of the system leaving only the sickest, experience rating is also problematic. Someone who has recently been sick will not be able to afford a premium individually tailored to their risk.

The quality of healthcare depends on issues of access. You don't have a good system of healthcare if most people can't afford necessary procedures or are made bankrupt by illness. I don't care how many wealthy people flock to our best institutions.

[paulclifford]

>>>Of course if you can't afford to pay for a doctor's care, then it doesn't matter how distinguished and knowledgeable he is. Affordable care is what one chiefly needs.

Quite so. That's why 1/3rd of all poor people eligible for Medicaid turn it down. They know — and studies prove — that they will have better medical care if they have NO insurance at all, and simply present themselves to a doctor as a charity case. The doctors know this, too, because Medicaid restricts their ability to practice medicine in whatever ways they might deem best for the patient's health.

Another example:

Do you own a car? If so, you have car insurance. When you engage in regular care and maintenance for your car — filling up with petrol, oil change, spark plug replacements, tune-ups, new tires, tire rotations, etc. — do you pull out your auto insurance card and hand it to the mechanic with the idea that your insurance provider will pay for it? No. Of course not. YOU pay for these things out-of-pocket. The insurance becomes relevant when, God forbid, you're in an accident.

If some weird government program were implemented that required auto insurance to cover buying gas, oil changes, tire rotation, tune-ups, etc., do you believe the prices of these things done by an ordinary mechanic would increase, decrease, or stay the same?

[paulclifford]

>>>There are lot’s of people in this Nation who put off trips to doctor because the cost of a trip to a general practitioner would wipe out their budget for the month.

I doubt that. One reason medical care is expensive in this country is that many people who ought to put off trips to the doctor because it's unnecessary, do not do so. The additional demand "pull" on the supply of medical care — made possible by bureaucratically regulated insurance policies that mandate coverage for just about everything at taxpayer expense — has the perverse effect of raising prices.

Example:

If government decided that all poor people should have the same access to filet mignon as the wealthy, it might implement a program with a taxpayer-subsidized coupon, which a poor person could exchange for filet mignon at a supermarket or butcher's for the additional cost (a "co-pay") of, e.g., $1.00. If filet mignon is $12.00/pound on average, a qualified poor person would get his voucher from a government agency and hand it, plus one dollar of his own, to the butcher, and get a pound of meat. The voucher would therefore be worth $11.00.

Obviously, this has nothing to do with the rich. They still consume as much filet mignon as before, with no problem paying $12.00/pound for it.

But now look at things from the butcher's point of view. He doesn't care who pays, or where the money comes from. All he knows is that before the government program, only the rich were buying filet mignon from him (let's say, 50 customers a week); but after the program is implemented, he sells filet mignon to 150 people: 50 rich people and 100 poor people with vouchers. That's fine for him! But the question is this: what happens to the price of filet mignon when so many more people have access to it? Does it go up? Down? or remain the same?

Obviously, with 3-times the number of people buying filet mignon as before the program, the price of filet mignon goes up! And it makes no difference if the government starts a propaganda campaign about the "greed of the butchers!" The price of filet mignon will rise as it responds to increased demand. Period!

How high will it go? Hard to say exactly. But it will probably go up to the point where it can "level off" of the demand, relative to its supply, so that it will go back to only having 50 customers again! So let's say it rises to $23/pound. The wealthy can still buy all they want; but the poor only have a voucher worth $11.00, so their "co-pay" will be $12.00/pound . . . which is exactly what they had to pay BEFORE the big-hearted, well-intentioned government-run program to give the poor greater access to filet-mignon! Did the program work? No. Perhaps briefly, in the short-run, when it first started. But the long-run effect is zero! Additionally, there's now a big bureaucracy, with big bureaucrats, that have to be supported in the "US Department of Filet Mignon for the Poor" in Washington, DC.

Now, substitute "health insurance" or "medical care" for "filet mignon" and you'll see why government handouts to the poor don't have the effect of the ones intended by their supporters. By inducing people — even poor people — to use more medical services via health insurance policies, polices AND medical care goes UP in price, responding to the artificially increased demand.

And if you think that government might deal with those nasty, greedy butchers by simply mandating to them that they NOT raise their prices — even in the face of 3x the demand for the product — one of two things will occur: they butchers will sell out quickly and those showing up a day or two later with their vouchers and a dollar will find that there's nothing left (this is called a "shortage"); or, the butchers might intentionally remove their filet mignon from the shelves and store it in deep freezers, hoping the stupid price-controls will be abolished after the next election. If it's not abolished, you know what they'll do? They will sell it on a black market for the actual market price of filet-mignon, or they will take it home to their families and consume it themselves. Either way: it won't be on the shelves for the poor people with their government coupons and their dollar bills.

Again, substitute medical care for filet mignon and you'll see the effect of government/bureaucratic management as opposed to profit/loss management. In programs that put price controls on medical care or health insurance, there are always shortages of both.

And finally: government might respond to the threat of a shortage by not only mandating a set price for filet-mignon, but mandating to customers how much they can purchase: e.g., only one pound per customer every alternate Monday and Friday if your Social Security number begins with an odd number, or every alternative Tuesday and Saturday if it begins with an even one.

This is called "rationing."

It's completely whimsical and arbitrary, of course, but people will feel "assured" and "relieved" that their government "cares for them" by "protecting them from those greed, graspy butchers."

Replace "filet mignon" with "health insurance" or "medical care" and you've got the idea. I don't see how the inevitable rationing of medical care ultimately provides greater access to medical care for the poor. It's a bit like telling a poor person, "You only have to pay $1.00 + a voucher to a butcher to get filet mignon; unfortunately for you, none is left. But before the program, there was lots of filet mignon available and you had to pay $12/lb. for it! Surely you're much better off now!"

Additionally, much of the increase in medical care costs is a direct result of bureaucratic regulation that requires constant 1) compliance and filing costs on the part of doctors, clinics, hospitals, and other providers; and 2) implementation-policing costs on the part of the bureaucrats who pull fat salaries, pension, and benefits.

I hope you understand that as regulation increases in the holy name of "uniformity", the size of the bureaucracies (and the number of bureaucrats) standing between the otherwise direct economic line of "patient-doctor" grows, often exponentially; and that, furthermore, most of the costs of such centrally-directed systems have to do with the political/bureaucratic side of things. In all nationalized healthcare systems in the world, most of the money from tax revenues gets consumed by the managing bureaucracy . . . the lion's share does NOT go to the patient or the medical care provider.

None of this helps the poor, who are just as interested as anyone in the middle class as getting a cure for their ailments, and not just a piece of paper that says "You have the right to get in line and wait."

>>>It can be uniform. It can be simple.

Simplicity is never a result of government regulation or hampering of voluntary trade in the market, and never has been (and never will be), precisely because nothing the government does is motivated by the need to earn more than their costs. That's precisely why government programs are always so wasteful of natural resources and human labor: precisely because it need not earn a profit, government has no way of assessing whether the economic value of the things it uses (call it the "inputs") is of lower value than the things it provides to the public (call it the "outputs"). Obviously, if an economic input is of lower value than the economic output, then the program is economically successful: it's providing something of higher value to people that they wouldn't be able to get on their own had they simply gone directly to those inputs. Conversely, if the output is of lower value to people than the inputs, the program is wasting resources; it's not directing those inputs to their highest-valued uses to consumers . . . "highest valued" means "most important from the consumers' own point of view," not a nanny-bureaucrat telling them what's most important for them.

There's no way for a government, "non-market" institution to solve this fundamental problem.

There's nothing wrong the simplicity as a value, but I'm no admirer of uniformity. What the poor need more than anything else — just like anyone else — are CURES for their ailments; and CURES are the result of INNOVATION, not uniformity.

You don't want a healthcare system run like the armed services, where everything is uniform: dress codes, speech patterns, basic training, pay grades, triplicate forms, etc.

You want a healthcare MARKET modeled along the same lines as the vibrant consumer electronics market: constant innovation, intense competition, lots of price wars.

The poor have all the access that everyone else to iPods, iPads, iPhones, notebooks, desktops, smartphones, BlackBerries, etc.

I want the poor to have the same kind of choices and access to medical care as they do to consumer electronics. The way to accomplish this is by structuring the market for healthcare along the same lines as the market for consumer electronics and computer technologies: NO ARTIFICIAL BARRIERS TO ENTRY.

For some reason, you want to structure the market for healthcare along the same lines as the "market" for postal delivery by the US Postal Service, driver licenses as provided by the Department of Motor Vehicles, and the US Army.

Somehow, regimentation in the name of "simplicity" and "uniformity" is supposed to result in lots of choices — choice in both quality and price — for the poor. But it actually has the opposite effect, as well as stifling the life-blood of medical care which is innovation.