Missing Portraits Russell Roberts A picture is worth a thousand words. So the New York Times Sunday Magazine _article_ (http://www.nytimes.com/2006/01/15/magazine/15wage.html?pagewanted=1) (discussed earlier _here_ (http://cafehayek.typepad.com/hayek/2006/01/on_legislating_.html) and _here_ (http://cafehayek.typepad.com/hayek/2006/01/vertical_demand.html) by Don and me) that found so many reasons to love living wage ordinances and so few reasons to be skeptical of their virtues, included powerful photographs of workers who have benefited from living wage ordinances with poignant descriptions of what these workers are doing with their raises: (javascript:pop_me_up2('http://www.nytimes.com/imagepages/2006/01/11/magazine/15cover.1.html', '15cover_1', 'width=456,height=600,scrollbars=yes,toolbars=no,resizable=yes')) (javascript:pop_me_up2('http://www.nytimes.com/imagepages/2006/01/11/magazine/15cover.1.html', '15cover_1', 'width=456,height=600,scrollbars=yes,toolbars=no,resizable=yes')) Alessandra Petlin for The New York Times Name: Manuela Soto. Marital status: Single mom. Occupation: Assistant hotel housekeeper. Home: Santa Fe, N.M. Hourly wage before local "Living Wage" ordinance: $7.50. Hourly wage now: $9.50. What she'll do with raise: Pay bills faster, offset higher gas prices, buy more supplies for sons. _More Photos >_ (javascript:pop_me_up2('http://www.nytimes.com/slideshow/2006/01/11/magazine/20 050115_WAGE_SLIDESHOW_index.html', '20050115_WAGE_SLIDESHOW', 'width=750,height=600,scrollbars=yes,toolbars=no,resizable=yes')) Strangely enough, there were no pictures of the workers who had lost their jobs because the legislation priced them out of the job market. Nor were there any descriptions of how these people were coping with being unemployed. I am proud not to be a progressive. Posted in _Seen and Unseen_ (http://cafehayek.typepad.com/hayek/seen_and_unseen/index.html) , _Work_ (http://cafehayek.typepad.com/hayek/work/index.html) | _Permalink_ (http://cafehayek.typepad.com/hayek/2006/01/missing_portrai.html) | _Comments (3)_ (http://cafehayek.typepad.com/hayek/2006/01/missing_portrai.html#comments) | _TrackBack (0)_ (http://cafehayek.typepad.com/hayek/2006/01/missing_portrai.html#trackback) Vertical Demand Curves Russell Roberts A key issue in the debate over the virtues of the so-called living wage is whether the demand for labor slopes downward—will employers hire fewer workers when legislation forces employers to pay more? ACORN, the Association of Community Organizations for Reform Now, is the most important advocate of living wage ordinances as reported in _this_ (http://www.nytimes.com/2006/01/15/magazine/15wage.html?pagewanted=1) New York Times Sunday Magazine article. (Don's post on the article is _here.)_ (http://cafehayek.typepad.com/hayek/2006/01/on_legislating_.html) I have read elsewhere that ACORN in 1995 tried to get itself exempted from the state of California's minimum wage legislation. I have always wondered whether this was an urban legend. Could it possibly be true? It appears to be true unless someone has hacked into the _Findlaw_ (http://lp.findlaw.com/) website. (_Here's_ (http://login.findlaw.com/scripts/callaw?dest=ca/caapp4th/41/298.html) the Court's judgment against ACORN. If that doesn't work, try googling this: Association of Community Organizations for Reform Now v. Department of Industrial Relations (1995) 41 Cal.App.4th 298 , 48 Cal.Rptr.2d 486. I'd like to see ACORN's brief as well if someone knows how to dig it up.) Most of ACORN's critics delight in pointing out the hypocrisy of ACORN. How could an organization that fights for higher wages deny its own workers those higher wages? But I'm more interested in the arguments that ACORN used to make their case. Here, from the court's decision, is why ACORN argued that applying the minimum wage to ACORN would have an adverse impact on the organization: According to ACORN, this adverse impact will be manifested in two ways: first, ACORN will be forced to hire fewer workers; second, its workers, if paid the minimum wage, will be less empathetic with ACORN's low and moderate income constituency and will therefore be less effective advocates. The first argument was that demand slopes downward. The second argument is why I'd always wondered whether this story was an urban legend. The second argument seems worthy of Saturday Night Live if the show were written by economists. I am proud not to be a progressive. Posted in _Work_ (http://cafehayek.typepad.com/hayek/work/index.html) | _Permalink_ (http://cafehayek.typepad.com/hayek/2006/01/vertical_demand.html) | _Comments (2)_ (http://cafehayek.typepad.com/hayek/2006/01/vertical_demand.html#comments) | _TrackBack (0)_ (http://cafehayek.typepad.com/hayek/2006/01/vertical_demand.html#trackback) The Market for Health Care Russell Roberts Any time someone complains to you about how bad the market for the health care works, it's important to remind them that most areas of the health care system are highly regulated in a top-down fashion or heavily subsidized. The top-down part is often hidden, but today, at least, it's out in the open. >From the _New York Times_ (http://www.nytimes.com/2006/01/16/politics/16drug.html?hp&ex=1137474000&en=f9353ff31dd315be&ei=5094&partner=homepage) (rr): With tens of thousands of people unable to get medicines promised by Medicare, the Bush administration has told insurers that they must provide a 30-day supply of any drug that a beneficiary was previously taking, and it said that poor people must not be charged more than $5 for a covered drug. Someone should ask Samuel Alito why this is constitutional. Posted in _Health_ (http://cafehayek.typepad.com/hayek/health/index.html) | _Permalink_ (http://cafehayek.typepad.com/hayek/2006/01/the_market_for_.html) | _Comments (2)_ (http://cafehayek.typepad.com/hayek/2006/01/the_market_for_.html#comments) | _TrackBack (1)_ (http://cafehayek.typepad.com/hayek/2006/01/the_market_for_.html#trackback) January 15, 2006 On Legislating 'Living Wages' Don Boudreaux Jon Gertner’s _cover article_ (http://www.nytimes.com/2006/01/15/magazine/15wage.html) in today’s New York Times Magazine offers no surprises. It’s as predictable as what you’ll read here. Gertner reports on the movement for a “living wage” – a movement working mostly at the local level, trying to persuade local governments to legislate minimum wages well above the national minimum wage of $5.15 per hour. Of course, Gertner mentions the famous (or infamous) 1995 study by David Card and Alan Krueger in which the authors claim to find evidence that a hike in New Jersey’s minimum wage caused no fall in employment and might even have caused employment to increase. Card and Krueger are quoted, each predictably insisting that their data exposes the error in the standard economists’ analysis in which legislated minimum wages increase unemployment among low-skilled workers. Gertner makes no mention of the many critical responses to Card’s and Krueger ’s study. (He does quote critic David Neumark – once – but only on the success of the political movement for ‘living-wages,’ not on the Card-Krueger study.) A good summary of the criticisms of Card-Krueger is _this essay_ (http://www.cato.org/pubs/regulation/reg18n1c.html) by Donald Deere, Kevin Murphy, and Finis Welch. (I must also recommend _this outstanding blog-post_ (http://econlog.econlib.org/archives/2005/05/infinite_contra.html) by my colleague Bryan Caplan, over at EconLog.) Maybe Gertner can be forgiven, for Krueger told him that (in Gertner’s words) “Some recent surveys of top academics show a significant majority now agree that a modest raise in the minimum wage does little to harm employment.” If a “significant majority” of “top academics” accepts the Card-Krueger finding, why bother to talk with the lunatic fringe who cling to the archaic superstition that higher minimum wages cause greater unemployment? But look more closely at what Krueger told Gertner – namely, “top academics” (we’ll assume those to be economists and not sociologists and experts on French literature) “agree that a modest raise in the minimum wage does little harm to employment.”
It seems as if Krueger is saying that economists now agree that “modest” increases in the minimum wage are justified, or at least not harmful. That is certainly Gertner’s reading of Krueger’s meaning. But taken literally, the economist consensus that Krueger reports is neither new nor inconsistent with the traditional understanding that higher minimum wages reduce employment. This understanding has nothing to do with the extent of the effect that higher minimum wages have on employment; it has to do with the direction of the effect: higher minimum wages, lower rates of employment of un- and low-skilled workers. Because more than 95 percent of American workers have skills sufficient to enable them to earn wages higher than the federal minimum, any “modest raise in the minimum wage” is unlikely to have an effect on employment that is more than modest. But let’s assume that Krueger really means something more substantive – namely, that economists have been wrong to assert that higher legislated minimum wages increase unemployment – and that, therefore, the economists’ case against the minimum wage is without merit. (Again, this meaning is the one that Gertner takes from Krueger.) Because there are margins other than pecuniary wage rates upon which employers and employees can adjust, it’s possible that higher legislated minimum wages don’t so much reduce employment as reduce the quality of available employment. Most obviously, employers of low-skilled workers can reduce (or not increase) fringe benefits, or they can work their employees harder (thereby extracting more output per hour from them). If the brunt of employer and employee adjustments to higher minimum wages take place on these non-wage-rate margins, even the finest empirical studies will show little or no effect of higher minimum wages on the rate of employment. But it would still be a grotesque error to conclude that low-skilled workers are generally better off as a consequence of the higher minimum wage. Posted in _Prices_ (http://cafehayek.typepad.com/hayek/prices/index.html) , _Reality Is Not Optional_ (http://cafehayek.typepad.com/hayek/reality_is_not_optional/index.html) , _Regulation_ (http://cafehayek.typepad.com/hayek/regulation/index.html) | _Permalink_ (http://cafehayek.typepad.com/hayek/2006/01/on_legislating_.html) | _Comments (20)_ (http://cafehayek.typepad.com/hayek/2006/01/on_legislating_.html#comments) | _TrackBack (2)_ (http://cafehayek.typepad.com/hayek/2006/01/on_legislating_.html#trackback) January 13, 2006 Munich Russell Roberts _This commentary_ (http://www.washingtonpost.com/wp-dyn/content/article/2006/01/12/AR2006011201541.html?nav=hcmodule) (rr) by Charles Krauthammer gives some of the reasons why I won't be seeing Spielberg's new movie Munich. He could also have mentioned that killing murderers is not the same as murder. Posted in _Film_ (http://cafehayek.typepad.com/hayek/film/index.html) | _Permalink_ (http://cafehayek.typepad.com/hayek/2006/01/munich.html) | _Comments (12)_ (http://cafehayek.typepad.com/hayek/2006/01/munich.html#comments) | _TrackBack (0)_ (http://cafehayek.typepad.com/hayek/2006/01/munich.html#trackback) Maryland Malfeasance Russell Roberts Maryland has now passed legislation (overriding Governor Ehrlich's veto) requiring large employers to spend at least 8% of their payroll costs on health care or pay money into the state's coffers. Only Wal-Mart will be affected by this requirement. You can spend a semester on why this legislation is likely to hurt poor people and low-skilled workers. _This_ (http://www.washingtonpost.com/wp-dyn/content/article/2006/01/11/AR2006011102001.html) unsigned Washington Post editorial gets it right: The Maryland bill is a legislative mugging masquerading as an act of benevolent social engineering. It is true that skyrocketing health care costs and the growing ranks of uninsured workers represent a burden on the state's health system that other corporations in effect help subsidize. But Wal-Mart employees, like the employees of other large retailers that employ many low-wage workers, are only slightly more likely to collect Medicaid benefits than the national average. And unlovable as it may be, Wal-Mart serves low- and middle-income people, both by creating entry-level and part-time jobs for people who might otherwise be unemployed and by saving its moderate-income customers a staggering amount of money. The legislation has prompted imitators in 30 states. Where it passes, no one should be surprised by unintended consequences. Wal-Mart and other targeted firms may shift jobs or planned facilities elsewhere. Many low-wage younger workers may still opt out of health coverage even if offered a more generous plan. In trying to address the national problems of health care and uninsured workers, lawmakers in Maryland and other states could inflict on themselves a new set of problems while failing to solve the underlying one. Posted in _Regulation_ (http://cafehayek.typepad.com/hayek/regulation/index.html) | _Permalink_ (http://cafehayek.typepad.com/hayek/2006/01/maryland_malfea.html) | _Comments (17)_ (http://cafehayek.typepad.com/hayek/2006/01/maryland_malfea.html#comments) | _TrackBack (6)_ (http://cafehayek.typepad.com/hayek/2006/01/maryland_malfea.html#trackback) January 12, 2006 ABCs of Education Don Boudreaux _John Stossel_ (http://abcnews.go.com/2020/ABCNEWSSpecial/) promises to have much good information and wisdom about schooling in _this hour-long special_ (http://abcnews.go.com/2020/) that will be telecast tomorrow night. I'll not miss it. Stossel truly is the finest broadcast journalist of our age, specializing (as he does) in making that which typically is unseen seen. I'm also eager, by the way, to read his forthcoming book. Posted in _Education_ (http://cafehayek.typepad.com/hayek/education/index.html) | _Permalink_ (http://cafehayek.typepad.com/hayek/2006/01/abcs_of_educati.html) | _Comments (16)_ (http://cafehayek.typepad.com/hayek/2006/01/abcs_of_educati.html#comments) | _TrackBack (0)_ (http://cafehayek.typepad.com/hayek/2006/01/abcs_of_educati.html#trackback) January 11, 2006 The Temptation to Subsidize Russell Roberts Pete Geddes of the Foundation for Research on Economics and the Environment _(FREE)_ (http://www.free-eco.org/index.php) does an excellent job in _this column_ (http://www.free-eco.org/articleDisplay.php?id=486) describing why subsidizing "good" kinds of energy (wind farms and biofuels) have perverse effects due to political manipulation and the law of unintended consequences. An excerpt: When we subsidize things that trade in the market, we benefit the well off and well organized at the expense of the most vulnerable members of society. This holds true whether in Bozeman, Boston, or Birmingham. Geddes goes on to quote George Will. It's such a good quote I dug up Will's column (from 2/4/1993 in the Washington Post) to find the context. The column is about how streetcar companies and later taxicab companies used regulations to keep out competition from jitneys serving poor people. The column opens: The world, a wit has said, is divided into two kinds of people, those who divide the world into two kinds of people and those who do not. I say: The world is divided between those who do and those who do not understand that activist, interventionist, regulating, subsidizing government is generally a servant of the strong and entrenched against the weak and aspiring. That last part (after "I say") is what Geddes quoted. The ending of the column is equally eloquent: The world is divided into two kinds of people, those who want to prosper by competing and those who want to prosper by getting government to cripple their competitors. America is divided between genuine entrepreneurs and those persons whose entrepreneurship consists of turning government into a dispenser of privilege and injustice. Posted in _Energy_ (http://cafehayek.typepad.com/hayek/energy/index.html) , _Politics_ (http://cafehayek.typepad.com/hayek/politics/index.html) | _Permalink_ (http://cafehayek.typepad.com/hayek/2006/01/the_temptation_.html) | _Comments (8)_ (http://cafehayek.typepad.com/hayek/2006/01/the_temptation_.html#comments) | _TrackBack (2)_ (http://cafehayek.typepad.com/hayek/2006/01/the_temptation_.html#trackback) Atlas Should Punt Don Boudreaux Is there no end to politicians' pretensions? The New Orleans City Council is now _meddling in choosing a head coach_ (http://sportsillustrated.cnn.com/2006/football/nfl/01/09/bc.fbn.williamsresoluti.ap/) for the _New Orleans Saints_ (http://www.neworleanssaints.com/) football team. Isn't the city's rebuilding effort enough to occupy these pols? Actually, come to think of it, better that the city's politicians ruin the football team by meddling in it rather than ruin the city by meddling in the rebuilding effort. (Hat tip to Andy Morriss.) Posted in _Politics_ (http://cafehayek.typepad.com/hayek/politics/index.html) | _Permalink_ (http://cafehayek.typepad.com/hayek/2006/01/atlas_should_pu.html) | _Comments (3)_ (http://cafehayek.typepad.com/hayek/2006/01/atlas_should_pu.html#comments) | _TrackBack (1)_ (http://cafehayek.typepad.com/hayek/2006/01/atlas_should_pu.html#trackback) January 10, 2006 The Real World Don Boudreaux Today I listened to some of the broadcast of the confirmation hearings of Supreme Court nominee Samuel Alito. The part I caught included questioning by Sen. Joe Biden. Biden expressed great admiration for retiring Justice Sandra Day O’Connor (whom Alilto is nominated to replace). Biden kept saying that Justice O’Connor understood “the real world” and cared about “the real world.” Clearly, Biden was suggesting that good judges pay attention to “the real world” – and that failure to pay attention to the real world (say, by instead paying attention only to abstractions) is a mark of a poor judge. I agree with Biden that the real world is important. Law grows from experience. Good law cannot be deduced logically by a genius or a committee of geniuses. But I suspect that Biden’s concept of the real world differs from my own. What is the real world? The real-world examples used by Biden to flesh out his conviction that a good Supreme Court justice is one who pays attention to the real world were of employees who were fired or not promoted because of alleged workplace discrimination. My guess is that Biden regards any political or judicial theory that is skeptical of granting relief for such real-world discrimination as a theory that ignores the real world – a theory that callously elevates abstractions over reality. If I were before Sen. Biden's committee, I’d respond to Biden’s remarks like this: Senator, I, too, believe that law is a product exclusively of the real world and should not be divorced from it. I agree with Oliver Wendell Holmes’s observation that law is no “brooding omnipresence.” But Senator, we must be careful about what we take to be the real world. The real world is not limited to the here and now; it’s not limited to the plaintiff and defendant in whatever case happens to be in front of the court. It’s not limited to the people we can see and hear standing before us or shouting behind us. The real world exists through time and vast space. It includes millions of people whose names and faces we don’t know and will never encounter – but each of whom is as real as you and me. The fact that we – you and me – don’t see these persons and don’t know them doesn’t make them unreal or less-real than the people we do see and hear and touch and smell in our courtrooms and in the lobbies of our legislative halls. So let’s say we have a statute aimed at preventing employment discrimination against disabled people. I ask: Which disabled people? And I answer: all disabled people. Surely being a man committed to the real world you understand that this country contains many more disabled people beyond the one who sues a company under the statute. If the court grants relief to the plaintiff – the disabled worker who filed the suit demanding (say) that his employer build a special elevator just for his use – that real-world disabled worker might well be helped. But what if the consequence of applying the statute in this way makes it less likely that disabled people will be hired in the future and by other companies? I realize, Senator, that judges’ scope for making policy decisions is far narrower than that enjoyed by legislators. And I agree that judges' role is not to rewrite legislation. But please, Senator, don’t insult me or the audience listening to _this political spectacle_ (http://www.nytimes.com/2006/01/11/politics/politicsspecial1/11senators.html) by insinuating that only persons, such as yourself, who focus only on the anecdote, only on a handful of identifiable persons, have a monopoly on caring about the real world. Don’t suggest that those of us who care about rules – who understand that rules are to be judged by their performance over time and space rather than by how they work in any one instance – are less concerned about the real-world than you are. Indeed, Senator, because I understand that statutes and legal rulings have effects far _beyond those which are seen_ (http://www.econlib.org/library/Bastiat/basEss1.html) , I dare say that I am more aware of the real-world than are those – such as you, Senator? – who typically judge a rule to be good or bad based exclusively upon how it affects a single or a few identifiable persons. Senator Biden, the issue isn't whether or not the real world matters. We all agree that it does. What separates you and me, Senator, is that I don’t ignore that part of the real-world that is less visible than that relatively small part that attracts the attention of politicians and the press. Posted in _Current Affairs_ (http://cafehayek.typepad.com/hayek/current_affairs/index.html) , _Law_ (http://cafehayek.typepad.com/hayek/law/index.html) , _Reality Is Not Optional_ (http://cafehayek.typepad.com/hayek/reality_is_not_optional/index.html) | _Permalink_ (http://cafehayek.typepad.com/hayek/2006/01/the_real_world.html) | _Comments (4)_ (http://cafehayek.typepad.com/hayek/2006/01/the_real_world.html#comments) | _TrackBack (2)_ (http://cafehayek.typepad.com/hayek/2006/01/the_real_world.html#trackback) Recent Posts * _Missing Portraits_ (http://cafehayek.typepad.c om/hayek/2006/01/missing_portrai.html) * _Vertical Demand Curves_ (http://cafehayek.typepad.com/hayek/2006/01/vertical_demand.html) * _The Market for Health Care_ (http://cafehayek.typepad.com/hayek/2006/01/the_market_for_.html) * _On Legislating 'Living Wages'_ (http://cafehayek.typepad.com/hayek/2006/01/on_legislating_.html) * _Munich_ (http://cafehayek.typepad.com/hayek/2006/01/munich.html) * _Maryland Malfeasance_ (http://cafehayek.typepad.com/hayek/2006/01/maryland_malfea.html) * _ABCs of Education_ (http://cafehayek.typepad.com/hayek/2006/01/abcs_of_educati.html) * _The Temptation to Subsidize_ (http://cafehayek.typepad.com/hayek/2006/01/the_temptation_.html) * _Atlas Should Punt_ (http://cafehayek.typepad.com/hayek/2006/01/atlas_should_pu.html) * _The Real World_ (http://cafehayek.typepad.com/hayek/2006/01/the_real_world.html) _Archives_ (http://cafehayek.typepad.com/hayek/archives.html) * _January 2006_ (http://cafehayek.typepad.com/hayek/2006/01/index.html) * _December 2005_ (http://cafehayek.typepad.com/hayek/2005/12/index.html) * _November 2005_ (http://cafehayek.typepad.com/hayek/2005/11/index.html) * _October 2005_ (http://cafehayek.typepad.com/hayek/2005/10/index.html) * _September 2005_ (http://cafehayek.typepad.com/hayek/2005/09/index.html) * _August 2005_ (http://cafehayek.typepad.com/hayek/2005/08/index.html) * _July 2005_ (http://cafehayek.typepad.com/hayek/2005/07/index.html) * _June 2005_ (http://cafehayek.typepad.com/hayek/2005/06/index.html) * _May 2005_ (http://cafehayek.typepad.com/hayek/2005/05/index.html) * _April 2005_ (http://cafehayek.typepad.com/hayek/2005/04/index.html) [Non-text portions of this message have been removed] ForumWebSiteAt http://groups.yahoo.com/group/Libertarian Yahoo! Groups Links <*> To visit your group on the web, go to: http://groups.yahoo.com/group/Libertarian/ <*> To unsubscribe from this group, send an email to: [EMAIL PROTECTED] <*> Your use of Yahoo! Groups is subject to: http://docs.yahoo.com/info/terms/
